Quality, cost, and value in health care: How to solve the puzzle

I sometimes explain to medical students that they are entering a profession being transformed, like coal to diamonds, under the pressure of a new mandate.

“The world is going to push us, relentlessly and without mercy, to deliver the highest quality, safest, most satisfying care at the lowest cost,” I’ll say gravely, trying to get their attention.

“What exactly were you trying to do before?” some have asked, in that wonderful way that smart students blend naiveté with blinding insight.

It is pretty amazing that healthcare has been insulated from the business pressures that everybody from Yahoo! to my father’s garment business have experienced since the days of Adam Smith. We experienced a bit of this pressure in the mid-1990s, when pundits declared healthcare inflation “unsustainable” (sound familiar?) and we invented managed care to slay it. We know how that story ended – the public and professional backlash against HMOs defanged the managed care tiger to the point that it could barely produce a “meow.” The backlash was followed by a 15-year run during which efforts to slash healthcare costs have been remarkably meager.

That run has ended.

Luckily, while we’ve been let off the hook on cost-reduction, we’ve not been given a free pass on improvement. Beginning with the Institute of Medicine reports on safety (2000) and quality (2001), we have been under growing pressure to improve the numerator of the value equation: patient safety, quality of care, and patient satisfaction. Particularly for those of us who work in hospitals, we now feel this pressure from many angles: from accreditors (more vigorous and unannounced Joint Commission inspections, residency duty hour limits), transparency (Medicare’s Hospital Compare), comparative measurement (HealthGrades, Leapfrog, Consumer Reports and many other hospital rankings), and, most recently, payment policies (no pay for “never events,” penalties for readmissions, value-based purchasing, and “Meaningful Use” standards for IT).

These initiatives have created an increasingly robust business case to improve. Hospitals everywhere have responded with new resources, committees, ways of analyzing data, educational programs, computer systems, and more.

In my own Division of Hospital Medicine at UCSF, we have powerwalked this walk. Faculty members from my division now lead our division’s QI committee, our department’s QI efforts, our medical center’s QI/safety and patient satisfaction programs, and our hospital’s IT implementation.

While our commitment to improvement has been inspiring, about three years ago I started worrying about the balance of our value improvement activities. At one of our weekly lunches, I asked about 30 of my faculty a series of questions.

“How many of you are involved in a project designed to improve quality?” I asked. Virtually everyone raised his or her hand.

“Great, how about patient safety projects?” About half raised their hands. “Fabulous.”

“Projects whose primary goal is to improve the patient experience?” About a third.

“Ok. How about projects whose primary goal is to reduce the cost of care or decrease waste?” One or two people sheepishly raised their hands.

“Wrong!” I barked, nearly banging my shoe on the table. “If we’re serious about improvement – and we need to be – then we should be attacking the denominator of the value equation with as much passion as we are the numerator.” The next day, we launched our efforts to rebalance our portfolio.

We’ve been at this value improvement business for a couple of years now, and there are some lessons regarding how to structure a program that I’d like to share with you. I suspect that if you’re not deeply engaged in this work yet, you will be, and soon.

The first question we faced was this: where should the various components of value improvement “live” in our org chart? We faced this at the divisional level, but this question is relevant to departments, to medical centers, and to healthcare organizations. Is cost reduction work its own thing or is it a branch of the existing QI workflow?

As I described in my closing address at the Society of Hospital Medicine annual meeting, there are some fundamental differences between quality and cost work. First, the latter requires the acquisition of some new skills, including methodologies such as Lean (more on this later). Moreover, to do cost reduction well, you need to know something about accounting and payment policies, or make sure there is someone on your committee who does.

Perhaps more importantly, cost reduction work requires that you pay attention to diplomacy. One can spend a lifetime improving quality and safety and not make anyone too upset. But the minute you begin to tackle “unnecessary” procedures or “wasteful” practices, you are attacking someone’s livelihood and budget, and you have to be prepared for pushback. When our division decided to take on unnecessary CT scans, it was only a few minutes before the chair of radiology gave me a ring, inquiring about what we were doing and how he could help. Key stakeholders need to be identified before you get too far into their space, either bringing them into the tent or figuring out ways to manage their objections.

Despite these differences, if you already have a strong quality/safety/improvement infrastructure (as we did), I strongly recommend that you roll your cost reduction work into it. Many of the core skills (literature and best practice reviews, change management, IT, data analysis) are the same, and building a new infrastructure would be, ironically, wasteful. Perhaps the largest threat to rolling the cost work into the existing quality/safety/patient experience work is the chance that the former will be under-resourced – significant new work being covered under the old budget. But the alternative, I believe, is worse.

Our division created a “High Value Care Committee” – a multidisciplinary group co-chaired by an extraordinary young faculty member, Chris Moriates, and our fabulous division administrator, Maria Novelero. In its first year, Chris, Maria, and the energetic committee members have tackled a half-dozen targets, areas in which our practice was costly and added little value: using nebulized bronchodilators when metered-dose inhalers would do, ordering far too many ionized calcium laboratory studies (at $100 a pop), leaving patients on proton-pump inhibitors for far too long (or putting them on inappropriately in the first place), excessive and near-reflexive use of telemetry beds.

Some of our choices were informed by the lists produced by the ABIM Foundation’s “Choosing Wisely” campaign, while others were chosen by the committee after brainstorming and literature review. As Chris described at the recent SHM meeting, the results to date are impressive, including a nearly 50 percent reduction in the use of nebs. More importantly, these projects have gotten the attention of our trainees (who increasingly find cost awareness “cool”) and the other services in our medical center. I will be surprised if other major departments, and the medical center itself, don’t launch equivalent committees within a couple of years.

The High Value Care Committee’s work “lives” under the umbrella of our QI director, Michelle Mourad, and we treat it as one of the components of our quality work, along with safety and patient satisfaction. (The nomenclature is a source of perpetual confusion. I think of value as being the integration of quality, safety, patient experience, and cost. Yet the oversight committee is often called a “quality” committee, and the cost/efficiency group is often called a “value” committee. As we did, these choices should be made pragmatically, and based on local culture and preferences.) As hoped, keeping the work connected has created many synergies (such as shared personnel, data, and infrastructure), and a high level of physician engagement. As this work goes medical center-wide, I will lobby to stick with the same philosophy: not to wall off cost-reduction in a corner of the organization (such as under Finance, which would disenfranchise the clinicians) but to make it a critical component of our value improvement activities.

Another part of the jigsaw puzzle – one I didn’t anticipate – comes in the form of Lean. Many healthcare leaders, most prominently Virginia Mason’s Gary Kaplan, have embraced Lean with near-religious fervor, to great effect. At UCSF, under the leadership of Adrienne Green, a hospitalist and the medical center’s Associate CMO, we’re just beginning to use it to attack complex processes. One of our first Lean projects involves mapping out all of the wasteful steps in our discharge process. As you know, Lean’s philosophy begins with this kind of mapping, followed by identification of non-value-added steps to be purged. While I worry that Lean is being a bit overhyped, it is a powerful tool to address complex, multifaceted, multidisciplinary processes. I’m quite sure that every healthcare organization will need to adopt it, or some similar methodology, to help organize its cost and waste reduction activities in the next few years.

So this is another part of the puzzle that needs to be solved: some efficiency activities will resemble the ones that Chris and Maria are working on: attacking discrete targets like overused nebulizers, CT scans, or laboratory tests. The steps here are relatively straightforward: choose the target (via literature review, inclusion in Choosing Wisely, or faculty consensus), analyze the consequences of overuse (including cost but also patient harm and wasted clinician/patient time), build a campaign around curtailing its use (including education, audit and feedback, computerized decision support, administrative or other barriers to use, and perhaps incentives), anticipate and address pockets of resistance, analyze the outcomes, disseminate them (if the program worked; retool if it didn’t), and implement a strategy to maintain the gains.

This process works well when you’re trying to get the docs to order fewer hematocrits, but is all but irrelevant when you’re trying to improve the registration process. For the latter, a Lean-type effort will be necessary. Whether the same committee manages both of these kinds of programs is going to be determined by local circumstances, including the interests and skills of the leaders. For our division, Chris and Maria’s committee is currently driving the target-specific work, while Adrienne and the medical center are managing the Lean projects. My hope is that we will ultimately integrate the two types of work under a single structure, though the Lean projects, particularly the big ones, involve so many departments and disciplines that they are likely to require co-management at a higher level of the organization.

Quality, cost, and value in health care: How to solve the puzzle

Yes, culture does trump strategy, and a great org chart will not guarantee a great program. But a bad one can nearly guarantee failure. As we move aggressively into value improvement, making sure this work is organized and resourced correctly will markedly increase the odds of success.

And succeed it must. Given the estimate that 30 percent of healthcare expenditures produce no benefit for our patients, we are, quite literally, Too Big to Fail.

Bob Wachter is chair, American Board of Internal Medicine and professor of medicine, University of California, San Francisco. He coined the term “hospitalist” and is one of the nation’s leading experts in health care quality and patient safety. He is author of Understanding Patient Safety, Second Edition, and blogs at Wachter’s World, where this post originally appeared.

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  • Dr. Drake Ramoray

    I will listen to you ivory tower types about the cost of treating patients when you stop charging facility fees. Until you can explain and address why a thyroid ultrasound in my office costs about $125 dollars and the same ultrasound five blocks down the road at the hospital was billed to a patient of mine for a total at $554 for which she was responsible for 80%, I have little reason to read what you have to say. Pretty graphs and tables though. I’m sure you will get published.

    • http://onhealthtech.blogspot.com Margalit Gur-Arie

      I thought this entire article was a pretty clear explanation of why facility fees are needed. Committees don’t work for free and I suspect your org chart is a bit scrawnier…

      • Guest

        Darn right. Model Organizational Charts for Value Improvement Programs don’t just draw themselves, you know. And have you seen the price of Targeted Initiative Mission Statements these days?!

        Not to mention (although the author does…) THE NOMENCLATURE IS EVOLVING.

        Evolving nomenclature costs a bomb, even if you’ve got a friend of a friend who can get it for you wholesale.

        This is exactly why healthcare is too important to be left in the hands of unsophisticated bumpkins like you all.


        • Guest

          LOL, well done!

  • southerndoc1

    Pretentious, self-righteous bloviation from a master of the art.

    • Guest

      I got lost in the sea of buzz words. I suppose that’s how these policy types and blowhards keep themselves relevant.

  • azmd

    Wow! That’s a lot of people in charge of micromanaging,um I mean cost containment…how much do they all get paid?

  • azmd

    Honestly, I think all this exhausting corporate-speak is hardly necessary, nor all these administrators and flow charts. Why not just start by letting clinicians know how much procedures, tests, etc, cost?

    I have been a hospitalist for the last five years and have asked multiple times to be given information regarding what it costs to run, say, a CMP on a patient. You would think that administrators would be all over that one, since I am showing an interest in costs.

    But no, apparently I am merely a clinician and cost containment should be left to the likes of more qualified administrators who will then tell me exactly what to do. No need for me to know what things cost! I just need to spend time in meetings hearing about my RVU numbers for the last month.

    • Guest

      Seriously. We have one of the most expensive health care systems in the world with some of the most dismal outcomes, and this guy is chirping away about a High Value Care Committee and Lean. It’s mortifying.

    • buzzkillerjsmith

      Is that really true? They won’t tell you any of the costs but just try to have you increase your RVUs? Please expound if you have the time. I’m very interested to hear your story.

      • azmd

        Oh, there are a variety of annoying little stories, all of them from my last place of employment which I mercifully was able to leave to work in a well-run public hospital.

        For example, I spent about 6 months trying to find out if it was cheaper to get an isolated TSH or just repeat the entire CMP, receiving many blank/annoyed looks from administrators along the way. Eventually I just gave up. Honestly, I think if every time we ordered a test, the billing charge automatically popped up for us to view, it would help a lot. Why hasn’t anyone tried that?

        • buzzkillerjsmith

          Thanks for the info.

  • Guest

    Good lord. Do you realize at all how irrelevant you are, and how you are responsible for the bloated costs of health care? How do you sleep at night?

  • Bob

    Don’t worry about the ACA, it can’t work or fly since adding 46 million more patients as well as the 4 million “boomers” each year are impossible for the existing physician and nursing providers to handle, if and when they would decide to give up a large share of their profitable patients. And if ACA raises the payments this will take healthcare to even more than the 20% of GDP it is now and quickly lead to National bankruptcy. And it takes years to produce doctors and nurses while hundreds of thousands of them are “boomers” that will retire before their replacements are licensed.
    All other products and services have prices that can be compared, along with providers credentials and experience and service can be assessed by waiting time, so just tell consumers the price, and don’t be surprised to find the lowest price comes from the poorest performing providers which you have to wait the longest to see.

  • http://euonymous.wordpress.com euonymous

    Well written. Doctors and hospitals find themselves, in some respects, in positions not all that different from the politics and functioning of corporations. Cost savings are an excellent example. We seem to have evolved a healthcare system that has boxed us in and made structural improvements difficult if not impossible. Everyone who has a stake in the status quo will throw rocks, as evidenced in the comments.

    • southerndoc1

      No one has a greater stake in the status quo than the rapacious academic medical centers and the parasitical medical boards, which is why so many of us are offended by the OP’s holier-than-thou lecturing.

  • buzzkillerjsmith

    Wow, is it just me, or this guy’s word salad getting worse? I suggest an evaluation, perhaps starting with his PCP. Unless of course he doesn’t have one because of the shortage.

  • katerinahurd

    How do you place a price on the safety of a patient? Do you think that the safety of the patient bears the ethical weight as is stated in the cornerstone ethical principle: First do no harm? What would be the source of argument with respect to your health care ans delivery model? How do you think medical education should transform itself in order to accommodate your model?

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