Hospitals Pay Doctors to Reduce Costs

The use of financial incentives to improve performance in healthcare is expanding from hospitals to doctors.

I previously discussed and supported Medicare’s decision to stop paying for “never events” – mistakes that should never happen, such as operating on the wrong patient – which gives hospitals incentives to avoid the mistakes in the first place.

According to an article in Philadelphia Business Today, a dozen hospitals in New Jersey have launched an experiment to change the way doctors are paid, recognizing that, like hospitals, doctors also respond to financial incentives.

Hospitals, for example, are usually paid a flat fee for treating a patient with, say, pneumonia. The payment is the same no matter how many days the patient stays. The hospital's profit is higher when stays are short. But most doctors are paid on a fee-for-service basis, so they make more money when the patient gets more care.

Doctors that choose to participate in the three-year pilot project will be paid the same way by Medicare, but their hospitals will give them bonuses of $100 to $300 per patient if they reduce costs and improve quality.

They can do that in a variety of ways, said Alan Pope, vice president of medical affairs at Our Lady of Lourdes Medical Center in Camden, one of the 12 hospitals. They can start surgeries on time, order needed tests quickly, schedule rounds in the morning so they can write discharge orders early, think about price when ordering supplies such as artificial knees, and do everything possible to prevent infections…

Asked if Lourdes doctors even know what supplies cost, Pope said, "many of them do not or haven't had an interest in it. This [new program] will help increase their interest in it."

Most people would support the idea of a lean strategy of eliminating waste and focusing just on the steps of a process necessary to add value. But if the financial incentives are not aligned with that strategy, it won’t work. This kind of approach can help achieve the proper alignment.

Book Talk: Measuring and Improving Performance

Deploying IT systems can often be the bane of a company’s existence. A new book, Measuring and Improving Performance: Information Technology Applications in Lean Systems by James William Martin, explains how the effective use of Lean project management methodologies can increase the productivity of information system deployment in service and manufacturing organizations.

Featuring roadmaps and checklists, this book will help IT and lean professionals discover more efficient ways to monitor business activity, gather business intelligence, and manage and analyze business processes.

The book covers several project management methods including agile project management, agile unified process, SCRUM, and extreme programming.

Martin has been a Lean Six Sigma consultant and master black belt for 10 years. He is also the author of Lean Six Sigma for the Office and Operational Excellence: Using Lean Six Sigma to Translate Customer Value through Global Supply Chains.

Do you have a question or comment about a book(s) that you would like addressed in Book Talk? Email me directly at Ralph.bernstein@taylorandfrancis.com.

Join the Healthcare Improvement Book Club

If you belong to LinkedIn, you can join a new Healthcare Improvement Book Club we’ve created as a LinkedIn group.

The purpose of the club is to identify and discuss books about process improvement in healthcare.

Since we publish books of this type, obviously we hope this club will help make people aware of those books and purchase them. However, the club is open for discussion of any books on healthcare improvement, not just those published by Productivity Press.

So please join the group and start a discussion about a book you know, a book you’re looking for or another topic.

Is Twitter a Lean Tool?

Twitter, the incredibly popular website where people post millions of 140-character messages, won’t help you improve capacity or eliminate waste like other lean tools.

But Twitter can help you focus on creating value for the customer.

I come to that conclusion after reading about General Motor’s recent decision to cancel plans for a Buick sport-utility vehicle.

Creating customer value is, of course, at the heart of a lean strategy, so it is essential to understand what customers consider to be value.

According to Bloomberg.com, GM achieved that understanding rapidly via the Internet, primarily through Twitter.

The decision was made Aug. 14, after GM earlier in the week showed the SUV and other future vehicles to consumers, dealers, employees, analysts and news reporters, Vice Chairman Tom Stephens said on a company blog.

“We were all struck by the consistency of the criticism,” Stephens wrote. “It didn’t fit the premium characteristics that customers have come to expect from Buick.” He didn’t elaborate on the vehicle’s shortcomings.

The decision to cancel the Buick was based on all of the input, face-to-face, blogs and tweets, Christopher Barger, GM’s spokesman for social media, said in an interview. No matter how they expressed it “they just didn’t like it...”

Negative feedback spread on Twitter Inc.’s site after users began calling the vehicle a “Vuick,” a reference to GM’s Saturn Vue that provided the basis for the Buick. It looked more like a retread than a fresh design, they said. Detractors began using the “#Vuick” name as a hash tag -- an indexing tool on Twitter that lets users quickly find messages on the same topic.

Rebranding a mediocre model with a new name was typical of the “old GM,” blogger Joel Feder said last week on his Twitter account. He called the car hideous and a crying shame. “#Vuick must die,” Feder wrote.

It used to be that you had to send letters, conduct interviews, conduct surveys and more to understand what your customers wanted.

The Internet changes the methods. What hasn’t changed is the need to understand what customers value.

Do We Need a National Healthcare Safety Board?

A former transportation official has some valuable insights into reforming healthcare – though I’m not sure whether I agree with what he proposes.

Jim Hall served as chairman of the National Transportation Safety Board (NTSB) from 1994 to 2001. He is currently managing partner in a healthcare and safety consulting firm.

In an op-ed piece in The New York Times, Hall discusses the huge costs of medical mistakes and argues that the biggest problem with healthcare is the way people think.

Because American medicine accepts error as an inevitable consequence of treatment, our hospitals, insurers and government do little to respond to unnecessary deaths. If we are to address the problem in a serious manner, we must first change this culture.

What we need, he argues, is a healthcare equivalent of the NTSB.

As a former chairman of the National Transportation Safety Board, I am familiar with the deadly consequences of human error. However, because that agency views every transportation death as a preventable occurrence, our roads, rails and skies enjoy an unparalleled level of safety. After any significant accident, the board undertakes an extensive investigation, and makes recommendations to the parties involved to ensure that such an accident never recurs. While the transportation safety board has no regulatory authority, its recommendations are viewed by the industry and the public as unbiased and therefore credible, and federal regulators usually act with haste to address them.

Such an investigative body could substantially improve the safety of medicine in the United States. While it surely could not investigate every individual instance of error, it could address many well-known maladies. Hospital-acquired infections, for instance, affect millions of Americans each year. A National Medical Safety Board would collect regional data on the problem, paying particular attention to hospitals with high incidences of infection. It would then determine preventive measures and make recommendations to state and federal regulators, hospitals and health care officials.

I agree with Hall’s view of the cultural problem in healthcare. We need a lean mindset where mistakes are viewed not as inevitable, but as the result of process flaws that can be corrected.

However, I’m not sure I agree with his solution. I tend to be skeptical of proposals for new government regulation, though there is logic to his argument. And I’m not sure how his proposed board would work in the maze of federal and state regulations currently governing healthcare.

Do you agree or disagree?

Book Talk: Pursuing Excellence in Healthcare

Adding to our offerings in healthcare-related books, next month we are publishing Pursuing Excellence in Healthcare: Preserving America's Academic Medical Centers by Dr. Arthur M. Feldman,

Feldman, who is the Magee Professor of Medicine and Chairman of the Department of Medicine at Jefferson Medical College, analyzes the issues and challenges facing AMCs and offers recommendations that allow them to achieve their core mission — the delivery of outstanding patient care.

He focuses on four intersecting spheres of action – structure, research, education and business – and addresses the challenges faced by each.

The book has received advance praise from a variety of leaders in the field. For example, Dr. Michael Johns, chancellor of Emory University, says Feldman “identifies the key problems we need to solve and the kinds of solutions we must adopt to ensure the excellence of our essential missions in research, training, and health care going forward. A book all health care leaders should read and then read again.”

Do you have a question or comment about a book(s) that you would like addressed in Book Talk? Email me directly at Ralph.bernstein@taylorandfrancis.com.

The Wright Brothers: Lean Thinkers

I visited the memorial to the Wright brothers at Kitty Hawk, N.C., while I was on vacation last week, and came away with the impression that Orville and Wilbur understood at least a few lean principles.

Their famous first flight of a motorized airplane occurred in December 1903 – the same year that the Ford Motor Company was incorporated, but a decade before Henry Ford launched the mass production assembly line.

The Wright brothers did not focus on processes or removing waste from processes. They probably didn’t know much of anything about increasing throughput or capacity. They made and sold bicycles, so they may have known something about creating value for the customer, though perhaps not in lean terms.

But I believe they did understand, at least to some degree, root cause analysis and continuous improvement.

For example, gliders had been in existence for some time before the Wright brothers added a motor. And designers of gliders understood that the upper portion of a wing needs to be curved to create lift.

The Wright brothers refined the concept. They experimented to determine exactly how the wing should be curved to produce the maximum amount of lift.

Also, when the brothers found that their glider wasn’t responding to its controls as well as it should in some initial flights about six feet off the ground, they analyzed the situation and determined that by flying higher they achieved better control.

The Wright brothers were scientists, inventor and entrepreneurs. They also embodied the spirit of lean.

Ignore the Consultant: Don’t Wait for Lean

I get annoyed when I hear purported business improvement “experts,” especially those at large consulting firms, make inaccurate statements about lean.

What currently has me annoyed are statements coming from Ovum, a global consulting firm owned by Datamonitor. Dr. Alexander Simkin, described as an IT Services senior analyst and process improvement specialist at Ovum, said recently that when we have reached the depths of a severe recession, it may be “too late” for lean.

He argues that lean implementation takes too long and is too resource-intensive for an organization currently reviewing its IT processes, and therefore does not offer the rapid efficiency gains that CFOs are increasingly demanding of CIOs.

“What they don’t realise is that becoming Agile or Lean takes time and requires major change management. If you’re starting from a base of traditional processes, these approaches won’t provide rapid cost reduction. The efficiency of your processes may even get worse before they get better. CFOs need to know that and it’s a CIO’s job to educate them.”

Simkin doesn’t spell out what he believes would achieve rapid cost reduction. Does he mean layoffs (which typically get rid of people with valuable knowledge an experience)? Or seeking lower-cost suppliers (which may lead to quality problems and undermines the trust needed in supply chain relationships)? Or outsourcing production (which can create quality and lead-time problems)?

Good luck with those.

There may be a small grain of truth in Simkin’s statement, in that, with lean, processes may appear to get worse before they get better (but not always).

However, the more important point is that well-executed lean initiatives increase capacity, improve quality and – yes – reduce costs, and can do so rapidly. The trick is doing it right.

Simkin claims that he is not against lean or Six Sigma. He suggests they may be a good approach when the economy improves. Too bad he doesn’t understand they also make sense now.

I guess I would call him a fair-weather friend of lean.

Hospitals Make Patients Feel Better – With Whiteboards

A whiteboard is a wonderful visual control, one that we lean advocates just love. It is inexpensive, easy to maintain and often the best way for interested parties to track the status of production.

I recently read about an intriguing use of a whiteboard in hospitals: as a way for the patient to track the status of their medical care.

Hospital patients often deal with several different doctors and nurses. Sometimes care is not as coordinated as it should be. Sometimes different professionals offer different advice. And sometimes patients just have trouble remembering what each person said – or even who they are.

One current trend is that increasing numbers of hospitals employ hospitalists: hospital-based general physicians who assume the care of patients in place of the patient’s primary care physician. Their activities include patient care, teaching, research, and leadership related to hospital medicine.

A recent article from Hospitals & Health Networks magazine discusses the issues facing hospitalists, and how many hospitals are evaluating their performance based partly on patient satisfaction.

And that is where whiteboards can play a role.

Physicians and nurses write their names on the boards to help patients remember who their clinicians are. Doctors post test results or exams scheduled for that day, and families post questions if they miss the doctors’ rounds.

The Medical College of Wisconsin actually linked an improvement in its Press Ganey patient satisfaction scores to the use of whiteboards, says Michael Radzienda, M.D., chief of the section of hospital medicine at the Medical College of Wisconsin in Milwaukee.

Hospitalists in Radzienda’s organization also carry a magnetized photograph of themselves and a magnetic business card. “You go into the patient room, hand them your business card and put your photo magnet on the whiteboard,” he explains. “A frequent complaint is, ‘I don’t know who’s running the show.’ This allows the hospitalist to be better identified as the care manager. This is your doctor.”

I’ll bet this kind of use of whiteboards helps some doctors, as well as patients, track what is happening.

Sometimes the simplest, low-tech solutions are the best.