Hospitals Must Learn to Focus on Results

While growing numbers of hospitals are learning how to apply lean concepts to their operations, they have a lot to learn about how to measure performance.

I come to that conclusion after reading an article from Hospitals and Health Networks Digital Magazine, which said that hospitals are hiring more doctors.

The authors of the article believe, and I agree, that this is a good trend. It is driven by several factors, including the fact that many young physicians entering the profession are wary of the hassles involved in running a private practice today and prefer the stability of a hospital job.

However, the article notes that contracts between hospitals and doctors typically include productivity targets and incentives that represent a greater portion of the physician’s compensation than in the past.

Data available from previous employment efforts are enabling hospitals and physicians to design "smarter" contracts. Examples of smarter incentives include both group and individual incentives, better calibrated productivity measurement (whether productivity is measured in patient volume, RVUs, gross charges, collections, etc.) and other measures designed to tightly align the hospital employer's goals with the physician's, such as quality outcomes. Hospitals that directly employ physicians have tighter control over productivity and tracking.

I am concerned that the emphasis will be more on quantity – the aforementioned patient volume, gross charges, etc. – than on quality outcomes.

We publish several books by Mark Graham Brown, who is an expert on metrics and incentives. Several years ago, Mark taught me the basic rule of incentives: They should be based on results, not activity.

Quality outcomes (meaning patients with improved health) are results. Patient volume is activity. If you pay your doctors to see more patients, they will see more patients. But what matters is whether they are improving the health of their patients.

I hope hospitals come to understand that and revise their metrics and incentives accordingly.