One area in hospital operations that has gone largely untouched is reducing the cost of delivering safe, quality health care. This is where new thinking about workforce productivity, case management, and lean processes and policies can reduce the cost of running a hospital. Hospital leaders can transform their organizations into leaner, faster and better organizations—with sustainable improvements.

Hospital leaders often fear efforts to improve productivity will alienate staff or lessen quality. Including all stakeholders, redesigning processes and working toward national benchmarks will ensure that productivity improvements stick.

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How to Make Productivity Gains Possible and Profitable

EXPANDED COVERAGE CHANGES EVERYTHING

Mandated insurance coverage will change the game. Expanding coverage to currently uninsured people will cause an influx of new demand and revenue for hospitals. Although this sounds good for hospitals, there will be undesirable consequences.

First, the healthcare system will be challenged to meet the increased demand for services. Advocates for reform cited studies that showed that uninsured people seek care less often, and later, than people with insurance as an important social problem. Newly insured people, as experienced in Massachusetts, will flood hospitals and their EDs. The increased demand will cause government outlays to exceed budget and affordability (many of the newly insured will be paid for by government programs). Inevitably, this will lead to reimbursement reductions (a major concern at the AHA Annual Meeting in Washington last month).

A PERILOUS BALANCING ACT

Since Medicare is a break even business and Medicaid is an unprofitable business, future reimbursement reductions will make it harder to break even. Insurers, under pricing pressure and maybe government price regulation, will prevent cost shifting to them. Reform believers think that hospitals will be better off since more people will be paying customers. Others are concerned that the increase in the number of low paying customers will shift the payor mix and unfavorably alter hospital profitability. It’s not clear how hospitals will balance their books. Lowering pay to healthcare providers may balance the books, but what will it do to the supply, given that shortages already exist?

THREE STEPS TO HELP YOU PREPARE FOR THE FUTURE

Proactive hospitals need to prepare for the future – today.  Here are three areas you can act upon right now:

1. Tighter management of productivity while redesigning work processes

Productivity management and work processes are closely linked. If you improve productivity without redesigning work, other important outcomes might suffer. In addition, productivity gains are often short-lived if work processes haven’t changed. The stress of “short-staffing” results in declining productivity after the intensive focus on productivity evaporates.

2.  Throughput management

Another area receiving attention is throughput management, especially in acute care and the emergency department. More patients will be coming to emergency departments although ED capacity isn’t likely to expand. Hospitals that don’t figure out how to address throughput will have to address more complaints and patient safety problems. Similarly, hospitals will need to admit more patients but they won’t be able to increase beds or hire more nurses. Hospitals will need to manage care so patients are discharged when they no longer need hospital care. This may alter the perception of what is an unnecessary hospital stay.

3.  Readmissions prevention

Finally, hospitals are beginning to address readmissions prevention. Although there is no reimbursement for this service, new financial penalties will hurt hospitals with too many readmissions. And the rules may get tighter with time. Readmission prevention also makes more room for new patients.

Action today will smooth the path for tomorrow’s reform.

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There’s a lot of guessing about the impact of the Reform Act on hospital operations and bottom lines. A few patterns of prediction are emerging and , as in any major change, there will be winners and losers.

We’re witnessing significant commitments of investor money to hospital acquisitions, as the Detroit Medical Center and Caritas Christi announcements demonstrate and these folks don’t usually make dumb bets so they obviously think there is money to be  gained  in hospitals.

Two other trends are even more predictable for the impact of reform on hospital leaders.

The implications of these two very predictable trends are to get your house in order both in terms of compliance and through put.

First: there will be increased scrutiny as regulators seek to find and punish poor quality operations. We will see more state department of health surveys for cause and complaint response and more hospitals experiencing Immediate Jeopardy and threats of CMS termination based on same. The urgency to single out poor performers, whether accurate or not, will only grow.

Second: if the Massachusetts experience is in any way emulated as expanded coverage impacts, we’ll see a tremendous uptick in demand for care. More people covered will seek care for conditions they have ignored.

This does not mean you have to turn your entire hospital upside-down.

A more sensible approach might well be to focus on departments that are most likely to be impacted or that need improved efficiency or quality. For example, many of these “new to healthcare” patients who are unable to find an available primary care physician will likely enter the system through the ER. Is your ER efficient to handle a surge? What about the other departments that in turn are most likely to see admitted patients from ER such as surgical services or various nursing departments or increased demand on radiology or pharmacy. Working on areas where you know you have corrective issues now will prepare you to handle what seems to be a predictable outcome of reform.

It’s a familiar scene. A hospital inpatient unit chronically misses its productivity target or budget by approximately ten percent. The nurse manager for the unit repeatedly attempts to explain, but the targets remain unmet, and the financial ramifications of unnecessary hospital labor costs continue to mount.

Ingrained Attitudes Impede Improvement
In today’s hospitals, it’s not uncommon to encounter this type of defensiveness among inpatient unit managers who miss their targets. While some frustration amongst managers is understandable, the productivity losses that can accompany negative attitudes and biases pose a serious threat to hospitals’ bottom lines. So, before embarking on any hospital productivity improvement initiative, it is important to understand how misconceptions about productivity information and deep-seated biases can hinder progress.

When observing situations like the one described, we, as consultants, are not surprised to find certain attitudes and frustrations within hospital divisions like Nursing, Finance and Human Resources. Managers who think they are managing properly can begin to question the origin and validity of the data and targets contained in productivity reports and monthly financials. Likewise, nurse managers can express exasperation with relentless questioning of their productivity performance. And, attempted explanations of variances can solidify over time into institutionalized excuse-making and high hospital labor costs.

Different Perspectives Mean Different Biases
Within the Finance division, negativity regarding the motives and perhaps even the competence of unit managers who struggle with chronic productivity variances can arise. Members of hospital Finance divisions generally feel that they are supplying an abundance of valuable management information and frequently interpret productivity variances as evidence of overstaffing. In addition, those in Finance may express consternation when the request is made for a vacancy to be filled.

Similarly, members of the hospital’s Human Resources department may harbor negative misconceptions about nurse managers who have difficulty meeting their labor expense budgets. Such doubts may dampen the enthusiasm with which vacancies are recognized, posted and pursued to a speedy conclusion. Because, in general, members of hospital Finance and Human Resources divisions have little “clinical” education or background, there is a tendency for them to be inhibited about asking challenging questions that may actually illuminate the underlying causes of FTE variances and reduce hospital labor costs.

On the other hand, nursing administrators can also operate under their own set of faulty assumptions in the absence of a clear, fact-based understanding of productivity performance variance. This can lead to less time and energy spent on leadership and management development, and more emphasis on protecting managerial prerogatives. When you consider that typical hospital inpatient units are comprised of 40-45 FTEs, and their negative productivity variances can be 4-5 FTEs per unit, misconceptions and defensiveness can translate into significant, unnecessary hospital labor costs.

Positive Change from Objectivity
Constructively addressing hospital productivity means properly interpreting variance. It requires carefully examining multiple factors within the hospital as potential contributors to departures from expectations. A 4.1 FTE variance rarely means that there are four too many nurses working on a given inpatient unit, rather it is a mathematical relationship between actual and expected productivity within the hospital. Factors like overtime, incremental time, errors in scheduling, actions of the central staffing office, actions of the shift supervisor, etc. can all contribute to variances in hospital productivity measures, so it’s rarely possible to “blame” underperformance on a single factor or person.

So, when addressing hospital productivity, it is very important that analysis of data is undertaken in a neutral, objective manner, devoid of preconception or prejudice. Such efforts can help to diffuse defensive attitudes amongst hospital staff and aid members of multiple departments—like Finance, Nursing and Human Resources—in understanding the true implications of productivity data. Giving nursing managers and others the benefit of the doubt, and working to reverse negative attitudes can be crucial to the success of any hospital productivity initiative.

For more information about how to achieve improvements in hospital productivity, contact Eric Dam at 513.241.0142.

About The Journal of Healthcare Management
The Journal of Healthcare Management is a publication of the American College of Healthcare Executives (ACHE) featuring articles on current healthcare management topics and industry trends. The journal is published six times per year and presents scholarly studies and columns by healthcare executives, industry experts and clinicians.

Practical Advice for 2010
“Guide to CMS Compliance” focuses on recent and anticipated changes in CMS regulations and offers insight into trends for the upcoming year, including more surveys and greater regulatory scrutiny. Elzer presents recommendations for understanding CMS regulatory requirements and presents practical approaches to delivering compliant patient care and responding to poor surveys.

About Ruth Elzer
Ruth Elzer is an expert at keeping hospitals compliant. As the Practice Leader for Accreditation and Compliance Services at Compass Clinical Consulting, Ruth gives clients practical solutions that work across the board. Before specializing in accreditation and compliance, Ruth worked for St. Joseph Medical Center in Joliet, IL, and at The Joint Commission (TJC), where she managed the development of educational programs designed to help hospitals prepare for regulatory survey. Ruth is trained as a surveyor for not only The Joint Commission, but also CMS and EMTALA. A nationally recognized speaker, Ruth is a member of the American Organization of Nurse Executives (AONE) and ACHE.

The article can be downloaded free from Compass Clinical Consulting’s Accreditation Resource Center.

Given this information, the question for hospital executives and other healthcare leaders becomes:

How can we decrease labor costs without affecting quality, patient safety, and satisfaction?

In fact, a better question is:

How can we improve quality, patient safety, and satisfaction while decreasing labor cost?

Many times productivity and workforce management are not addressed in hospitals because clinicians fear the process of looking at these crucial elements will affect patient care negatively. But, a few techniques, if implemented successfully, can help hospitals lower costs while continuing to provide high-quality care and creating a very positive experience for everyone in the organization.

• Using a balanced scorecard or operations dashboard shows concern for protecting the interests of all stakeholders. The dashboard should measure employee metrics, patient/quality metrics, and business practices. This helps to demonstrate organizational responsibility and recognition that changing one dimension can affect others unless they are all monitored and managed simultaneously.
• Put in place a productivity system that is transparent, that everyone understands how to use, and that encourages everyone in the organization to find ways to improve processes or find waste to out-perform their benchmarks/targets.
• Often, optimizing value-add or revenue generating activities is difficult because too much time is spent on waste. Implement lean concepts.
  • 5 S’s (Sort, Straighten, Shine, Standardize, Sustain) for improved people, proficiency, and productivity
  • Identify non-value-added activities (waste or muda), and eliminate them; the seven key areas in which to look for muda are overproduction, inventory, repair/reject/defects, motion, processing, waiting, and transport.
• Address throughput issues that create inefficiencies. Throughput issues are hospital-wide problems, not just departmental problems. Inefficient or broken processes in one area of the hospital can have an impact on the ability of another department to function efficiently. The culture of the hospital must focus on the systems, not the “silos.”
• To sustain improvements, implement tools to help managers achieve and monitor their progress. Examples of tools that are helpful to managers are:
  • A staffing plan based on average workload
  • A position control of employees that matches the staffing plan
  • A flexible staffing plan for a department that has fluctuating volume
  • A daily and biweekly productivity tracking monitor

Planning for success and involving employees in changes can increase the likelihood of achieving savings through workforce management. Productivity gains come when everyone at the hospital works to be part of the solution, when there is a groundswell of support and a hospital-wide commitment to become better. Improving hospital labor productivity, while maintaining quality of patient care and employee satisfaction, is an important accomplishment. A hospital that achieves success with productivity and workforce planning, becomes a hospital that can embrace change in the future, opening it up to the potential for even greater improvements.

Every Good Idea has Downside Implications

Medicare’s Acute Care Episode Demonstration Project (ACE) has attracted a lot of attention as a way of encouraging greater physician and hospital alignment – presumably to lower the cost of delivering healthcare.

Hospitals like the idea of ensuring that physicians share the hospital’s concerns to reduce unnecessary utilization, supply control and improving patient safety. Physicians like the idea of the potential for gainsharing. Of course, each side has concerns about control and the degree of cooperation they will face from their new partners.

Stated and Unstated Goals of ACE

That’s all well and good. But the ACE demonstration has implications beyond the stated purpose of the project. Implications that could run counter to providing better care and counter to reducing the financial impact of malpractice legal issues.

Let’s realize that Medicare’s purpose is not just to lower government costs but to place the physician and the hospital in the position of deciding what is needed to treat the patient.

On the surface, this sounds nice.

The public certainly does not want the government deciding whether a patient needs a consultation or a test. But they are giving the physician-hospital partnership the authority to make these decisions under conditions of financial influence!

How is this financial influence different from the financial influence of pharmaceutical companies and medical device manufacturers?

Reality says that financial pressures will shape decision-making, thereby taking some chances with patient welfare that might not be taken if there were no financial influence. Critics of capitation have argued that patients suffer when care is limited by financial influence on the decision-makers. Yet isn’t the government’s purpose in proposing ACE to alter decision-making by transferring financial responsibility to others?

The ACE project also has implications for patient satisfaction with both their doctor and hospital experience.

Remember that Medicare, in response to a beneficiary complaint, instituted the Important Message from Medicare process. This unfunded burden on hospitals requires that hospitals notify patients, close to the time of discharge, that the patient has a right to appeal the discharge order to the QIO if they feel they are being discharged sooner than is appropriate for the patient.

Trouble Brews When Patients Trust in Providers is Put in Doubt

Won’t the ACE payment result in an increase in the patient’s concern that their interests are being subordinated to the physician’s or the hospital’s financial interests?

How will these concerns affect the patient’s assessment of their satisfaction with the hospital?

This payment also may have an impact on the roles that physician’s play in a patient’s care. For example, some surgical specialists have gotten used to consulting hospitalists to provide non-surgical care for the patient. Will new financial constraints place pressure on surgeons to resume the former practice of assuming all care responsibility of patients?

Another intentional consequence of ACE is a reduction in the number of consultants involved in a patient’s care. On the surface, this reduces confusion and cost. But financial interests change behavior in unintended ways. Internists may reduce the frequency of referrals to subspecialists, such as cardiologists and pulmonologists. The only problem is that common sense suggests that people who specialize in cardiology have a higher level of expertise in cardiology than a general internist. Could ACE cause internists to stretch themselves beyond their expertise resulting in harm to some patients?

New malpractice liability concerns might arise from the ACE project

Tests may be conducted to identify risks that when identified, alter treatment decisions. Financial incentives are intended to influence decisions on whether the test is necessary for the patient’s care. Hospitals and physicians are likely to develop guidelines for when tests are necessary. In many cases, there is not sufficient research to inform these decisions. Yet, without guidelines, practices will vary and errors will be made. When guidelines are developed, they will probably include cost benefit analysis, which depend upon probabilistic information. As with all probabilities, sometimes a patient is the rare event. Although physicians make these judgments now, they do so without any financial incentive influencing their decision. Won’t the presence of financial incentives influence a jury trial assessing whether the physician erred in not ordering a test?

Every change has intended and unintended consequences.

The demonstration project should look for unintended consequences, as well as the intended ones. Patients are entitled to know the full effect for how such a change in the healthcare system, while seemingly benign, could well have significant impact on their lives.

Every payer is looking for ways to cut costs, and surely costs must be cut. But instituting financial incentives to care givers to favor their own income rather than delivering safe, quality healthcare to every patient needs to have plenty of professional and public scrutiny. Otherwise, the only benefactors will be the attorneys handling yet another wave of medical malpractice cases.

The unintended demons should be carefully analyzed as this demonstration project moves forward.

It is difficult to guess the position of such a leader and revered figure but it takes little insight to predict his position: one of concern for the 44 million Americans who go without health insurance.

His keen sense of social justice would most likely be offended by the disparities rift in our current system. So perhaps in honor of his birth anniversary we should rededicate ourselves to finding a just and equitable way of delivering quality care to all Americans.

That seems a fitting tribute.

Across the country, hospitals are finding themselves on the receiving end of unannounced regulatory surveys. Failure to be prepared for such surveys can, in the worst cases, lead to Preliminary Denial of Accreditation by The Joint Commission (TJC) or findings of Immediate Jeopardy by the Centers for Medicare and Medicaid Services (CMS). But, hospital leaders can avoid adverse survey findings and ensure patient safety by paying attention to seemingly small issues before they become big problems.

So, how do small problems grow? We have found that small problems become big problems for two reasons. They either go unseen, or are perceived to be smaller or less consequential than they actually are.

Lack of visibility is probably the most common factor that allows small problems to grow. Often, unseen patient safety issues lurk behind seemingly positive data. Executives and board members should look critically at the quality reports that they receive, not just for the information that is included, but also for the information that’s missing. Are scores for select core measures consistently reported to be in the top percentiles while others aren’t mentioned? Are certain departments regularly highlighted for good performance but there is no discussion of problems? In other words, are you getting almost entirely good news?

When it comes to quality and patient safety, no bad news can be a red flag. Given the numerous patient interactions involved in day-to-day operations, every hospital should experience some level of failure. If, as a hospital executive, you don’t routinely hear about little problems, you’re probably missing the big issues, too. You can’t improve performance if you don’t know what needs to be improved.

So, when examining quality reports, look for the following signals that problems may be hidden or their gravity underestimated.

• Compliance with select core measures is consistently in the top percentiles.
  Core measures are important; there’s no denying that. But, they rarely tell the whole story when it comes to patient safety and regulatory compliance. Hospitals with nearly perfect core measure scores can still get into trouble on survey. Focusing on boosting core measure scores can divert attention away from day-to-day care. Also, CMS surveys are focused on compliance with minimum standards. So in many cases, core measures don’t correlate to compliance with CMS standards. For example, restraint and seclusion, a classic hot-button issue on CMS surveys, is not represented by a core measure.
• Certain departments are regularly highlighted for good performance.
  Every hospital will have stand-out departments that always do a good job of ensuring quality and patient safety. But, it’s important that you have a comprehensive view of all departments, not the just the best ones. Reports should cover every department at least once a year, with emphasis on patient outcomes. This type of strategy ensures that executives and board members and objective view not only of the entire hospital, but of the most important data.
• Reports focus solely on data and activities.
  While the current trend is to focus on risk reduction by improving processes, don’t forget that it’s important to understand how process improvements translate to better care. Be wary of reports that feature lists of actions and data without providing the analysis to show how those actions or data correlate to better patient outcomes. For example, reporting on the hours of sitter use is meaningless if those hours of supervision don’t lead to reduced use of restraints and fewer patient injuries. Also, appreciate that quality indicators are linked to other important business indicators. When more sitters are used, ask how this affects hitting productivity targets and how management responds to a productivity deviation.

Bringing minor problems to light before they have a chance to grow is perhaps the most important step toward preventing big problems. By keeping a critical eye and looking for warning signs, hospital leaders can ensure quality and patient safety by uncovering these small issues early.

To learn about one hospital where small problems turned into big problems, read “Hospital Near-Death Experience: How Medicare Termination Can Push Your Hospital to the Brink of Closing.”

Can a hospital have a near-death experience? If so, what would that look like?

For Haywood Regional Medical Center, “near-death” took the form of involuntary termination from Medicare. This traumatic event caused the hospital to lose physicians, morale, and its previously good reputation, not to mention significant amounts of money. But, with quick corrective action and strong leadership, the medical center regained its Medicare certification and received a second chance to thrive.

“Hospital Near-Death Experience: How Medicare Termination Can Push Your Hospital to the Brink of Closing,” the new whitepaper from Compass Clinical Consulting, tells the story of Haywood Regional Medical Center, examining some of the factors that brought this hospital to the brink of collapse and the swift, strategic action that brought it back to life.

When an organization has a performance problem, managers seek information to identify and assess the causes of the performance failure. Similarly, an analysis of a social problem should require policy analysts to identify and assess all significant contributors to the social problem. Our public discussion on health care reform has failed to meet this expectation.

The debate about health care reform has focused on several significant issues, such as getting financial coverage for the uninsured’s medical needs, building incentives for hospitals and physicians to provide better care, and removing inefficiencies from the fragmented delivery system.

However, there is an elephant in the room that is not being discussed – personal responsibility for health. For years, studies have shown that up to 70% of disease is influenced by personal (not provider) behaviors. As such an important aspect of health care costs, this issue cannot be ignored.

Why is personal responsibility being ignored? As health care providers know, changing patient behaviors is extremely difficult. The first step is for the patient to want to make the changes and not every patient wants to change their behavior to get better. Patients who struggle with emphysema still smoke. Patients with diabetes eat cakes and candies. They choose to continue the behaviors that got them sick despite the counsel of their physicians and other health care providers. From a psychological perspective, there are many reasons why this happens. Providing better access to care is not going to change this.

Talking about the need for personal behavior change is not politically popular. When he was president, Jimmy Carter advised Americans to reduce energy consumption. This unpopular message contributed to his failed reelection bid. Admonishing people is not an effective way to build a coalition of support. Yet, the failure of individuals to adopt pro-health behaviors will cause accidents and disease that will have to be treated, at great expense, after disease or injury occurs.

The elephant has to be addressed. Can we effectively control health care costs without including individual incentives? Assigning responsibility for patient behaviors to health care providers is easier from a political standpoint. But it fails to address a known driver of health care costs. It also has the unintended potential for creating discrimination against people who struggle to control their behaviors. Providers may terminate care relationships with patients who fail to comply with medical advice. Similarly, physicians may screen patient to determine whether a new patient is likely to fail to comply with medical advice. Ultimately, these patients will wind up in emergency rooms and other venues that cannot turn patients away.

Policy makers have a public obligation to understand the complex dynamics of the health care system before they propose changes that may have adverse effects that are as undesirable as the problems within the current system. “First, do no harm” does not only apply to caring for individuals.

By Kate Fenner, RN, PhD, Chief Executive Officer, Compass Clinical Consulting

Everyone is waiting for the shoe to drop – the impact of Healthcare Reform on hospitals. The details change daily depending upon which government plan is getting attention by various Congressional committees.

No one yet knows what shape reform may take but the predictable is being prognosticated by the pundits; we will most probably be asked to do more with fewer resources. One CEO of a for-profit system acknowledged to us recently that reform is one of the issues that is robbing him of sleep. Another CEO of a prestigious academic hospital is already taking steps to be out ahead of the game with a major workforce planning and productivity process redevelopment for when the inevitable decisions are made into law.

When you know the inevitable, why wait for details?

The cost pressures will not disappear. Increased access to high-quality healthcare must be paid for by everyone – including hospital providers.

1. Increased access brings both problems and opportunities. Problems for those not ready and opportunities for those hospitals that are getting ready to turn difficulty into advantage.
2. Cost pressures on providers likewise hang like a sword over every hospital leader, with little foreseeable advantage to community and academic hospitals. Again, however, there is opportunity for the prepared.

Smart executives can begin girding their hospitals for reform, regardless of requirements. How so? By stepping back two paces, taking a dispassionate eye to evaluating the status quo and going about the business of needed change before it’s mandated.

Several changes are predictable.

First, is the necessity of absolute efficiency. This is just a restatement of the Four Rights: right people with the right skills using the right processes in the right numbers. There will be no room for bloat, redundancy, inefficiency and overstaffing. Well-managed productivity systems and processes will be critical to preparedness.

Second, will be managing patient throughput, length of stay and case management. This requires admitting only those who need to be admitted, treating efficiently/effectively and discharging in a timely manner while minimizing waste, unnecessary care and readmission. Shaving patient days for particular DRGs will translate into millions of dollars in greater efficiency.

Third, will be managing revenue cycles with a draconian eye towards effectiveness; idle money, cumbersome systems and obscure processes must be banished.

Underlying these three critical requirements is the use of benchmarks. Valid yardsticks for measuring one institution’s performance against peers are ubiquitous; courage to dispassionately apply them is needed. But one hospitals benchmarks and targets cannot be arbitrarily dropped on another hospital. Each situation is unique and both senior and mid-management must be in agreement and take responsibility for making changes to hit the targets they collectively agree to meet.

A dispassionate assessment of current organizational state is the foundation for prioritizing and then addressing the areas above. Executives frequently have a “gut feel” that an area isn’t functioning at its optimal level. Application of measurement derived from objective industry standards permits validation of that feeling and opens the door to the necessity of corrective action. Armed with realistic targets and needed process changes, leaders can bring order to the potential chaos threatening the viability of the organization.

Don’t be a sitting duck. Smart executives aren’t waiting for reform to materialize, they are preparing now by getting their organizations lean and effective in anticipation of the requirements that are inevitable, regardless of what reform regulations become law.

For more information on hospital preparation BEFORE reform hits, visit Operational Improvement.

By Cary D. Gutbezahl, MD, President, Compass Clinical Consulting:

This week, the administration of Broward General Medical Center announced that a nurse had been reusing single-use IV tubing and saline bags. This problem had gone on for years, putting patients at risk for infectious diseases. Upon learning of the problem through the compliance hotline, the hospital acted responsibly. But one can’t help but ask, “How could this happen?” More importantly, we must ask, “How could this have gone on so long?”

As we all know, sometimes things happen in hospital operations that result in patient harm. Not infrequently, the proximate cause is that one or more people are not doing what they are expected to do. Although many factors may contribute to an avoidable injury, investigations often reveal that the policy and procedures were in place, the staff was trained on and understood the policy and procedures, staffing was adequate to do the work, but people didn’t follow the policy. Upon further investigation, it is often found that this one negative event was not a unique occurrence. Rather, lots of people fail to follow the policy, this just happened to be one time when the problem was detected. So, you have to ask, “How could this happen?”

The common managerial response to such adverse events is to punish those who were caught. Executives believe that this shows leadership and sends a message to others. But does it have any lasting effect? And does it convey the right leadership message? Punishing the guilty is appropriate, but it conveys the message that bad apples are the source of problems and that getting rid of them solves those problems. In other words, it’s not the system; it’s the people. Not only is this not a humanistic management message, but it ignores the observation that many people weren’t following the policy. Furthermore, a one-time event is not likely to have a more sustained impact on behavior than the original training on the policy.

To fix the problem, executives and managers must do two things. First, you have to investigate why people aren’t doing what they know they should be doing. You have to involve people who haven’t been doing their jobs to understand their reasoning. While it may be a challenge to do this in a non-threatening way, gaining the trust of the participants is critical to developing a systematic solution to the problem. You can’t assume that the problem was due to “bad people.” People act in response to their environments, whether that means workflow interruption or cultural norms. You can’t fix the behavior if you don’t understand the source.

The second step is to fix the problem. A highly attractive, but rarely available method is to develop mechanisms that force the desired behavior to occur. These types of solutions are usually technology-driven, e.g., an alert that is only turned off after blood pressure is checked. Of course, people may find ways to circumvent such technology. People can falsify documentation so modifying documentation requirements is not foolproof.

One critical component for management, especially when implementing a corrective action, is to design and implement a management information system that monitors the desired behaviors. You can’t assume that one-time corrective actions will continue to have the desired effects. Behaviors can drift over time. You need information, and you need to be creative in thinking about how to get that information. For example, if one-time use material is being reused, one should observe unexpectedly low supply costs.

In healthcare we also have an obligation to assure the competence of our staff. People have to be evaluated not just on knowledge, but on practice. Supervisors need to work side by side with staff to observe behaviors and make sure that the staff is following the policies and procedures. If this isn’t happening, management needs to find out why.

Finally, in our work investigating adverse events, we have found episodes of mass non-compliant behavior. Undetected errors lead to patterns of errors. At one hospital, “everyone” took wheelchairs across the entrance into the MRI suite, but “this was the first time that the metal wheelchair was (violently) pulled into the magnet.” These are particularly hard issues to monitor, unless you get out and see what’s going on. MBW (or Management By Wandering around) is still a good idea – old ideas should not be discarded just because they are old. But you have to look for problems, not just socialize.

The absence of a detected problem is not evidence that policies and procedures are implemented as designed. As hospital executives and managers, you don’t want to ask, “How could this happen?” because you’ll be reading your answer in the newspaper. Instead ask yourself, “How do I know what really is happening?”

To learn more about hospital policies and patient safety, visit Executive Leadership.

When we are asked to help a hospital that has major financial or quality problems, we almost always find that these problems didn’t begin overnight. In fact, there was evidence of problems for many years. In retrospect, it is easy to point fingers at those individuals and boards that “missed the problem.” The more important issue is whether the problem should have been recognized at an earlier time, when the problem could have been corrected without significant damage to the organization.

Our experience says that while hospitals sometimes overlook indications of problems, more often, CEOs and boards tolerate a series of ineffective attempts at fixing the problem.

Why would that be?

One reason we have found is that there exists a limited understanding of the real nature of the problem. Many organizations don’t think through what is driving poor performance issues. The best way to gain an understand of the problem is to mix knowledge with novelty. We recommend bringing knowledgeable insiders together with “uncontaminated,” but capable participants. The insiders provide factual information about what is going on, while people who are uninvolved can ask questions to surface issues that might be overlooked by people involved in the issue every day.

Another cause of poor performance is an unwillingness or inability to figure out how to deal with the drivers creating the problem. For example, sometimes people are afraid of asking the medical staff to change. In reality, this should not be difficult if hospital leaders develop a good solution that meets everyone’s needs.
Again, this is a situation in which unbiased participants can spur innovative solutions. Non-participants can ask questions or challenge assumptions that prevent creative solutions. As an interim CMO, I have often approached problem physicians and achieved positive outcomes. I don’t think this was because we were both physicians since other physician leaders had made failed prior attempts. The source of my success was that as a newbie, I wasn’t afraid of approaching the physician, I showed respect and that I brought a fair and unbiased perspective.

Often, failed problem-solving begins when the wrong people are invited to solve the problem. Many hospital managers when faced with a problem of poor performance have a tendency to “round up the usual suspects” (apologies to the movie, Casablanca). Frequently, this means the very people who have been unable to solve the issue before are still asked to come up with a new answer. The people who are involved in long-standing or slowly simmering problems had plenty of time to fix the issue but have been unable to arrive at a durable solution. This is a case of what you don’t know can hurt you – and it calls for a new set of eyes to bring about sustainable improvement in performance.

To create solutions to persistent problems, leaders and managers need to think differently. That usually requires gathering new perspectives from people who haven’t been part of the problem.

Read more about how hospital leaders can impact hospital performance.

Pressured by the prospects of mounting losses, leaders of Miami, FL, hospital expressed concern Monday that the public hospital employees had racked up almost 1.2 million hours of overtime over a 12-month period. Jackson leaders expect the system to lose $56 million this year and $168 million next year, and they’re looking to shave costs wherever possible.

Response by Shawna O’Neill, RN, MHA, and Labor Productivity Consultant at Compass Clinical Consulting:

Yikes!!

In hospitals across the country (unionized and non-unionized) we find the phenomenon of unreasonable overtime driving the cost of safe, quality healthcare out-of-control.

What the use of overtime and premium pay does to drive up health care costs is a shame, when those dollars could be put to much more productive use.

With the mandate to cut hospital costs, this is one area that is easily identifiable and fixable vs. the trauma of laying-off employees or 5% “across the board” cuts which is unfair to those departments already doing a good job. Some employees get very used to the overtime and in fact count on it in their pay check. Paying overtime to employees can never be cheaper or save the hospital money than having staff deployed according to:

RIGHT PERSON, RIGHT ROLE, RIGHT TIME, RIGHT PLACE (R4)

There are times when overtime may be an okay option in small doses. In departments where the workload is very volatile, overtime may be a better answer than having too many core staff that are asked to stay home when the volume falls. This is a delicate balance because once overtime is approved for a few departments it can easily get out of control in those departments and can then spread through the entire hospital.

HOW DO HOSPITALS OVERCOME THIS?

Determine your current percent of overtime hours compared to your total paid hours. Productive hospitals run 1% – 3% of overtime hours total paid hours.

Measure overtime by department to determine outliers. Work with those managers to find the reasons for excessive overtime (process changes to become more efficient, time management education if there are specific employees identified as consistent recipients of overtime).

Avoid casual behavior regarding clocking in and clocking out and make sure managers are monitoring and dealing with incremental overtime.
There needs to be departmental workload based productivity standards. Each department should have a staffing plan based on these standards and additional plans for increases or decreases in volume e.g. seasonal fluctuations in census. The position control should be filled with employees to meet the staffing plan – correct skill mix and adequate full-time and part-time mix must be identified. Float pools &/or per diem staffing should be built based on historical leaves, PTO, and seasonal census fluctuations. There should also be a daily staffing plan so that staff shifts as volume shifts.
The staffing plan should only have 12 hour nurse scheduled for 6 days in a pay period (0.9 FTE) so that overtime is not incurred (most hospitals have full-time benefits for 72 hour / pay period employees).

A GOOD NEVER

A good policy is to never schedule overtime.

It should only be used for emergencies (sick call, FMLA). Clear staffing and scheduling policies that are adhered to and implemented in all departments can also help to eliminate overtime e.g. the number of staff, by skill mix and shift, that are allowed to take vacation at the same time. Ensure that employees with attendance problems are progressively disciplined and that human resource policies are consistently employed throughout the organization.

What Health Care Reform will certainly bring:  It’s difficult to predict the specifics of what health care reform will bring, but it is clear that it won’t be business as usual. We believe that three things will be certain results of the current public debate.

First, reimbursement changes are going to increase the importance of managing the cost of delivering services. Hospitals will need to pursue operational efficiencies with a vigor that has not been widespread. Labor costs, work processes, duplication reduction, and reducing unnecessary utilization will be critical for preserving the bottom line.

Second, coordinating care will become more important. The public debate has highlighted the lack of coordination of care providers. For example, the debate on readmissions has blamed the problem, in part, on poor follow-up after hospital discharge. Post hospitalization care is a responsibility shared among hospitals, physicians, nursing homes and home health care providers. Yet, no one seems to “own” coordinating care. Regardless of the structure of reimbursement changes, someone is going to get blamed (and penalized) for letting patients fall through the cracks. This requires rethinking the health system’s business design, from being a collection of provider assets to a unified, single provider that cares for a patient.

The third major change will be increased accountability for failure to ensure patient safety (as measured by results, not processes) and treatment plans consistent with best practices and evidence-based medicine. Oversights will not be tolerated. While much can be learned from investigating undesirable events, there will be much more emphasis on error prevention. After an event, staff may be motivated to prevent a recurrence and willing to make changes, but preventing an occurrence will require changing current practices when the staff may not appreciate the degree of risk.

Many hospitals will struggle with this cultural challenge. Case management should be an important part of achieving these goals. Many hospitals fear implementing an effective case management program because they perceive that case management is similar to insurance company authorization process. This is a misconception. Health system based case management should be built to optimize multiple care process outcomes (financial, quality, and patient experience). Case managers collaborate with other care providers; they don’t evaluate them. When operating properly, case managers are valued by patients, physicians and hospital staff. Case management can multiply the effectiveness of other initiatives. Smart hospitals are not waiting for new legislation. Their leaders see the writing on the wall and are steering their organizations to make changes now!

In our experience in case management, both in hospitals and in managed care organizations, we have found many reasons why patients are readmitted to hospitals. These include medical reasons (such as a complication or instability of the disease), patient reasons (such as lonely people who don’t want to stay at home alone or patients who don’t want to eat a low-salt diet), and post-hospital care provider issues (such as nursing homes that are short-staffed and want to send “sick” patients back to the hospital). All of these are not single solution problems. The only clear fact is that hospitals are not responsible for causing these problems.

So, how can the hospital be held responsible for all this?

Because hospitals are an easy target and other more realistic solutions are harder to implement or not politically acceptable (holding patients and their families responsible for unnecessary readmissions).

The public does not realize that Medicare, under current regulations, does not pay for long hospitalizations. In fact, the DRG payment system creates financial incentives to shorten hospitalizations and creates financial penalties to hospitals that have long hospital lengths of stay. Medicare also wants patients to go home (without home nursing care) rather than to a nursing home. Medicare is no more compassionate than any other insurer.

Medicare also requires that hospitals provide patients with a list of post-hospital care providers and expects the patients to choose. Hospitals cannot, by regulation, indicate preference to their own home care company.  Doesn’t this further complicate the degree of responsibility that a hospital can reasonably assume for rehospitalization?

If this unreasonable penalty against hospitals is implemented, Medicare should allow hospitals to refer patients to their own nursing facilities and home health care agencies. This will provide better continuity of care and enable the hospital to be a true health system responsible for providing a wider scope of services to patients in their community.

Congress: First Do No Harm

The Democrats in Congress are discussing whether to apply reconciliation procedures to passing health care redesign legislation (I would call this redesign rather than reform, since the latter term implies improvement, which is not established at this time).

Reconciliation procedures were originally created to prevent the government from shutting down over budget disagreement. They allow passage of legislation with a simple majority and prevent filibustering, which requires 60 votes to close.

Our experience as healthcare management consultants validates that the principles underlying reconciliation procedures are dangerous for organizations.

Research on conflict management shows that conflict can be beneficial for decision-making if used correctly. Conflict arises from differences in points of view. By discussing these differences in perspective, organizations can uncover hidden assumptions about a wide variety of issues, which are important considerations.

Research shows that failing to consider these types of differences results in poorer decision quality. Cutting off discussion prematurely has the same adverse effects as groupthink.

Managers can fall into the same trap as Congress by rushing an opportunity to make change.

Leaders know how hard it is to mobilize people for change. Consequently, there is a desire to seize the moment. Wise leaders use the moment to create momentum, but understand that poor preparation for change can have unanticipated and undesirable effects.

There is no substitute for planning that integrates task conflict (good conflict), and when necessary, undertakes small tests of change before widespread implementation. We have a highly visible example right before our eyes with the Massachusetts Healthcare Reform experiment. While still to early to fully assess, already we are seeing unexpected consequences that should not be ignored as we move forward with national reform.

Our political leaders are failing all of us by rushing to a pre-conceived solution and then using the reconciliation procedure to eliminate constructive conflict to arrive at a more well thought-out solution. Two tactics are being used to interfere with constructive conflict.

First, Declare an Emergency to Stop Cognitive Discussions

The first technique that people follow when they want their own way is to declare that the situation is “an emergency.” They announce that the emergency requires immediate action.

Keep in mind that an emergency is not the same thing as a need to change or reform a broken system.

Example: A person with significant coronary artery disease may need angioplasty or cardiac surgery, but the condition is not an emergency unless that person has elevated enzymes or arrhythmias. So we do more discovery and testing to arrive at the best treatment. If we do have a real cardiac emergency, medical practioners have well-tested methods for addressing the emergency.

The exact opposite is true with large-scale healthcare reform. If we concede that we are really in an emergency situation, we don’t have a well-studied roadmap for resolution.

The principle of “First, do no harm” is about not rushing into action before an action plan is well-designed. And a well-designed plan is not rushed to implementation until sufficient discussion, information-gathering, and exploration has been conducted – with people who have a range of ideas that can lead to a better, more effective implementation.

Second, Drive a Stake Deep into the Ground and Refuse to Discuss Options

The second technique to stop constructive conflict is that both sides are unwilling to see the other party’s view. Republicans refuse to agree to the legislation proposed by the Democrats.

This is a perfect example of poor conflict management.

In a successful organization, the goal of conflict management is not to force the opposition to accept the majority perspective but to encourage the opposition to explain the reasons why opposition exists.

After the reasons are identified, the organization’s leadership tries to resolve the differences of opinion (it always comes down to opinions) by discussion, seeking more data, or conducting experiments that help resolve differences of opinions.

Exploration of the conflict usually results in a better solution.

As advocates of Better American Hospitals, we want to encourage Washington to develop legislation that provides hospital managers with the ability to care for patients. We do not want to see any process put in place that will result in incomplete planning and testing before implementation.

Congress needs to act like responsible managers and ensure (not just hope) that legislative changes enhance the health care system’s ability to provide care. Do Americans deserve less than the best plan? Like good organizational leaders, in an effort to “first, do no harm”, Congress ought to ensure that a full debate on any proposed legislation occurs before any redesign legislation is passed.

In response to this type of oppositional thinking, I hope they don’t repeal “First, do no harm”.

Emergency Room diversions continue to be an issue in the news. The Washington Post, the beltway paper, recently reported on the problems associated with ER diversions in the District of Columbia and Maryland.

Diversions are when ambulances are sent to another ER because the nearest ER is too busy and does not believe they can safely provide care.

Since everyone else reported on the potential for adverse effects caused by extra travel, I thought it might be useful to understand that the hospital goes on diversion because it has determined that patient safety might be at risk if more critical patients were added to those already at the hospital.

Adding more work beyond the capacity of the ER not only jeopardizes the new patient but puts all the other patients at risk. For example, when an ER nurse has too many ER patients, there isn’t enough time to check on their status, comfort or educate them (or their families).

You might say, “Hire more nurses.” But, there may not be enough nurses available. And financially, where will the money come from when Medicare and Medicaid pay so poorly (not to mention the many uninsured patients)?

But there is another aspect of the problem that is controllable. Many hospitals do not adequately manage hospital length of stay. Many patients can be discharged or moved to another, less expensive, care provider safely and earlier. Critical care and telemetry beds are often filled with patients who don’t need those specialized services.

One hospital scrapped plans to build additional ICU beds after implementing a more effective case management/throughput management program. By managing bed utilization better, beds are made available for quicker transfer from the ER.

Other changes that would also speed ER patient care are to do more testing on patients who might need to be admitted in observation beds (non-ER) or in inpatient units instead of waiting for all the tests to be done before the patient is admitted. To make this happen, other things need to be done – but these also are within the hospital’s control.

Similarly, many times tests done in Emergency Rooms can be done for patients as outpatients. It’s a matter of coordination of care and reallocating resources.

The fact is that things can be done to admit patients to an inpatient bed faster or discharge patients from the ER faster. When these things are done the ERs can see more patients (and provide safer care), thereby reducing the need for ER diversions.

The solution is not “either/or” but “and.” We need social policies that reduce the influx of patients to the ER and we need management practices that do the best with what we have. Health care providers must do what they can, even if it’s not the total solution.

Too many are standing around trying to figure out how reform will impact hospitals.  Those standing still will find proactive leaders passing them by.

The smart leaders understand that regardless of how healthcare reform looks when it becomes law, the real truth is that we’ll all be getting less. Knowing this is the end-point gives us all the freedom to take action now.

Proactive hospital leaders are already assuming the conclusion and are getting to the task of cost reduction and quality enhancement in preparation for whatever change comes our way.

The strategy to thrive (who just wants to survive?) is critical, stem to stern evaluation of all processes within the hospital from operations through administration, from staffing through organizational structure.

This need not be arduous, laborious or time consuming but it must be critical, objective and structured. In fact there is much merit in a blitz approach to assessment yielding fast, reliable opportunities that can be prioritized and addressed with alacrity.

Such a rapid approach is less disruptive, more culturally respectful and garners fewer opponents capable of hijacking the process. Analysis-paralysis is prevented. In the end, nothing yells success like results that translate to the bottom line and the ability to invest in mission critical activities.

A relatively small hospital recently took action to reduce labor cost and put an extra $8 million on their bottom line without layoffs or departmental closings – a savings that will repeat year after year. Consider then, the even greater potential for cost reduction at larger hospitals. The places to look for productivity gains with dramatic results lie in improving labor productivity, increasing patient throughput, eliminating the need for facilities expansion with more efficient processes and LOS reduction.

“Waste Not, Want Not.”  Or as Ben Franklin once said: “A penny saved is a penny earned. “ Never have pennies been as important as when you are fighting a recession, healthcare reform and more aggressive regulatory compliance – all at the same time.

Read more about hospital financial performance.

If necessity is the mother of invention, then it is time to pay a visit to her cousin, replication – replication, as in borrowing from the higher education playbook in generating more charitable donations from individuals and families.

Colleges and universities have traditionally placed a much higher premium on generating both annual and planned gifts than the majority of hospitals. Rather than expounding on the many legitimate reasons why this is the case, let’s focus on steps the Board, the Executive Suite, and the Chief Development Officer (CDO) can take.

Step 1: How philanthropic is your culture?

According to a survey by the Governance Institute, only 18% of hospital Boards have a written policy outlining individual directors’ responsibilities for supporting the organization’s philanthropic efforts.

·         Is charitable commitment/charitable connection a primary criterion for Board member recruitment and performance?

·         How many trustees have donor-advised funds? Are any of those funds coming to the hospital?

·         What percentage of the Board makes an annual gift, and how many gifts are five figures or more?

·         How many planned gifts have been made by the Board and C-suite? A $10,000 charitable gift annuity can be a reasonable starting point.

·         What percentage of the annual operating budget comes from charitable gifts?

Step 2: Have you done an opportunity assessment in the last 2-3 years?

Even if you are not conducting a formal campaign, consider one-on-one interviews with your 100-200 most influential constituents. Ascertain their visions for the hospital and their philanthropic commitment to seeing that vision become reality. These interviews will yield a goldmine of opportunities for generating charitable dollars for both current and long-term needs, not to mention some great ideas for new initiatives.

Step 3: Is your Chief Development Officer empowered to be a player?

A fancy-schmancy title like CEO of the Hospital Foundation means little if your chief fundraiser is perceived as a lieutenant or special events coordinator. The Chief Development Officer at a college or university is usually right up with the Provost or Chief Academic Officer on the power grid. Many higher education Presidents were CDOs in their previous positions. How many hospital CEOs do you know that came by that path?

Either empower or hire a CDO that has full access to the Board and the requisite skills to work with Trustees and the C-Suite to create a true culture of philanthropy. The pay-offs will be worth it!

Read more about hospital fund development.

Jim Mahon is a Principal at Compass Group, Inc., and has previously served as a Chief Development Officer in both the higher education and healthcare fields.

Recently published research in the Archives of Internal Medicine has attracted attention because it concludes that small gifts influence physician choice of medications. I am certain that this study will be used to justify future public and organizational policy decisions.

The focus of my comments is not related to influence on physician decision making. The issue is the misuse of research findings and extending conclusions beyond the conditions of the research. That this research is publicized is evidence of the failure of our educational system! It’s time to stand up and scream “Foul!”

This research used compared medical students, not physicians, at two medical schools that had different policies about small gifts from pharmaceutical companies. Based upon psychological tests of positive and negative associations, not prescribing patterns, the researchers concluded that even small gifts influence opinions.

There are a lot of reasons to believe that there are significant flaws in drawing conclusions about practicing physicians from this study.

First, the subjects were students not practicing physicians. Relying upon them as representative of physicians would be like assessing how well students can perform laparoscopic cholecystectomies and concluding that physicians are not skilled enough in performing surgery. Is there anyone who does not recognized that medical students differ from practicing physician?  Medical students are not engaged in “self-learning” and evaluating journal articles or practice guidelines. They are passive recipients of information. Physicians learn how to become life-long learners in their residencies. In addition, medical students have not gone through the socialization processes that are part of post-graduate medical education that prepare the physician to have a more questioning attitude to what they are told. And medical students are in an economically different place than practicing physicians and might be subject to greater influence by lower cost items (determining whether that’s true is a research study, in itself).

Second, if that were not enough to debunk this study, a fundamental flaw of experimentation was overlooked. Only two medical schools were studied. While these schools differed in their policy on small gifts, it’s very likely that they varied in other characteristics also. For example, faculty attitudes toward drug expenses might be different (which would align with the differences in policies). The problem is that there may be many unknown dimensions in which the two schools differed. To overcome the unknown differences, one needs to study students from more schools. Even that might not be sufficient, depending upon what the data reveals.

More than likely, the researchers had their minds made up before they conducted the research. That is, they were biased. When researchers are biased, it influences the quality of their research design, their analysis of data and the conclusions they draw. Ultimately, their research is not research, but rhetoric. Research requires skepticism.

The same is true in management. When management seeks to confirm what they believe to be true, they begin a path down a road that leads to missing important warning signs. Good research and good management research challenges pre-existing belief. Trying to confirm what you already believe is a dangerous practice. Instead, try to disprove what you believe to be true.

Taking $2 Trillion out of the healthcare system in the next decade is going to force everyone to change how they do business – hospitals, doctors, pharma manufacturers and retailers, medical equipment manufacturers – everyone. That’s the sum that has been pledged in exchange for a seat at the table where ultimate healthcare reform issues will be decided. For starters, hospitals will be looking at how to continue providing great care for several percent less in revenue.

The Robert Wood Johnson survey data discussed in my previous blog post are very interesting, but  in reflecting further on that 2001 survey, the world has changed. Data that were predictive in the past will not be predictive of the future. The RWJ survey simply could not account for the reality of healthcare reform and the impact of universal coverage.

Generals have always fought the last war. As they have painfully learned, the military needs to prepare for the next war. The same is true of hospitals facing healthcare reform.

The problem facing healthcare providers is the lack of primary care doctors. There is a lot of attention now in Washington about doctor reimbursement to encourage more doctors to go into primary care rather than into specialties. While this argument moves forward, too little attention is being paid to the immediate impact of healthcare reform on hospitals.

Universal care will likely overwhelm hospitals unless their systems can handle the surge of patients. Streamlining systems will be more important than ever before. Survival will no longer go to the fattest (as the RWJ Foundation data showed), but to the quickest.

The ED will be the front door to the problem. Because there are not enough primary care doctors to serve the rapidly expanded population soon to be entitled to care, these people will go to the nearest hospital emergency care unit in volumes too large for most EDs to handle. This is precisely what happened in the Massachusetts reform. Patients had nowhere to go except the nearest emergency department.

But the problem will not stop at the ED. It will rapidly flow across inpatient facilities and ancillary departments – more tests, more therapy, more pharmacy orders … more of everything. It will be like the python swallowing a pig. We will be able to watch the surge of patients hitting one department after the other as hospitals, like the python, attempt to swallow their pig.

Hospital managers cannot fix one part of their systems without a complete systemic redesign … like the old song “Dem Bones”:  The foot bone connected to the leg bone, the leg bone connected to the knee bone, the knee bone connected to the thigh bone …”

Hospitals best prepared will be those that focus now on the imperative for streamlining processes, eliminating redundancy and waste so they are quick and reimbursable. Hospitals that prepare now to handle the increase in volume will be in a position to benefit from influx of new patients.

If we are fast and good, the money will follow. 

This does not consider the potential negative impact of lower reimbursement rates. Selling at a loss and making it up in volume is no way to run a hospital. Government reformers need to understand that many hospitals are already running in the red and pushing unprofitable patients through the system will aggravate quality.

Two areas that will provide positive (even stunning) return on investment are labor cost management and case management. Both get at internal process and policy changes needed to reduce the amount of time staff spend on caring for patients efficiently. Altru Hospital in Grand Forks, ND, for instance took $4 million off their bottom line in less than 12 months.

We invite you to contact us so together we can look for opportunities to improve your most critical clinical processes. Call Cary Gutbezahl, MD, at 513-241-0142.

The primary rule of medicine is “first, do no harm”.

Why can’t health care policy makers adopt the same principle? Otherwise, in the not too distant future, we’ll be scrambling to replace the next broken healthcare system.

While the current health care system has generated its share of problems and complaints, the Federal Government is busily working on a successor program. We applaud the focus on improving access and managing costs, but wave a yellow flag about some basic opinions that seem to be the basis of evolving healthcare reform.

As the debates roar on in Washington, considerable attention has been focused on the so-called success of Medicare and recent Massachusetts health care reform.

Government policy analysts consistently err in predicting the effects of health policy.

Did anyone in 1964 think Medicare expenditures would be as high as they are today? The fact is that decision makers failed to look forward from a factual, predictive basis. They would have realized that there would be many more beneficiaries due to longer life spans, technological advances, and greater intensity of service. Despite monopolistic price control by the Federal Government, the sheer number of Americans now receiving coverage has driven Medicare expenditures through the roof.

Two recent news reports suggest that what we are promised may not be what we get.

The first story is from Massachusetts, the state whose model for health insurance reform is touted as a model for federal reform. Just this month, the State dramatically exceeded their own predictions and incurred an increase of nearly 25% to subsidize health care insurance in the last fiscal year. It should be noted that these are not healthcare consumers who fall under the poverty definition for Medicaid eligibility. Instead, the overrun was created by an increase in the number of people who purchase State-subsidized insurance. The cause for the increase is the number of eligible people; not increases in the cost of insurance.

Playing Politics with Healthcare

Similarly, government estimates of the cost of the end-stage renal disease program were grossly underestimated. Such gross underestimates of the costs of health care programs is more common than accurate estimates. These underestimates allow politicians to build a consensus for change. But the agreements underlying the consensus are eroded due to cost overruns. When the unanticipated results occur, financial distress forces the politicians to modify the deals that initially were made to get the legislation passed. Changes include health care provider taxes, reductions in payments to physicians and hospitals, and utilization review techniques.

Payment reductions and administrative hassles lead to the second news report. Last week, the New York Times reported that Medicare enrollees are having difficulties gaining access to physicians. Studies show that an increasing number of physicians are withdrawing from Medicare because payment levels are too low and there are too many administrative hassles. Physicians are often willing to negotiate a private arrangement with the patient, but they would rather forgo business than continue to practice under Medicare’s rules.

Physicians Choosing to Quit Serving Medicare Patients

That physicians are choosing to withdraw from Medicare has important implications for policy making. First, some voices in the public debate contend that the success of Medicare should be spread to other health care consumers. While Medicare is a success in many ways, it should be recognized that it has generated many problems as well. Medicare does not pay its fare share of health care costs. Since the beginning of Medicare, expenditures have far exceeded any predictions when Medicare was approved. In response to rising expenditures, due in large part from rising demand, the government has unilaterally set lower prices. We are now seeing that this is hurting access to care.

Pay-for-Performance Sounds Good Until You See How it Increases Costs

In addition, government plans to increase “pay for performance” are not likely to reduce the “hassle factor”. In fact, recent demonstration programs noted that many physician groups reported great difficulties (and expense) in trying to comply with the program’s reporting requirements. In other words, physician reimbursement reform may result in more administrative hassles, rather than fewer. Similarly, proposals to create bundled payment for hospitals and physicians are likely to create problems from a new set of built-in financial incentives and fights over “splitting the pie”.

If the government policies reduce the willingness of physicians to see patients, we will be creating a new set of problems. This issue should not be ignored since another lesson from Massachusetts is that expanding the numbers of insured people has resulted in shortages of physicians due to higher demand.

Where’s All This Headed?

There is a joke among compensation consultants that every company is working with three incentive plans. The one they one they just implemented, the one they just replaced, and the one they are working on to replace the new program. It seems likely that the same thing may happen to health care.

If we do healthcare reform right, we can perhaps avoid being the butt of the joke.

Image: http://erlc.com 

Cary Gutbezahl, MD and President, Compass Clinical Consulting

Research reported in a recent New England Journal of Medicine showed:

• Almost one-fifth of Medicare patients are re-admitted to a hospital within 30 days
• Over one-third are re-admitted within 90 days
• More than three-quarters of the re-admissions were following medical admissions, suggesting that the vast majority of hospital admissions were not scheduled admissions (most medical admissions are urgent and emergent, as are many surgical admissions). 
• More than half of patients who were re-admitted within 30 days did not see a physician prior to readmission.

The implied assumptions underlying the research design are also important.

The study implies that because 50% of re-admitted patients had no outpatient physician visits (as determined by invoices), their care was sub-optimal. This logic is flawed.

The facts of this research provide important information to focus further investigations into reducing healthcare costs.  The study, however, has significant limitations.

No one seems to notice that this research reported in April 2009 is based on the patients who were admitted in the Fourth Quarter of 2003 and followed through the end of 2004.

Thus, the effects of programs to reduce complications during the past few years such as the surgical complication reduction programs, acute myocardial infarction and congestive heart program were not included.

First, physician visits are not the only way to monitor patient compliance with treatment plans and clinical status. Many patients receive outpatient treatment from home health agencies. Some patients are admitted to skilled nursing facilities which require an examination shortly after admission (it isn’t clear whether the data revealed that these patients did not see a physician, which might suggest a methodological flaw). It also isn’t clear whether re-admission was more likely in nursing home patients than patients who were discharged to home, or whether re-admissions were more likely in patients discharged home with nursing care. In discharge planning, these supplemental care resources are associated with an assessment that the patient is at higher risk for re-admission. These patients are monitored, even if the physician does not see the patient.

Second, the observation that 50% of re-admitted patients were not seen by a physician may be skewed by the distribution of admissions within the 30-day period (shorter periods between hospitalizations had higher rates of not seeing a physician). However, it is concerning that only 25% of re-admitted patients at the 30-day mark had not seen a physician.

Medicare Demonstration Project

The results published in NEJM should also be considered in relationship to the recently reported finding of a Medicare Demonstration Project that showed that most “disease management” programs did not have a beneficial effect upon preventing subsequent problems. Disease management programs provide nurses who have frequent contact with patients to monitor compliance and screen patients for early signs of deteriorating care. Nurses contact the patient’s physician when the nurse is concerned about the patient’s clinical status.

How can these the NEJM results be reconciled with the Medicare Demonstration Project?

First, there is too little information in the NEJM article to understand why re-admissions occur. No patients were interviewed and no discharge instructions or medical records were reviewed. Instead of providing data, the authors cite reports showing reduced re-hospitalization rates based on better discharge planning (one of which was written by one of the authors). By the way, these studies did not cite physician visits as a preventative intervention for re-admission.

The Potential Impact of Flawed Logic on Healthcare Policy

There are several problems with transferring the responsibility for preventing re-admissions to hospitals through changes in reimbursement. This assumes that the causes of re-admission are known and that they are preventable. Additionally, the prevailing opinion is to punish hospitals for re-admissions. This will result in less money to hospitals that are already struggling to cover their costs. Although there is no evidence that hospitals are responsible for readmissions, it seems like policy-makers are trying to push the responsibility for reducing re-admissions to anyone they can accuse.

Another issue in holding hospitals accountable for re-admissions is patient choice over home health care agencies and skilled nursing homes. How can hospitals be accountable for re-admission rates when the patient has the choice over which home health agency is used or to which nursing home that patient is admitted? Does the patient lose choice or does the hospital get stuck with the risk when there is no ability to control the post-acute care provider?

By the way, let’s not forget that patients do decline and eventually die, despite the best medical treatment.

Policy-makers are rushing to find a culprit so they can utilize penalties to cover some of the cost of healthcare reform. But flawed logic will lead to bad policy.

As Henry Mencken wrote over 50 years ago:

      “For every complex problem, there is a solution that is simple, neat and wrong.”

When we are making healthcare policy, let’s make sure we really understand the issues and when we see any evidence that some of our conclusions are flawed, let’s step back and count to ten before we make errant decisions. 

According to the CDC’s National Center for Health Statistics “National Health Care Survey.” annual of emergency department visits jumped from 90.3 million in 1996 to more than 119 million in 2006, a 32 percent increase. At the same time, the percentage of non-obstetric hospital admissions that came through emergency departments climbed from 36 percent in 1996 to 50 percent in 2006.

“This means that a lot of diagnostic work is being done in the ER, and it is prolonging ER stays,” said Stephen Pitts, M.D., M.P.H., a fellow at the National Center for Health Statistics and an associate professor of emergency medicine at Emory University, who led the study.

The study strongly suggests that the growing use of emergency departments is directly related to the shortage of primary care physicians. Without a regular and continual source of care, patients are more likely to turn to emergency departments for treatment, said Pitts in an interview with AAFP News Now.

The study also reached the following conclusions.

·         Patients with Medicaid use the emergency department more frequently than patients with private insurance — 82 per 100 persons for Medicaid compared with 21 per 100 for private insurance. Medicaid patients have a harder time finding physicians who will treat them than do patients with private insurance, which accounts for the disparities in ER visits, Pitts said.

·         The average waiting time to see a physician in the emergency department was 56 minutes.

·         The rate of visits per 100 persons was about 36 percent for whites compared with nearly 80 percent for blacks, a fact that Pitts attributed to many blacks’ lower socioeconomic status and, consequently, their decreased access to physicians outside of ERs. Cultural factors also could play a role in discouraging blacks from seeking care from places other than ERs, Pitts said.

·         The rate of visits per 100 persons for Hispanics was about 35 percent, lower than the rate for whites. Pitts said this statistic could be a result of language and cultural barriers that make Hispanics less likely to report their visits to ERs.

·         Most ER visits occurred after normal business hours — 8 a.m. to 5 p.m. on weekdays — when 63 percent of adults and 73 percent of children younger than 15 came in.

Need to learn how to use ER facilities smarter.

Blogger Kevin Pho, MD, notes in a recent post:

One-fifth of patients coming to the ED did not have conditions requiring emergency care, and another one-fifth had urgent conditions that could have been treated in a primary care setting, the report shows.

The last point has resonance. The key is primary care and specialist access. When I work in ED fast-track, there is a good proportion who come in for medication refills and the like – simply because they can’t contact nor see their primary care physician.

Uninsured and Medicaid patients in some communities might have to wait six months or more for an appointment with a specialist. But if they go to an ED, they get all their needs met in one place at any time.

“The convenience of the emergency department really offsets the long waits that are associated with it” . . .

When patients use the ER, they get immediate attention to their ailments, but then return home with no means for follow up visits … no prevention until they return again to the ER for their next episode.

The uninsured actually are underrepresented in ER units compared to the overall population—17 percent of people in our country are uninsured, but they account for somewhere between ten and 15 percent of visits to the ER. When they do come in, they tend to put it off until the last possible moment, until they’re really sick.

If today’s uninsured were insured by a government/commercial system, they could then go to a primary care physician at a cost far lower than at hospital ER units. The case management plan for addressing their healthcare problem would be planned out by the primary care physician and the individual would stay healthier. This would also decrease the number of readmissions because follow-up care is provided outside the hospital.

Just one problem: there are not enough primary care physicians and they are not always located in the right place where those currently uninsured live.

The fact that there are fewer primary care doctors mean it’s hard to get appointments. If you call your doctor’s office and you say, “I’m really sick and coughing up green stuff,” and the doctor’s office says, “we can see you in two weeks,” you might think you need to go to the ER instead. But the issue you are running into is the queue to get in an see the relatively few primary care doctors is growing – at times beyond their ability to respond in a timely manner.

Considerable research indicates that a majority of policy makers and even doctors believe primary care doctors need to be paid more – to attract more medical students to pursue internal medicine instead of the more lucrative specialties.

While addressing primary care physician compensation, policy should also be focused on how to motivate more doctors to provide care in areas not now covered – rural and urban localities, in particular.

And there are other problems that backup into the ER. There’s a shortage of nurses and in-patient beds so you might get triage in the ER and have no room in the hospital for continued treatment.

There are no easy solutions. The ER can work on throughput issues. But that’s a tiny fraction of the problem. Hospitals cannot predict how many people show up in the ER. They cannot control how soon someone can get a bed if the hospital is short on beds or nurses. You can’t blame any one part of the system. You can’t say this is the ER’s fault, or the inpatient service department’s fault, or primary care physician’s fault. If we keep pointing fingers and blaming people, we’re not going to change anything. This is a system wide problem. If we are truly in the midst of coming healthcare reform, then all parties need to tackle this as a systemic issue … if healthcare reform is just about increasing access for the uninsured and decreasing the cost of the healthcare system, then we will have missed a huge opportunity to take a holistic approach to clinical care.

As many as a fifth of all Medicare patients are re-admitted within a month of being discharged and a third are re-hospitalized within 90 days.

Dr. Stephen F. Jencks, a former Medicare official, authored a study which analyzed Medicare claims data on patient re-admissions. He estimated that this cost was $17 billion in 2004 alone. Many re-admissions could be prevented with better follow-up care, according to Jencks’ study  in the New England Journal of Medicine and as reported in the New York Times.

The Obama administration has already identified hospital readmissions as a source of potential cost-cutting. The president’s budget calls for $26 billion in savings from patient re-admissions over 10 years, which includes lowering payments to hospitals with high numbers of patients who are re-admitted. Such a kneejerk reaction simply penalizes hospitals for following the rules — get patients out of the hospital according to DRG rules.

More Unintended Consequences

In our opinion, a kind of reaction by government is the wrong way for an enlightened leadership to address hospital readmissions. Simply decreasing payment to hospitals with high rates is an example of not seeing the whole situation. Penalizing hospitals by reducing payment for readmitted patients will create yet more unintended consequences.

Instead, more thought should be given to helping hospital leaders solve the problem with educational and outpatient care that is reimbursed. This approach can lower readmissions without making hospitals bear the financial consequences for failed policy.

We stand solid behind the need for rapid healthcare reform, but not by going so fast that the reform comes out wrong. Penalizing providers will have repercussions that hurt patients and, in the end, increase healthcare costs. Working with providers on a comprehensive and financially supported plan to overcome a serious problem is a necessary part of successful reform.

Hospitals, like all businesses, are in a race to become much more efficient, accomplishing more with the same, or even fewer resources. Stagnant or declining hospital revenue increases motivation to eliminate activities that bring little value, or even undermine quality outcomes, delivery and service.

We face is some ways “the perfect storm” — a movie about a fishing trawler caught in a perfectly coordinated fury of nature that led after a brave fight to the sinking of the boat and the loss of the crew. The perfect storm of 2009 for healthcare is a recession so deep that it is causing consumers to reduce their seeking healthcare services, a national economic reform that is so large that virtually no one can see the whole picture, and the near certainty of some form of universal access that will in one swoop double the potential number of patients coming into a supply system that is geared for much lower numbers.

Few businesses have the complexity that hospitals must deal with on a day-to-day basis. That means simply there is no magic bullet that is going to cure hospitals as fast as the government and other payers want things fixed.

Conflicting Signals

In fact, one part of government is pushing for cost reduction while another is pushing for higher levels of certification that call for increasing some areas of cost. Yet another is pushing for universal access to the system, a noble and essential pursuit of humanity, but it is being done without concern for the supply of care … today’s medical practitioners and facilities are not equipped for massive new numbers of patients.

While some may want less spent on healthcare, this movement toward universal access demands additional providers and facilities, combined with new ways of working effectively and efficiently. There may be attempts by government to push cost by containing payments to providers, and that will almost certainly lead to unintended consequences like the brightest of future college students seeking careers outside healthcare.

Such is the box we all find ourselves in with an impending struggle between government, physicians, hospital leaders and consumers of healthcare.

Admittedly, there are ways in which hospitals can move forward in both efficiency and effectiveness. That, after all, is precisely the task that the people at Compass Clinical Consulting have dedicated themselves.

We all need to make sure that unintended consequences of reform do not tear down what is still – with all its room for improvement – the best healthcare system in the world.

We know from experience that you cannot boil the ocean. The first thing is to begin listening. Our ears must be tuned to hear problems and discontinuities, especially those that seem counterproductive to producing a better hospital. No two hospitals are alike. Practically speaking, even no two DRGs are exactly alike. So when you ferret out the distinctive qualities that make you a good hospital and those that can be improved to make you a better hospital, you have begun the process of prioritizing action.

The time for such productivity improvements is now. If we wait for the perfect storm to swallow us, it will be too late to make the changes needed.

Sharon Begley, senior editor of Newsweek and accalimed for her ability to write about complex topics so that they are clear and understandable, has another point of view, expressed in this week’s issue of Newsweek Magazine. She sees doctors as having long resisted using science to guide their practice, thus leading to a chronic pattern of overtreatment and using more expensive techniques than are necessary.

Begley writes: It’s hard not to scream when you see how many physicians, pharmaceutical companies, medical-device makers and, lately, hysterical conservatives seem to hate science, or at best ignore it. These days the science that inspires fear and loathing is “comparative-effectiveness research” (CER), which is receiving $1 billion under the stimulus bill President Obama signed. CER means studies to determine which treatments, including drugs, are more medically and cost-effective for a given ailment than others.”

Spending a billion dollars to determine effectiveness of one treatment over another will shine a spotlight on some of the issues. Then it becomes policy-making time. Does Washington through its power behind Medicare payments dictate to doctors and hospitals how to treat patients? Or do we prefer as patients selecting our own physicians and hospitals based on they go about healing us? And who will pay for the difference?  In the end, no one wants overtreatment, we just want the right treatment. Who is to say who is right?