Quality: Promoting Performance or Process?

Last week’s reform summit focused the political spotlight on existing proposals for solving problems of access (i.e., availability, affordability, and coverage of insurance). Lesser discussions of cost and quality were also restatements of previously stated positions. The meeting of the parties was civil, but it was not a meeting of the minds.

If even one participant responded to the President’s request for new ideas—a precondition for progress, in my opinion—I missed it. Consequently, to complement last week’s new idea for getting expenditures under control by fixing medical spending at 17% of GDP (see 2/22 post), here is a new idea for improving quality: let’s replace pay-for-performance with pay-for-process.
Pay-for-performance (P4P) has caused many providers to improve care, but it has not eliminated bad care. Meeting an 80% performance standard, a common threshold for P4P quality indicators, is an improvement for many providers. However, 80% falls far short of doing the right thing all the time. I’d like to think that 100% appropriate performance is possible in a country that spends 17% of GDP on health care.

Pay-for-performance is viewed cynically by providers. It is frequently called pay-for-reporting because collecting the numbers presumably gets more attention than improving the care. Recent analysis even suggests that costs of reporting may exceed the financial rewards, reinforcing the cynicism. P4P is also compared to the equivalent reform in K-12 education, No Child Left Behind, where teaching students how to take the assessment test has become more important than teaching them how to learn.

Rewarding, even requiring, an operational performance improvement process (PIP) deserves serious consideration as a better approach to ensuring top-quality care. Assuming Americans don’t want anything less, I seriously suggest that health reform replace selective P4P with PIP encompassing the delivery of all care. Reimbursement and regulations should give providers a strong incentive to use data-driven, standards-based processes (e.g., ISO 9001, lean management, Six-Sigma, TQM/CQI) that identify unexplained variations and immediately initiate actions to prevent problems from happening again.

A comparison of performance-based and process-driven approaches helps make the case for shifting reform’s focus from meeting minimum standards to optimizing all care. Under P4P, hospitals receive extra payment for being able to document that aspirin was given to 80% of all heart attack patients within a specified period of time. Under PIP, hospitals would only be rewarded when every heart attack patient was evaluated and treated according to a protocol on the appropriate use of aspirin.

This new idea puts even more urgency on adoption of information technology and casts a different light on the emerging definition of meaningful use. But quality is #1, isn’t it? What do you want to reward—P4P or PIP?

How to Control Spending on Health Care

Since President Obama has asked for new ideas about limiting how much we spend on health care, I have a serious proposal: let’s actually put a limit on how much we spend on health care.  Participants at this Thursday’s summit should decree that the current relative level, 17% of gross domestic product (GDP), is all the country can afford because medical expenditures are now crowding out critical investments in education, environment, and infrastructure.     

As the national economy goes, so goes health care under my straightforward proposal.  The only way for medical enterprises to get more absolute resources is overall economic growth.  Unlike all the complicated proposals on the table, capping the medical sector’s relative share of GDP would operationalize reform’s only area of bipartisan agreement—that spending more on health care will soon lead to economic disaster.

This policy would also incorporate a lesson we should learn from the dozens of industrialized countries that produce healthier populations for 13% or less of their GDPs.  We have been studying differences in these countries’ health systems—which are substantial—without focusing on the one attribute they have in common.  All set global budgets for health spending.  They rely on a variety of public and private mechanisms for operating within the budget, but they put advance limits on spending.  My friends in these other countries are amazed that U.S. health policy effectively allows unlimited spending. 

Policy experts over the past year made a strong case that one-quarter to one-third of health spending in the U.S. is wasted.  Cutting this waste out of the system by reducing health care to 13% of GDP could quickly garner populist political support as an alternative to freezing expenditures at 17%, as I propose, or allowing them to rise to 20%, as CBO predicts.  We forget that Bill Clinton’s goal as a candidate in 1992 was to cut health spending below 10% of GDP.  He got elected by focusing on economic recovery, not health reform.  (The Obama administration has misinterpreted the lessons of subsequent events in the Clinton White House, but that’s another subject.) 

At this week’s summit, industry stakeholders should make a firm commitment to maintaining health care at 17% of GDP.  Further, they should agree to work together accountably and transparently for reallocating the wasted resources to quantifiable improvements in cost, quality, and access.  This direct approach should focus national attention on creating the best health care system that 17% of GDP can buy—a much more inspiring goal, to my way of thinking, than trying to find more resources for the dysfunctional system we have.  What do you think?

The Neglected Conflict: Politics vs. Policy

The ongoing battle over health reform is largely perceived as a confrontation between Democrats and Republicans. Focusing on two parties obscures a very important fact that the battle is waged on two fronts—whether a reform law will pass, and what will be in a reform law. It’s a classic conflict between politics and policy, and it rages within the parties at least as much as between them.


Politics is the art of getting things done. Its practitioners focus predominantly on winning elections and retaining power. Politicians work diligently to deliver on promises they made as candidates, always with the next election in mind. Passing (or defeating) a law is the ultimate measure of their success in politics. For health reform in 2009, Democratic leaders were much more concerned with rushing a bill to the President’s desk than they were with the bill’s content. They argued that the law’s flaws could be addressed in 2010 and beyond.

By contrast, policy is the science of creating purposeful change. It involves defining a desired future state and a viable way to get there. Policy makers analyze data and evaluate impact of actions that might move the numbers in the desired direction. They are inclined to take the time needed to put together a package that makes sense for their constituency. They aspire to “get it right” the first time so that a resulting law will not need to be amended in the next legislative session.

Sadly, from my perspective, politics trumped policy during the 2009 confrontation over health reform. Long-overdue policy changes fell by the wayside as political deals were made to secure votes. Getting a law passed was more important than passing a good law—and all sides lost when all was said and done. Consequently, my forecast for legislated health reform any time soon has slipped to 10%. (See my December 2009 blogs for details on the previous forecasts.)

Good policies that slipped from the pinnacle of reform to the purgatory of demonstration projects over the course of 2009 are unlikely to be enacted any time soon. However, the critical state of health care in the U.S. does not allow complacency. We’ve got an impending disaster on our hands if we don’t make needed changes, and it looks like we’ve got to make them without a reform law. We must resurrect and implement good policy proposals outside the political realm.

In your opinion, which reform policies need to be pursued ASAP? How would you proceed to get them implemented? (For my views, see previous posts to this blog and recent writings at www.jeffbauerphd.com/writing.htm. To express yours, click on Comments just above the title of this post.)

Three Reform Ideas Whose Time Has Come

As luck would have it, I was a student in Paris during the revolution of May ’68. Many protest banners featured Victor Hugo’s famous observation that nothing is as powerful as an idea whose time has come, and innumerable Left Bank discussions were dedicated to identifying the new thoughts that could lead to desired changes after the revolution was over.

The faltering reform battle in Washington reminds me of “les événements” in Paris—not because it is going to revolutionize American health care right away, but because its heated discussions actually highlighted concepts that are going to transform health care in the US in years to come. In my opinion, three powerful ideas that did not become linchpins of the reform bills will nevertheless be translated into progressive actions via the “invisible hand” of the marketplace (hopefully facilitated by supportive government actions).

• Progress in health care requires digital transformation of the way health care is delivered. State-of-the-art electronic medical records and related health information technologies (HIT) were common denominators of health systems that have accomplished the cost and quality improvements of health reform. These systems (e.g., Kaiser, Geisinger, Mayo, Intermountain) have already created the digital infrastructure required for exemplary performance improvement.

• Successful reform requires integrating hospitals and physicians in accountable care organizations. In addition to deploying HIT throughout the enterprise, systems that provide models for reform have employed their medical staffs and put physician leaders in their C-suites. These integrated systems eliminate the market failure created by competition between hospitals and independent medical staffs.

• Global payment mechanisms rewarding value must replace fee-for-service reimbursement that rewards volume. The significant waste of paying for medical services on a piecemeal basis was consistently demonstrated in expert testimony on reform. Providers and payers need to be given specific incentives to develop and implement efficient, bundled reimbursement mechanisms.

The House and Senate reform bills include limited programs to demonstrate the power of these ideas, but I don’t believe that federal demonstrations can produce the necessary changes fast enough. From my perspectives as economist and futurist, American health care delivery needs to be transformed sooner rather than later. We do not have the luxury of waiting 5-10 years for the results of demonstration programs based on ideas that have already proven their value. The 21st century economy is not going to be kind to a medical sector playing by 20th century rules.

Do you think that the health reform revolution of ’09 produced any powerful ideas whose time has come? Please comment on the three ideas above…or propose others.

Preventing the Clash of Two Cultures

A noted British scientist and novelist, C.P. Snow, argued in a famous 1959 lecture that social progress was confined by conflict between two cultures—the sciences and the humanities. His paradigm has been applied to other polarized relationships and is viewed as a helpful model for understanding communications failures that prevent competing groups from getting together to solve serious problems.

Recent events show that elected officials in Washington are not close to solving the serious problems of health care. Hence, it’s time for a “two cultures” analysis. Having concluded that collaborative solutions must be crafted ASAP in the private sector, I believe we should focus on cultural differences between providers and payers. Understanding these differences is a precondition for creating the efficient and effective health care we ought to be getting for 17% of GDP.

To launch discussion, I suggest that provider culture enshrines a sacred doctor-patient relationship centered on hospitals (AKA doctors’ workshops). Provider culture seeks to expand facilities and technologies that allow physicians to practice medicine at the state-of-the-art—that is, to do everything possible for every patient. It fiercely resists economic considerations because money is not supposed to influence a doctor’s decision. Provider culture can be traced back several thousand years to Greek philosophers.

Payer culture, on the other hand, is uniquely American and not even a century old. Unlike every other country in the Western world, the United States formally rejected government finance mechanisms for health care in the decades surrounding World War Two. The third-party payer is as American as apple pie, purposefully created as a private business to channel funds from purchasers (mostly employers, until now) to providers. Payers can only survive by generating revenues in excess of expenses. Requiring payers to spend more—the final focus of politicized reform in 2009—compels them to raise revenues or to develop new “work-arounds” that make the medical marketplace even more inefficient.

The clash between provider and payer cultures is predictably dysfunctional. It pits two groups of generally good people, doing the jobs we expect of them, against each other in a negative-sum game. If disaster is to be avoided, creative and visionary leaders must find ways that the two cultures can work together to improve the health of Americans. Given today’s political gridlock, can you think of any more important reform than reconciling providers and payers? If not (like me), what steps would you take to align the two cultures for producing consistently good health care as inexpensively as possible?