Tuesday, December 9, 2008

Low-Cost and High-Quality: An Ill-Considered Goal?

Sometimes synergy just jumps right up out of bed in smacks you across the face.

A while back I started plowing through the IBM Healthcare 2015 documents – and even posted an entry about their opening concepts of the role of delivery networks and personal responsibility in improving health and reducing cost.

The next place I was intending to go was an interesting expansion of the discussion about the various types of healthcare delivery organizations that might emerge from an evolved healthcare ecosystem. IBM titles this conversation, “New Models, New Competencies – Recommendations for Care Providers,” and sets out to challenge the traditional approach of hospitals/care delivery organizations (CDOs) operating under “broad and abstract targets” attempting to be all things to all people and still compete effectively.

If you buy that premise, and I’ve seen little evidence to the contrary, you are quickly lured into a seemingly irrational conversation – the infamous “Low-Cost, High-Quality” debate. That’s where synergy comes in. This morning I finally got caught up on some email and one of the articles in the inbox was a HealthLeaders editorial with the intriguing title, “Improving Your Way to Oblivion.” It’s a rhapsody that echoes the all-to-common strains of the reform debate. How can health care costs continue to rise at meteoric rates without unacceptably crippling the national economy? A reasonable question, and one I’ve puzzled over here before. It seems every time I read something that digs into this question though, the punch line is the same…CDOs must improve themselves so they deliver top-notch quality while constantly pushing costs lower and lower.

The HealthLeader’s author, Philip Betbeze, writes, “[this] is why my panelists from HealthLeaders Media's Top Leadership Teams event are so focused on improving by cutting the cost of care. That's right, they see their long-term survival in being among the low-cost leaders—a counterintuitive concept in an industry that has the power of inelasticity of demand.” He goes on to quote Jeff Thompson, CEO of Gundersen Lutheran Health System in La Crosse, WI – identified by the Dartmouth Atlas as one of America’s highest quality, lowest cost institutions - "The ultimate prize is making the cost not only low enough to compete but to improve health of communities."


Our cars will be safer and more fuel efficient if we make them less expensive to produce.

Buy that?

Now, call off the dogs. I understand the principles of efficiency, process improvement and eliminating waste. And yes, since it’s only been 20 years since prospective payment, hospitals are still working on becoming lean operations. But it seems to me this is a flawed philosophy.

The argument goes that, if we make the provision of care efficient based on demonstrated best practices, it will free up dollars in the system to reinvest in prevention and population health. Research from all corners suggests efficiency and cost gains can be made without impacting quality – heck even moving mediocre providers up the quality chain. All good things.

My concern is that this view perpetuates the organizing principle of “all things to all citizens.” To the best of my imagination, no other industry on earth – beyond public utilities, and is that the desired endgame for CDOs? – operates this way. The closest proxy is air travel, where everyone, except Southwest and JetBlue, believe their raison d’ĂȘtre is to provide cheap, economy air travel with perks and premiums for more desirable clients; simultaneously advancing positioning of egalitarian utilitarianism with premium-quality snob appeal. At least the Chrysler K car admitted it was a K car!

It seems to me that model isn’t working for airlines and it won’t work in healthcare. Alternatively, the wonks at IBM suggest CDOs intentionally migrate to one of four delivery models:
  1. Community Health Networks, focusing on optimizing access across a defined geography.
  2. Centers of Excellence, focusing on optimizing clinical quality and safety for specific medical conditions.
  3. Medical Concierges, focusing on optimizing patient experience, differentiating itself on the quality of its service.
  4. Price Leaders, focusing on optimizing productivity and workflow.
“Each of these models places different emphasis on the value dimensions of access, clinical quality, service quality and cost. Successful organizations will likely meet a threshold or minimally acceptable level of performance on all four service delivery models and differentiate on one or more models.” I’ve said before that I’m intrigued by this construct. It disassembles the current modus operandi and suggests hospital leaders, strategists and planners do something they hate – make a choice!

The next step in this discussion goes to what IBM labels the Five Strategic Competencies and how they work in different proportions in each model. That’s a conversation for another day.

My question for today is, what would it take to get there? I work under the hypothesis that a minority of US hospitals can truly achieve Low-Cost, High-Quality, and in the attempted pursuit of the panacea-ic goal we’ll end up with some distribution of High-Cost, High-Quality (the Unabashed Dominants), Lower-Cost, Moderately-High Quality (the Model Tertiary Community Hospital), Mid-Cost, Mid-Quality (the Fat Risky Middle), and the Barely-to-Unprofitable Basically Safe (the Yugos). In this scenario, I imagine most Americans receiving healthcare in one of the two last categories. Success!! Not.

The problem is that the reimbursement structure, as it currently exists is discussed as Obama-Care begins to shape up, seems to not jive with the IBM vision of intentional, specialized care models. That is the next thorny question, and one I believe they address in the next chapter of the tome. I’ll get to that.

So, am I just too jaded to believe we can build a network of Southwest Airlines hospitals from sea to shining sea? I have a hunch, A. We can’t and B. It’s not a good goal.

More to come…

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