HCI3 Update from the Field: It’s the Incentives, Stupid!

Submitted by francois.debrantes@hci3.org on Friday, July 13, 2012 - 12:21

Newtown, CT – July 13, 2012

Two recent books summarize the massive potential for improvement in the delivery system and lead to this observation: It's the incentives, stupid! The Pittsburgh Regional Health Initiative and the ThedaCare Center for Healthcare Value have each published a set of best practices from delivery system reengineering. In Potent Medicine, John Toussaint illustrates the real measurable improvements in cancer care, primary care, orthopedic care, and other areas of medicine in and around Appleton, WI. In Moving Beyond Repair, Karen Wolk Feinstein assembles a series of case studies showing massive reductions in unnecessary C-sections, central line infections, medication errors, emergency department overflow, and COPD readmissions, among others. These are real case studies, not made up, and the achievements illustrate how phenomenal the US healthcare system could be, and how it fails the American patient day in and day out. The sponsoring organizations of these two books aptly point out that the training in total quality management principles is sorely lacking in most healthcare organizations and that this training has to become a prime focus for improvement to stick. Yes, but it's really about the incentives. The bottom line folks is that it's pretty tough for people to do good when they're encouraged to do bad. And FFS payment encourages provider organizations to do bad, not good. Readmissions, for the most part, generate revenue. Central line infections, ditto. C-sections are reimbursed at a higher rate than normal vaginal deliveries, and a NICU is a real cash machine. As such, healthcare organizations have optimized dysfunction as a primary way of continuing to generate top dollars from payers.

What this means to you – Business schools don't teach their MBA candidates about Lean Six Sigma, other than to illustrate how it's used in certain companies. To an extent we shouldn't expect medical schools to teach Lean to its students. When companies like GE launched their Lean Six Sigma efforts, it was in response to international competitive pressures – deliver value or see your markets and margins erode. There is no such competitive pressure yet for health care organizations. They can continue to deliver defect-ridden services and get paid as much, and sometimes more, than those that deliver defect-free services. Moving Beyond Repair's case study on reducing COPD readmissions illustrates the point starkly. The facility embarked on a classic reengineering process that led to a 40% reduction in readmissions of patients who had a prior admission for acute exacerbation. The net effect: $270K in annual savings for the payer….and less money for the provider. Granted, under the new Medicare rules on all-cause readmissions, the incentives game is changing, but not fast enough. These two books are a must read for those who doubt that the US can deliver world-class defect free care almost every day to every patient. And it should leave you with the same impression: It's about the incentives, Stupid! So let's stop futzing around at the edges and get serious. Mind you, the hand-wringers will exalt the virtues of patience, or incremental change lest we get it wrong, and we have to ignore them. Incremental change is fine if you're sitting at the top of the food chain, but it sucks when you're at the bottom. And today, most patients in America are at the bottom of the healthcare value chain. The time to change that has come.


Francois de Brantes
Executive Director
Health Care Incentives Improvement Institute, Inc.
w: www.hci3.org