ThedaCare, Payment Reform and the Lack of Payer Response

Submitted by on Wednesday, October 30, 2013 - 07:59

By Douglas Emery, MS
HCI3 Program Implementation Leader, Western Region

Recently I had a wonderful opportunity to attend a site visit hosted by ThedaCare in Appleton, Wisconsin. For almost 11 years now, under the visionary leadership of Dr. John Toussaint, ThedaCare has been implementing an aggressive Toyota-style Lean Management approach to reorganizing their hospital and ambulatory care processes. And I must say, the results are impressive. I wish I could say payer response has been just as impressive. Unfortunately, it has not, and therein lays the problem in microcosm of what confronts the entire US healthcare system.

ThedaCare is a health system operating 5 hospitals, specialty centers, primary care clinics and urgent care centers over a fairly wide geographic spread – so they’re not a small, localized concern. After an early morning introduction to Lean and what it is to build a “Shingo House” – after Shigeo Shingo, the Japanese industrial engineer who pioneered Lean – it was demonstrated that the underlying principle of Lean is built on a foundation of respect for all team members, from bottom to top. Indeed, a Shingo House is a bottom up enterprise, and it can be seen and felt throughout the entire organization. Everyone on the tour was impressed with how deeply the nursing staff is integrated into the everyday management process, including daily “huddles” where each nurse is encouraged to come up with new ideas on process improvements.

It’s not just lip service. Promotions are, in part, based on ideas incorporated in daily processes contributed by individuals on the nursing staff. Thus, respect is not a mission statement stapled on a wall, but built into daily huddles reviewing data-rich metrics and an emphasis on team creativity and inclusion. Why? Because they are the people closest to the problems, not management, far away in imperial towers. I could detect no sign of the more typical Doctor-as-God, Nurse-as-Serf culture. Even the nurse hiring process has been re-engineered according to Lean.

But the most impressive part was being on the actual cardiac floor of a ThedaCare hospital. Aside from the design items our guides pointed out, there were three things that immediately jumped out at me: 1) it was very quiet, almost like a library, 2) as opposed to the brash, almost garish primary colors I’ve seen in most hospitals, the whole floor was bathed in soothing, natural earth tones, and 3) the almost complete lack of visible, chaotic motion on the floor – all by design. ThedaCare performed an intense amount of patient interviews to find out what the customer wants, and it shows in almost every nook and cranny, from the halls to the patient rooms. Case in point: most of the monitoring and gas systems that scare the daylights out of patients were hidden behind the walls. But what is on the wall, front-and-center of the bed, is the patient’s care plan and all the clinical team members involved, with a schedule of care events (all managed within five minute windows). Patients are not left in the dark; they are considered part of the care process. They are told what to expect and when, and expectations are met.

Lean is about the customer – not the institution. Anxious, anxiety-ridden patients are not happy customers, or good, cooperative patients (even if they are getting an intrusive heart procedure).

Obviously, over a day-and-a-half tour, many details of ThedaCare’s Lean approach could be elucidated. But the point is, it gets results. And Lean is all about results. Over the past 6 years, their Lean journey has resulted in $315 million in cost savings. They have saved 48, 764 days of wait time. In one primary care clinic, I saw only one person in the waiting room, and he quickly disappeared. They’ve doubled their operating margin in 4 years, have increased days cash on hand from $120 million to $400 million, and were ranked No. 1 by Consumer Reports in physician quality (who all, by the way, seem to be very happy with their work environments).

Intransigent payers, unfortunately, threaten all these gains. Only 20% of ThedaCare payers have changed payment to reward improvement such as gain sharing models; 80% have not, and are freeriding. You might think there would be an aggressive movement on the part of carriers to move market share to ThedaCare, but Dr. Toussaint tells me in 10 years they have not gotten payers to budge market share an inch. He says area employers are very frustrated. Despite the internal efficiency successes mentioned above, Dr. Toussaint, Arnold Milstein and Stephen Shortell reported recently in JAMA that ThedaCare is beginning to operate at a loss.

Wanting to do the right thing and altruism can only go so far. Pioneering organizations like ThedaCare cannot be expected to cut their own throats in the name of progress. Unless health plans massively reorganize their payments and benefits processes (ala Lean), and not just these small “pilots” here and there, thousands of Americans will continue to die unnecessarily.

I’d cry for the shame, except I’m too angry.