Value Over Volume
When the parts of our healthcare system are motivated by volume and revenue growth, the result of the whole system is represented in this graph:
Every country in the developed world has an unsustainable slope of increasing per capita spending on healthcare. Each part of the system is successfully hitting revenue and growth targets guaranteeing the unsustainability of the system as a whole.
If private insurers raise rates and decrease benefits each year, hospitals continue to grow revenue and volume, physicians continue to hit increasing productivity targets, and pharmaceutical and device companies continue to hit increasing quarterly Wall Street revenue targets, what else do you think would happen at the whole system level? An unsustainable increase in global per capita spending is predictable because our healthcare system is designed for revenue growth rather than patient care.
Our healthcare system, hospitals and academic medical centers in particular, may be in the most complex of all industries and organizations in our world. But these organizations are designed in a reductionist system structure that leads to increased fragmentation when complexity is increased. They have been relatively insulated, with subsidies from government, foundations and research dollars, as well as philanthropic and investment proceeds. But ultimately this increased fragmentation results in an unsustainable increase in administrative bureaucracy and waste reflected in this graph:
The current reductionist organizational structure in healthcare evolved with no attention to the vast diversity of patient populations and increasing complexity of problems that are seen in a typical medical center. The result is more fragmentation manifested by an ever-increasing number of department silos that are not designed around each definable patient care process. It would be like a car manufacturing plant that functioned in department silos – one department for tires, one for engines, one for steering wheels, etc.
These department silos would not communicate well with each other, yet they were expected to make flawless automobiles. The first automobile on the manufacturing line is intended to be a sports car, the next is a school bus, the next is a tow-truck, the next is an SUV, and so on. It would be a disaster. By continuing to address increasing complexity with reductionist structural solutions, the harm and waste we see in healthcare is guaranteed.
This fragmentation also leads to system tools being designed inappropriately into the fragments of care rather than for whole patient care processes. For example, Electronic Medical Record (EMR) systems are designed for the fragments of care, often with the purpose of documentation for coding and billing. By only collecting data for a fragment of care, it’s not possible to measure the outcomes of care for any whole patient process. This prohibits the appropriate measurement of value-based outcomes and the appropriate analysis that could be applied to learn how to better measure and improve outcomes.
So, if volume is an unsustainable strategy, what is a sustainable strategy? VALUE. The language about the transformation of healthcare from volume to value is all over the place. But the understanding of how to do this and the science behind why we should do this is still not well understood. If you don’t measure the value of the service you’re providing, or the product you’re manufacturing, you can’t reliably improve value.
Think about the value of digital storage or flat screen televisions. Years ago, the cost of large amounts of digital storage or a single flat screen television was in the thousands of dollars. Today, you can get a flat screen television for less than $200 and digital storage is nearly free (or a small monthly fee for cloud-based storage). In his book, FREE: The Future of a Radical Price, Chris Anderson gives many more examples of companies lowering costs and improving the value of products and services for consumers. It’s time for health care to join these groundbreaking companies.
Sadly, no hospital that I know of has made this transition yet. For the good of our patients and for the good of our physicians and clinical teams, this transition is essential. The continued focus on volume (an extrinsic motivator) instead of value (an intrinsic motivator) is having a significant negative impact on patients and the front-line clinicians who care for them.
In his book, Drive, the Surprising Truth About What Motivates Us, Dan Pink presents a compelling argument based on decades of research about what motivates us as human beings and the differences between extrinsic motivators (like money for doing tasks) and intrinsic motivators (like improving the value of care – lowering costs of care while improving patient outcomes). Basically, our prime motivation comes from autonomy (having control over what we do and how we do it), mastery (getting good at what we enjoy doing), and purpose (having a goal in life that is bigger than just serving ourselves).
One interesting thing about this body of research is that extrinsic motivators work well to incentivize people to improve the output of simple mechanical tasks, like hammering a nail. But these same extrinsic motivators, when used to incentivize people performing complex work, like in healthcare, lead to poorer performance.
By incentivizing physicians with money for seeing more patients in clinic and doing more procedures and operations, we guarantee poorer outcomes than if intrinsic motivators were used. Simply moving from a fee-for-service volume model to a value model will improve patient outcomes and it will be healthier for the people providing care.
In his book, Designing Care, Richard Bohmer gives one of the best descriptions I’ve read about why we need to be learning from every patient and how leadership will need to provide resources and authority back to the frontline clinical teams designed around definable patient groups (called an Integrated Practice Unit (IPU) by Michael Porter and others at Harvard Business School). This will give autonomy back to physicians with the caveat that they will need to lead these multi-disciplinary clinical teams, including patients, and be accountable for outcomes that measure and improve the value of each care process.
These structural changes to allow the transformation from volume to value in healthcare will require a deep knowledge of systems science tools including the appropriate application of data science, non-linear analytics, the application of human-computing symbiosis, learning to lead and work in small teams, and developing an evolved mindset to allow this transformation to happen. This is our challenge, and opportunity, to transform to an economically sustainable global healthcare system. When will it happen? I don’t know. When will we have the courage to consciously reject the status quo and embrace the discomfort of change that unifies all parts of the system around value for the patient? Soon, I hope.
(The content of this blog post was previously published in the March 2020 issue of General Surgery News)