Publications from the Institute of Medicine (IOM), including the 2012 report Best Care at Lower Cost: The Path to Continuously Learning Health Care in America, bring patient safety and quality into focus for the healthcare industry. The IOM was created under the congressional charter of the National Academy of Sciences to serve as advisor to the nation on health and health care. HFMA concurs with the IOM’s premise that health care’s ever-increasing complexity and ever-escalating costs have made the status quo untenable.

In recognition of its significant positive contributions to health care, the IOM will receive the Richard L. Clarke Board of Directors Award at ANI: The 2013 HFMA National Institute in Orlando, June 16-19. Michael McGinnis, MD, IOM senior scholar and executive director of the IOM Roundtable on Value & Science-Driven Health Care, will accept the award on behalf of the IOM. In this interview, McGinnis shares his perspectives about how to achieve best care at lower cost.

 Q. What can health care learn from other industries, such as manufacturing, about managing complexity?

 A. Health care has a great deal to learn from other industries about managing complexity because some of them do it well, and we’re doing it pretty poorly right now in health care. Clearly, as care becomes more complex, we’re not able to manage the cost implications. But more important, quality is suffering. It’s now reasonably well-known that over a dozen years ago, the Institute of Medicine reports To Err Is Human (1999) and Crossing the Quality Chasm (2001) found substantial shortfalls in the quality of care, and in fact pointed out that as many as 90,000 deaths a year could be attributable to medical errors. You’d think that with an alarm rung as loudly as that one, the corrective responses would be immediate and there would be dramatic improvements. 

Unfortunately, that’s not the case. Some steps have been taken with great success—for example, the work in anesthesiology to use checklists to eliminate anesthetic errors—but problems persist in most other areas, such as patient hand-offs. In fact, the case could be made that the shortfall, relative to medicine’s theoretical ability to provide more effective treatments, is growing. That is, the increasing complexity of new medical interventions developed with new techniques, technologies, tailored therapeutic regimens, and so forth, compounded by the increasing prevalence of multiple co-occurring chronic conditions in our aging population, has not been matched with concomitant skill in applying them. So, even though we are becoming more adept at addressing some of the quality problems of the past, the gap between what we know we can do and what we actually are doing is growing.

This is not the case in other industries, and certainly not what we have come to expect from other industries. Take airline travel. What could be more complicated than putting thousands of 800,000-pound airplanes into flight every day? Yet the rate of accidents has plummeted. Or consider banking. We fully expect that when we walk up to an ATM, our records will be available and we’ll be able to use that ATM to get cash, make deposits, or check on the status of multiple accounts instantly. Clearly, in health care, we’re at a far cry from that state. Under ideal circumstances, our healthcare system would be supported by a digital infrastructure that provides instantaneous access to the necessary patient information, regardless of where the patient receives care. But that’s just not the case. If the banking industry had the kind of chaos in its record keeping that we have in health care, there would be a substantial public outcry.

The construction industry offers another example. There is one set of blueprints for building a house. All contractors who are working on the house—plumbers, electricians, bricklayers, and the rest—use the same set of blueprints, and there is a reasonable level of coordination among them. In health care, of course, the situation is a bit different. With the increasing occurrence of co-occurring chronic diseases, more specialists than ever are involved in a patient’s care. The level of communication among specialists before and sometimes after a patient visit is lower than it should be. For example, it’s essential for the management of high blood pressure to be supportive of the management of congestive heart failure or cancer treatment. Anything short of perfect communication around an individual’s care is unacceptable.

We can even look to the auto industry for inspiration. Over the past 20 years, quality control mechanisms have been implemented on auto assembly lines so that a worker at any level who sees a problem occurring can stop the process to have the problem fixed. Also, with continual monitoring activities—some electronic, and others related to service reports from repair shops—the auto industry has taken control of business to an art form. That is a wonderful example of the kinds of things medicine ought to be able to do, because we have a digital infrastructure and a capacity to recognize when things go wrong. Unfortunately, the culture of health care does not celebrate the discovery of problems in a care process. We’re getting closer to that point, but most of the industry is still more inclined to hide process problems than to identify and correct them.

There are many other industries that health care can learn from, and is learning from in some areas, but we’re doing so far too slowly.

 Q. The use of safety checklists, now routine in air travel, has made inroads in health care. What are the obstacles to broader use, and how might those obstacles be overcome?

 A. Wherever there is a clear vulnerability, we need routine approaches to managing the social and environmental parameters that decrease or increase risk. Today’s routine use of simple checklists in certain circumstances—such as with certain OR procedures, with anesthesia use, and with some procedures performed in intensive care units—is a splendid example of such an approach in health care. But there is not—nor can there be—a specific checklist that applies universally to every clinical circumstance the condition presents. Instead, the fundamental approach should be to have standard work at the core of the care process and tailor care at the margins. 

We have been far too tolerant of widely variant individual variations in practices that are largely provider-centric, in some fashion. We need to turn this around. Consider joint replacement therapy. A single institution may have to stock many different types of artificial knees from different manufacturers because of provider preference, or a surgeon’s relationship with the manufacturer. Despite the lack of evidence for practical advantages from one to the other, this means that the hospital and surgical team needs to adapt to unjustified variation. That type of variation shouldn’t exist within an organization simply because a physician has a particular relationship with a company or a preference for a certain material. Too much fluidity in the process can lead to inconsistencies that undermine the overall treatment process. 

In patient-centered care, each patient should expect to receive the standard best care deemed most appropriate for his or her particular condition, tailored at the margin to any unique elements of the personal profile that make the patient’s situation different.

The notion of standard approaches and standard work, to use the industrial term, is absolutely key. Many organizations have standardized certain guidelines and institutional processes, so we’re beginning to adopt that mindset and that culture. But overall, we are still in the Wild West in much of what is practiced in medicine.

 Q. How can we achieve continuous learning in health care?

 A. Learning is all a matter of how we develop and apply new knowledge. Generating new knowledge through a series of research studies that are very expensive to organize, that take years to complete, and that even then can be generalized only to a limited extent will not enable us to deal with the increasing complexity of the care process. We need to capture the patient experience much more reliably with electronic health records (EHRs), gather patient-generated information, and develop and incorporate statistical algorithms into the EHR so there will be a continual search process that identifies variations from the expected experiences in a care process. We have the potential for continuous learning about what works best for whom under what circumstances.

To achieve that potential, we need to change the way we think about knowledge generation, moving away from self-contained episodic experimental processes to continuous knowledge generation. Furthermore, when there are implications for the development and application of new interventions, medical devices, or care changes, we need the ability to apply those interventions selectively to individuals who meet criteria that point to a reasonable expectation of success. We could then expand the application to broader pools of patients over time as we learn more about the conditions of their effectiveness. Because people are different, the notion of a binary decision rule—either using the intervention in practice across the board for all patients, or not using it for anyone—is totally impractical. We should be learning about the effectiveness of new interventions through structured introduction into the clinical marketplace.

 Q. Consumers who are shopping for appliances or booking a hotel room today can easily compare prices and look at performance reviews. Is buying health care just fundamentally different from making these other purchases?

 A. Well, buying health care is fundamentally different in many ways, but with respect to out-of-pocket costs, it shouldn’t be. Health care has become more expensive, and consumers are paying a greater proportion of the costs out of pocket, directly, through insurance premiums, or cost sharing, so they need to become more knowledgeable purchasers. If the purchase of healthcare services is an economic transaction, people should be able to take advantage of the rules of the marketplace. However, as it stands, there is an inherent market failure in health care. Costs, prices, and outcomes must be transparent for the market to work. Until consumers are informed about the relationship between what
they pay and what they get in terms of anticipated outcomes, we will continue to have market failure. 

The healthcare experience is different from the experience provided by other consumer services, but that doesn’t mean the same kinds of market forces ought not to apply, with respect to individual outlays. From my perspective, and from society’s perspective, transparency on both the cost side and the outcomes side is absolutely essential.

 Q. The IOM’s Value Collaborative is identifying prominent examples of the ways in which economic incentives in health care are misaligned. Would you share some of those examples?

 A. Except for a few managed care organizations, payment structures prevail in which providers and provider organizations are paid per unit of service, clearly creating an incentive to provide more services and to provide more expensive services. One of the fundamental laws of economics is that if the marketplace enables providers to determine volume, and if people are paying providers according to volume, then providers will lean toward providing more services. That’s simply where all the reward systems are applied. So there are tremendous inefficiencies, and there is virtually no economic reward for positive outcomes.

Also, because of the way our system is structured to pay each physician specialist separately, there are incentives to have increasing numbers of physicians involved, and those specialists are the highest-cost providers. So it’s not a matter of perverse motives on the part of individual providers; the system as a whole provides perverse incentives and structures that lend themselves to inefficiency. Until we have incentives and structures that are centered around outcomes and value, the existing market inefficiencies will simply be perpetuated.

 Q. The IOM’s Value Incentives Learning Collaborative is in the process of creating a taxonomy of value incentives. Tell us more about this initiative.

 A. The collaborative is now working on an inventory of the innovative experiments that are underway, with the goal of increasing the spread of successful approaches to improve value. Unfortunately, the nation has a limited capacity to rapidly and systematically capture the key lessons of these pilot projects and spread that knowledge broadly. Although multiple reasons limit dissemination and spread, one important reason for this situation is that the amount of activity now occurring challenges the ability of any individual to stay current—it is estimated that there were 450 value pilots operating in 2008, and that number has likely increased due to new programs and fiscal pressures. The inventory seeks to provide a common tool that encourages cross-fertilization between leaders of different value initiatives and to facilitate the dissemination of important insights and effective activities.

 Q. Accountable care organizations have been faulted for not providing incentives for patients to seek high-value care. The Value Incentives Learning Collaborative is exploring ways to include patients in value initiatives. What are the collaborative’s findings to date?

A. We know that lasting change won’t occur in health care unless we involve patients and their families in the reform. Engaging patients and the broader public in healthcare initiatives has the potential to transform every aspect of the system, and this is especially true for improving value. The collaborative explored in depth what was known about patient engagement in value incentives. Participants published a paper last year describing the current barriers that prevent people from being involved in their care and outlining the opportunities for overcoming these challenges. 

The participants found several important lessons during their work. First, a value initiative cannot succeed unless it understands, and connects to, people’s needs, goals, and values. Second, they found that there was little information on the value of different healthcare options that was accessible, usable, and actionable for patients, and this lack of information limited patients’ ability to play active roles in care decisions. Finally, all aspects of health care should embed value—from incentives to benefit design—to support patient efforts to improve the value of their care. These lessons highlight that if patients have the tools they need, they can transform the value of the healthcare system.

 Q. If healthcare finance leaders could do only one thing to reduce waste and improve value, what should it be?

 A. There are two foundational items that must be addressed to move toward a high-value healthcare system. The first is moving away from the current fee-for-service payment system, which promotes overuse and waste, to an incentive structure that rewards better health and better value. The criticality of changing the incentive structure cannot be understated as it permeates all aspects of healthcare delivery. However, changing financial incentives is not sufficient; it needs to be coupled with increased transparency of price, cost, quality, and other performance measures. Making this information transparent allows patients to make educated decisions, provides institutions with data they can use to improve their operations, and highlights the organizations and clinical practices that are providing high-quality care at lower costs.

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 About J. Michael McGinnis

J. Michael McGinnis, MD, is a physician, epidemiologist, and long-time contributor to national and international health programs and policy. An elected member of the Institute of Medicine (IOM) of the National Academies, McGinnis has also served as IOM senior scholar and executive director of the IOM Roundtable on Value & Science-Driven Health Care since 2005. He founded and stewards the IOM’s Learning Health System Initiative. In prior posts, he has served as founding leader, respectively, for the Robert Wood Johnson Foundation’s Health Group, the World Bank/European Commission’s Task Force for Health Reconstruction in Bosnia, and, in the U.S. government, the Office of Research Integrity, the Nutrition Policy Board, and the Office of Disease Prevention and Health Promotion. Widely published, McGinnis has made foundational contributions to understanding the basic determinants of health. He has held visiting or adjunct professorships at George Washington, UCLA, Princeton, and Duke universities. McGinnis is a graduate of the University of California at Berkeley, the UCLA School of Medicine, and the John F. Kennedy School of Government at Harvard University.

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 About the Value Incentives Learning Collaborative

Under the auspices of the IOM Roundtable on Value & Science-Driven Health Care, the Value Incentives Learning Collaborative (VILC) seeks to develop a learning network by convening organizations and individuals actively working to design, develop, test, and evaluate innovative approaches to shifting healthcare payment in ways that reward value. VILC participants represent organizations and individuals devoted to value determination in health care, and to the implementation of innovative payment approaches that provide incentives according to the value delivered.

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