"Each year, I can point to thousands of Intermountain patients who would have died but did not," says renowned quality expert Brent James, MD, chief quality officer at Intermountain Healthcare, about the organization's quality-improvement efforts. "We have also taken well over $150 million in variable costs out of Intermountain in the last couple of years. That's a massive ROI." In a recent conversation with HFMA's President and CEO Richard L. Clarke, DHA, FHFMA, James said that Intermountain achieved these results through data-driven performance improvement grounded in shared values. James, a featured speaker at this year's ANI: The HFMA National Institute, calls this "just good management," but cautions that organizations that do not master the use of data in performance improvement may not survive in a changing healthcare system.

Richard L. Clarke: Intermountain Healthcare is known for its successful engagement of physicians in transforming care delivery based on evidence-based care and performance measurement. What are some key steps you have taken to successfully engage physicians?

Brent James, MD: There are three. The first step is to recognize our shared values. In 1992, we started the Advanced Training Program in Clinical Practice Improvement, or ATP for short. Hundreds of our key physician leaders and administrators have taken the course. The principles, methods, and approaches used in the ATP closely match our shared values. That strategy has worked very effectively for us.

The second step is to focus on professional values. Physicians are motivated by the values associated with patient care. If you can set up care delivery in a way that reflects those values, you get far better participation and engagement.

The third step is to use good data. Physicians respond to evidence. We have found methods to develop robust data sets around specific clinical entities. We consistently apply those methods to get the right data for a particular clinical condition. It's a matter of how we get to what we all want for our patients as opposed to how we're in control. We've been quite successful with getting everybody engaged.

Most hospital systems have a mission statement that says they exist to deliver care to patients. Yet if you apply the old litmus test "you manage what you measure," you'll find that the role of administration in most healthcare organizations is to manage a facility within which independent physicians deliver care. Leaders vigorously track budgets and variance reports. But those reports are typically organized around departments within a hospital rather than the care that is delivered by that hospital.

We decided that we were not behaving in a way that reflected our mission statement. We were managing facilities, but our core mission was care delivery. So we built a management system for care delivery. The old separation between administration and medical staff that had defined care delivery for so long is just not viable anymore. So we put our administrators through the ATP, side by side with the clinicians, because we were in the same business.

Clarke: What key approaches did you take to facilitate this achievement?

James: The key approaches we used are to get the mission right, focus on our core work, build the data systems needed to manage and track these clinical processes, and create a management structure that uses those data for accountability and change.

After we determined our mission, we built our approach around quality guru W. Edwards Deming's idea of processes. Quality improvement is the science of process management. Deming argued that quality organizations should organize everything around value-added front-line work processes. From a strategic standpoint, that is absolutely dominant.

Using a technique called key process analysis, we identified four major categories of key processes. The first was how we treat clinical conditions. The second was how we deliver clinical support services-that is, clinical processes that are not condition-specific, such as radiology, nursing, or pharmacy. The third was how we manage service quality, or patient perceptions of quality. Although this category follows the same principles as the others, it appears to operate almost independently of clinical and cost outcomes. The last category was how we approach administrative processes.

Initially, we focused on the first clinical care delivery category above. We looked at more than 1,400 condition-related clinical processes-both inpatient and outpatient-that defined Intermountain as a system from our clinical care delivery mission. Of those, 104 processes-62 inpatient and 42 outpatient-accounted for 95 percent of all of our care delivery. This is the Pareto principle at work. Technically, 7 percent of our clinical processes accounted for 95 percent of our work.

Next, we built the infrastructure-the management information system and management accountability hierarchy for clinical medicine. The principles are not new to anybody who understands management. The idea was to take those management principles and apply them to our core business of clinical care delivery.

We attacked clinical processes in size order. For example, we identified our two highest volume clinical processes: pregnancy, labor, and delivery and the management of ischemic heart disease. During that first year we focused on those two processes.

The third and most challenging step was building the data systems needed to manage and track these clinical processes. We had attempted clinical management twice before and failed both times, losing approximately $5 million to $10 million in sunk costs each time. We came to realize that the data systems we had used to manage facilities were not sufficient to manage clinical processes. We found that we were missing 30 to 50 percent of critical data elements and had to essentially build these data systems from scratch.

After we built the data systems, we hired and trained physicians and nurses for leadership positions in which they would be accountable for our new clinical budgets. That is how we got our  physicians  philosophically on board. This strategy involved not only identifying leaders, but also making our leaders effective.

There's nothing new here. This is just good management.

We count our successes in lives. Each year, I can point to thousands of Intermountain patients who would have died but did not. We have also taken well over $150 million in variable costs out of Intermountain in the last couple of years. That's a massive ROI.

Clarke: What is the role of finance in supporting the effort to drive improvement in clinical quality and efficiency?

James: Clinical performance drives financial performance. The clinical and cost outcomes are tightly linked.

As noted earlier, we built an outcomes tracking system that manages our big clinical processes. Within our biggest clinical process-pregnancy, labor, and delivery, for example-is a set of clinical categories that define clinical performance. One key performance factor is elective inductions. Not meeting clinical criteria for appropriate elective inductions leads to negative results, such as an increase in the admission rate to the newborn ICU, increases in length of time in labor, and increased unplanned caesarean section rates.

You can control your unplanned C-section rate. Intermountain has a 21 percent overall C-section rate while the rest of the nation is at about 34 percent because we manage to this level. An unplanned C-section delivery performed at Intermountain costs 2.05 times more than a normal delivery. With our outcomes tracking system in place, our inappropriate elective inductions rate went from 28 percent to very close to zero today. That same measurement system allowed us to take about 45,000 minutes out of labor. That means that we can deliver about 1,500 more babies per year without a single additional nurse or labor and delivery suite. For those 1,500 patients, we just have to cover our variables. The rest drops to our financial bottom line.

Of course, we have some advantages. As an integrated health system, we can better manage capacity than most stand-alone hospitals. We have a growing population in Utah, so in most of our communities demand is increasing and we can put the capacity freed up by our improvement activities to good use. This has financial consequences. For example, we can demonstrate that we've saved the people of Utah about $50 million per year because of our lower C-section rate. We can point to more than $10 million a year in direct variable cost savings for mother or child from this and a series of other small projects done by our Women's and Newborn Clinical Program.

This clinical achievement drives the organization's finances. Yet in most circumstances, you get punished financially because those savings go back to purchasers as windfall savings. Saving the state $50 million by reducing unplanned C-sections hurt Intermountain's operating margins by about $8 million to $9 million.

We would have made more money by doing the inappropriate C-sections. As the shift into capitated care continues, the strategies I'm talking about are probably essential to survival in the new developing world, but what do you do in the meantime?

If your finance department handles contract negotiations, they can use the data to negotiate more favorable contracts. That's where we were successful. We were able to turn this improvement in clinical operations and costs of operations into advantage in the marketplace through contract negotiations. It's a nontrivial undertaking. Our finance department-that's where contract negotiations reside for Intermountain-plays a critical role in putting the whole picture together.

Clarke: What are some lessons that you have learned from this experience that could help other hospitals and health systems?

James: First, I would say start now. This is our future. Don't wait. Even though it may not be immediately financially advantageous, you will need these skills within your organization. You'll need the cultural shifts that go with it, too.

Second, start a program like the ATP. The purpose is to share ideas about where the future lies with your administrative and medical staff. Start to build that cadre of leadership that "gets it" within your system.

Next, don't try to do everything at once. Just pick one or two key processes to get started. You don't even have to do a formal key process analysis. Pick a big process, and use it as a learning lab to teach you how to more effectively do these sorts of things. If you do it well, you can tie it to the course. In our course, participants have to complete a successful improvement project to graduate, and it works best if those projects come from management. When they're assigned by management, you're aligning the content of the course to your strategic need.

The key role for senior leaders is to build infrastructure that "makes it easy to do it right." The people laboring at the front line are the only ones who truly understand the work processes that define our businesses and our success. They're dedicated, hard-working, and smart, but they don't control the systems within which they work. We do, at the management level.

Part of building an infrastructure is setting a vision. But the more important part is the data systems you use. Data are absolutely critical. The way your management team looks at data should align to the way the work actually happens. In many organizations, management reports do not align to the work. As a result, management is always out of sync with the front-line reality, and that puts so much sand in the gears. It slows you down. The role of management is to clean that up.

Deming said, "You don't have to change. The universe doesn't require that you survive."

We probably have at least 50 percent oversupply in healthcare delivery resources at the present time. Some people are going to figure this out, and others are not. Perhaps the key survival factor moving into the next generation of health care is being able to master this. If you can't, your organization deserves to die, and it will.


A recognized leader in healthcare quality improvement, Brent C. James, MD, MStat, is chief quality officer and executive director of the Institute for Health Care Delivery Research at Intermountain Healthcare Salt Lake City.

Through the Intermountain Advanced Training Program in Clinical Practice Improvement, he has trained almost 5,000 senior physician, nursing, and administrative executives, drawn from around the world, in clinical management methods, with proven improvement results (and nearly 50 "daughter" training programs in eight countries).

Previously, he was an assistant professor in the Department of Biostatistics at the Harvard School of Public Health, providing statistical support for the Eastern Cooperative Oncology Group, and staffed the American College of Surgeons' Commission on Cancer.


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About Intermountain Healthcare  

Intermountain Healthcare, Salt Lake City, is an integrated system of 22 hospitals, almost 200 clinics, a 900+ member physician group, and an HMO/PPO insurance plan jointly responsible for more than 530,000 covered lives serving patients in Utah, Idaho, and, at a tertiary level, seven surrounding states.  

Publication Date: Thursday, March 01, 2012

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