Richard L. Clarke, DHA, FHFMA
“How would they know? How could they know? The answer is frightening: There’s no chance to know. Without knowing what to do, we can be ruined by best efforts.”
W. Edwards Deming, the “father of the modern quality movement,” made this observation after 13 years of trying to convince American manufacturing executives of the need to improve quality (Delavigne, K.T., and Robertson, D.J., Deming’s Profound Changes, PTR Prentice Hall, 1994). Eventually, American manufacturing heard his message and—systematically and in earnest—began to measure performance, identify opportunities to reduce variation, and improve processes and outcomes. American health care is just now learning this same lesson.
In manufacturing, once Deming’s message was embraced, quality improvement and cost reductions began to go hand in hand. And market share shifted dramatically to companies that produced value (high quality at lower cost). It was a matter of survival.
In health care, the connection between quality and cost is somewhat fuzzy because the relationship between value and market share or profitability is not as clear. For my DHA dissertation in 2005, I studied the relationship between financial performance and patient satisfaction. I found none. Perhaps this disconnect explains, in part, why health care has been slower than manufacturing to spend sufficient time and money on improvement efforts.
In 2008, the Institute for Healthcare Improvement (IHI) released a report entitled Seven Leadership Leverage Points for Organization-Level Improvement in Health Care. According to IHI, one of the seven leverage points is to “make the chief financial officer a quality champion.” IHI recognizes the important role the finance officer plays in helping to measure, focus, and fund quality efforts even when the returns are difficult to measure. Without finance, it is almost impossible to know if improvements are having a positive impact on value.
The good news is this: Despite the challenge of linking quality and value, and despite the natural professional distinctions between finance and clinicians, finance leaders are eager to be part of quality improvement. HFMA’s educational programs and publications offer many examples of how finance, clinicians, and others have collaborated for measurable improvements in quality, cost, and competitiveness. In the spring, HFMA will hold a major executive event focusing on the quality-cost connection.
I also hear an eagerness to embrace quality improvement among hospital finance leaders. At HFMA’s third annual Thought Leadership Retreat in September, more than 100 finance executives met to deal with thorny issues raised by payment reform, which will emphasize payment for value instead of volume. The executives recognized the need to integrate clinical and financial information for effective decision making. Also, they saw the effort it will take to identify measures and approaches, and to achieve improvements. It was inspiring to hear their willingness to try.
Deming points out the problem of acting “without knowing what to do.” Healthcare finance professionals—like clinicians—are dedicated to transforming data into the basis for sound decisions. And that makes finance a perfect partner as healthcare organizations strive always to “know what to do.”