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4/18/2010
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The New Normal: Healthcare Reform and Disruptive Innovation
Stephen Mayfield, DrHA, MBA, MBBSenior Vice President
American Hospital Association
Healthcare Reform and Disruptive Innovation
In the Next Few Minutes
• Reform as we know it now• Major transformation in hospital business model• Leadership’s Responsibility• Focus on Efficiency Effectiveness and Safety• Focus on Efficiency, Effectiveness and Safety• Necessary Emphasis on Quality Science• Consumer / Patient Expectations• Innovation – System, Process & Technology• Resistance to Change• Workflow Redesign as Innovation• Seeing opportunities where others cannot!
Healthcare Reform
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Health for Life
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Big PictureHealth for Life
System Reform Framework
Hospitals in Pursuit of
Excellence Field
Leadership Strategy
Seven Topics ( G )
Infections
M di ti S f tEducation Support
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(and Growing)Theme:
Integration, Risk,
Accountability
Medication Safety
Patient Flow
Patient Safety
Care Coordination
HIT
Improve Efficiency
Products
National Implementation
Provided to the Field By Three
Ways
Impact AHA Strategic Plan
Strategic Performance Commitments
Health Reform Legislation - Key Delivery System Reforms
• Accountable Care Organizations– Beginning 2012, allows hospitals in cooperation with
physicians to voluntarily form an ACO to manage care and share savings.
• Bundling – Beginning 2013, requires a national, voluntary, five g g q y
year pilot program. If successful, pilots may be expanded after 2015.
• Hospital Readmissions– Beginning FY 2013, penalties for hospitals with
readmissions in “excess” of “expected levels. Excludes critical access hospitals and post-acute care providers.
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Health Reform Legislation - Key Delivery System Reforms (contd.)
• Value-Based Purchasing– Beginning FY 2013, the program would redirect 1-2%
of Medicare payments based on quality performance. • Hospital-Acquired Conditions (HACs)
– Beginning in FY 2015, adds a 1 percent penalty to hospitals in the top quartile of rates of HACs, resultinghospitals in the top quartile of rates of HACs, resulting in reductions of $1.5 billion over 10 years.
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Health Delivery Reform• Accountable Care
Organizations
• Bundling
H it l
More Integrated Care
More At-Risk• Hospital
Readmissions
• Value-Based Purchasing
• Hospital-Acquired Conditions
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More Accountable
Health Care
Roadmap to Understanding and Implementing Health Reform
National Framework for System Reform
•Developing Accountable Care Organizations (ACOs)•Testing Bundled Payment Implementation•Implementing Health Information Technology•Testing Tort Reform
Key Legislative Reform Issues
g•Reducing Avoidable Readmissions•Value-based Purchasing•990 Schedule H
Market Forces•Greater Integration•More Risk•More Accountability•Increased Efficiency•Increased Quality•Greater Value
+Education, Guides and Projects to Support Implementation
Proposed Reform Policies and Stated ObjectivesCross the Cross the
ContinuumContinuumBe SaferBe Safer Use Use
ScienceScienceBe FrugalBe Frugal Be TransBe Trans--
parentparentHPOE HPOE EffortsEfforts
Payment and Delivery System ReformPayment and Delivery System Reform
Value Based Value Based PurchasingPurchasing
BundlingBundling
Accountable Accountable Care OrgsCare Orgs
Care Delivery IssuesCare Delivery Issues
InfectionsInfections
ReadmitsReadmits
IT AdoptionIT Adoption
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The New Realities
The New Realities
More Risk, Accountability & Transparency
The New Realities
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Criticisms of Care Delivery
• Excessive variation and variability• Average Reliability• Undesirable Harm• Less-than-optimal Efficiency• Unsustainable Costs
Themes from High-Performing Leaders• Seeing the problem or opportunity• Willingness to Change the present situation• Implementing the Innovation for improved performance• Using design and reengineering methods to improve
Patient Flow and Workflow while Reducing Inefficiencies and Eliminating Defects
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Evolutionary & Revolutionary Change
• “The real test of leadership, then, is to be able to compete successfully by both increasing the alignment or fit among strategy, structure, culture, and processes, while simultaneously preparing for the inevitable revolutions required by discontinuous environmental change. This requires organizational
d t kill t t i t k tand management skills to compete in a mature market (where cost, efficiency, and incremental innovation are key) and to develop new products and services (where radical innovation speed, and flexibility are critical). Managers need to do both at the same time, that is, they need to be ambidextrous”.
Tushman, M. and O’Reilly, C. The ambidextrous organization –managing evolutionary and revolutionary change. California Management Review, Vol 38, No. 4.
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Putting Some Context
Which would you rather have?:
A Million dollars right now, or:
A Billion dollars*?
Putting Some Context
Which would you rather have?:
A Million dollars right now, or:
A Billion dollars*?* You have to count it, at the rate of one dollar a second
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The New Realities
Consumer Reports
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The New Realities
= MarginBundling payments
Non-payment adverse events
Inefficiency
- COSTSREVENUES
Non payment adverse events
Medicare pressures“20% to 50% of all health
care efforts are attributable to inefficiency.”
Rework, work arounds, defects, errors,
unnecessary harm, delays, misuse, overuse, underuse.
Non payment readmissions
The New Realities
Doing the Right Thing Well
The Business Model of Hospitals has been “we will do everything for everybody.”
However there are two divergent businesses models under the same roof:• Solution shops – which diagnose and recommend solutions and must be compensated on a fee-for-service basis; and• Value-added process businesses – performing
Cost Problems are due to Overhead,
Quality Problems are due to Poor Integration.
Recommendation – “deconstruct activities operationally into two different business models. The work done in each business model must be organized differently and their cost accounting and procedures on definitively diagnosed problems with a relatively standard sequence of steps and paid on fee-for-outcome basis.
pricing systems must be structured in ways appropriate for each.”
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Revenue vs. Savings
HCOs really only have two choices to deliver their services and they are to either:
• minimize total cost subject to a given constraint on output orconstraint on output, or
• maximize output subject to a total cost constraint.
From McGuigan
A CEO Shares his Thoughts
Henry Ford Health System
• “Seven years ago we decided to stop blaming others, and attend to that which is in our control:
Quality– Quality– Cost– Service– Access”
» Nancy Schlichting, CEO Henry Ford Health System
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John Toussaint, MD, is president of the ThedaCare Center for Healthcare Value. Dan Ariens is president of Ariens, Inc.
How Long Would it Take You to Change a Tire?
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• Innovate (v. tr.): application of creative energy to implement change; a departure from past g ; p ppractices.
From Webster’s
One Example of Innovation?
“Innovation is change that creates a “Innovation is change that creates a new dimension of performance.”new dimension of performance.”
P t D kP t D kPeter DruckerPeter Drucker
Drucker, P. (1999). Drucker, P. (1999). Management changes for the 21st century.Management changes for the 21st century. New York: HarperBusiness Publishing.New York: HarperBusiness Publishing.
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On a Cruise who has the most impact on your safety?
Strategy, Structure, Culture and Process: 1847 • See
Dr. Ignaz Semmelweiz General Hospital of Vienna
Patients Deaths Percent4,010 459 11.4
Patients Deaths Percent
3,754 105 2.7
First Ward Second Ward
Outward Visible Signals of Culture
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Outward Visible Signals of Culture
• See
Dr. Ignaz Semmelweiz General Hospital of Vienna
Strategy, Structure, Culture and Process: 1847
Patients Deaths Percent4,010 459 11.4
Patients Deaths Percent
3,754 105 2.7
First Ward Second Ward
He would scream WASH YOUR HANDS !Individual competence in a poorly designed system
Strategy, Structure, Culture & Process: 1986
Challenger Disaster resulted from decisions made in 1972
Individual competence in a poorly designed system
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Why Was there an “O-Ring” Expert?No O-Rings on External Fuel Tank!
Jesica Santillan
Strategy, Structure, Culture and Process: 2003
• Successful transplant surgery (twice)• No verification system for “matching
blood type”Individual competence in a poorly designed system
Jump From 1847 to 2009
• Number One National Patient Safety Goal of the Joint Commission for reducing Healthcare Associated Infection:Associated Infection:
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“Innovation is change that creates a “Innovation is change that creates a new dimension of performance.”new dimension of performance.”
P t D kP t D kPeter DruckerPeter Drucker
Drucker, P. (1999). Drucker, P. (1999). Management changes for the 21st century.Management changes for the 21st century. New York: HarperBusiness Publishing.New York: HarperBusiness Publishing.
Automated Hand Washing
Engage
-Systemness
-Culture
-Structure
Leadership Employs System Thinking that Embraces Innovation in Process Excellence
Context Leaders(executive, trustee, physician leaders)
g gLeaders -Strategy
-Process Field
-Process Excellence
-Competencies
-Team
-Training
-Process Improvement
Content Leaders(clinical and non-
clinical)
From Stephen Shortell
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= Shift Process Average= Reduce Process Variation
Six Sigma Objectives Lean Objectives
= Improve Process Flow
Reduce:= WasteNon Value Added
Improvement Objectives
© 2010 Institute of Industrial Engineers
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= Reduce Process Variation= Robust Products and Processes
Flow= Reduce Process Complexity
= Non‐Value Added Work
= Cycle Time
Lean Six Sigma Improves Quality, Cost, and Delivery
More Hospitals Adopting Lean
• Adoption of U.S. Quality Science methods– Shewhart– Deming
• Two epiphanies: – Detroit Assembly Lines– American SupermarketTaiichi Ohno
1. Transportation (moving material/product from one place to another)
2. Inventory (material/product waiting to be processed)
Lead Time can only be minimized by the elimination of the Seven Types of Waste
Lean Methods Supports Improvement by Attacking Waste – “TIMWOOD”
© 2010 Institute of Industrial Engineers
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3. Motion (excess movement and/or poor ergonomics)
4. Waiting (delays caused by shortages, approvals, downtime)
5. Overproduction (producing more than is needed)
6. Overprocessing (adding more value than the customer is willing to paying for)
7. Defects/Rework (correcting mistakes)
Also People – un‐used or under‐utilized talents
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• Embarking on initiatives which have the potential to reengineer the way care is delivered in fundamental ways should be considered not as incremental change butconsidered not as incremental change, but rather disruptive innovation
Tushman and O’Reilly, 1996
Disruptive Innovation
First Cell Phone – 1973Weighed Over a Pound Cost: $3,500
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Disruptive Innovation
Unintended / UnanticipatedConsequences
• One study found that the unintended consequences can develop in surprising fashion. The study makes a distinction between unintended consequences versus unanticipatedconsequences. In this context ‘unintended’ is related to lack of p rposef l action or ca sationrelated to lack of purposeful action or causation, while ‘unanticipated’ refers to an inability to forecast the occurrence. The authors report that either category of consequence may be adverse or beneficial. Some may be happy surpriseswhile others represent preventable, and in some cases, severe harm.
Ash, et al, 2007
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Improved Efficiency and Throughput
Hospitals are Not Factories
ConsumerismBook:
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Layout/Flow - Lean & Sigma
Improved Efficiency and Customer Satisfaction
Human FactorsInnovation &
Mi t k P fiMistake-Proofing(Poka-yoke)
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• Perception and Communication
• An Example
The Swiss Cheese ModelThe Swiss Cheese Model
ErrorsSafety Measure Gaps
Patient
Safety Measures
The Swiss Cheese Model –Poka-yoke
The Swiss Cheese Model –Poka-yoke
Errors Sharp Cheddar
Patient
Safety MeasuresSafety Measure Gaps
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Pin Insertion Safety System
Pin Insertion Safety System
Visual Control:Which dial turns on the burner?
Stove A
Stove BFrom P. Gluck
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Mistake Proofing
Effective Employee Involvement(“people don’t resist change…just being changed”)
• Employees’ personal commitment to the organization comes from the answers to the following questions:
• What am I supposed to do for the organization?• What help will I get to do the job?• How and when will my performance be
evaluated?• What will I be paid, and how will pay relate to my
performance evaluation?
Strebel, P.(1998). Why do employees resist change? Harvard Business Press.
Health Delivery Reform• Accountable Care
Organizations
• Bundling
H it l
More Integrated Care
More At-Risk• Hospital
Readmissions
• Value-Based Purchasing
• Hospital-Acquired Conditions
75
More Accountable
Health Care
4/18/2010
26
Proposed Reform Policies and Stated ObjectivesCross the Cross the
ContinuumContinuumBe SaferBe Safer Use Use
ScienceScienceBe FrugalBe Frugal Be TransBe Trans--
parentparentHPOE HPOE EffortsEfforts
Payment and Delivery System ReformPayment and Delivery System Reform
Value Based Value Based PurchasingPurchasing
BundlingBundling
Accountable Accountable Care OrgsCare Orgs
Care Delivery IssuesCare Delivery Issues
InfectionsInfections
ReadmitsReadmits
IT AdoptionIT Adoption
In the Next Few Minutes
• Reform as we know it now• Major transformation in hospital business model• Leadership’s Responsibility• Focus on Efficiency Effectiveness and Safety• Focus on Efficiency, Effectiveness and Safety• Necessary Emphasis on Quality Science• Consumer / Patient Expectations• Innovation – System, Process & Technology• Resistance to Change• Workflow Redesign as Innovation• Seeing opportunities where others cannot!
4/18/2010
27
The New Normal: Healthcare Reform and Disruptive Innovation
Stephen Mayfield, DrHA, MBA, MBBSenior Vice President
American Hospital Association
Healthcare Reform and Disruptive Innovation
