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The Challenge

• U.S. healthcare costs >$2 billion/year• Healthcare inflation >CPI for many years

• Continuing issues of safety and errors• Lack of use of evidence-based medicine• Patient dissatisfaction

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Institute of Medicine —Crossing theQuality Chasm

Goals of a New System

• Safe• Effective• Patient-centered• Timely• Efficient• Equitable

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Steps to Close the Chasm• Care based on continuous healing

relationships• Customization based on patient needs and

values• The patient as the source of control• Shared knowledge and the free flow of

information• Evidence-based decision making

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Steps to Close the Chasm (cont’d)

• Safety as a system property• The need for transparency• Anticipation of needs• Continuous decrease in waste

• Cooperation among clinicians

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The Opportunity

• Evidence-based medicine – Could reduce healthcare costs by 28 percent – Over 400 care guidelines currently available

• Knowledge-based management – The new engineering/healthcare partnership – Widespread adoption of electronic health records

• A more active role for the consumer – Consumer-directed healthcare savings accounts – The Internet and self-care

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System Stability and Change(Peter Senge —The Fifth Discipline)

• The structure of a system is the primarymechanism to produce an outcome

• No system is ever completely stable• Each system’s performance is modified and

controlled by feedback• Feedback is ―any reciprocal flow of influence • Feedback can be one of two types: reinforcing or

balancing• A confounding problem of feedback is delay

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System with Reinforcing and

Balancing Feedback

Salaries

+

+

+

Employeemotivation

Financialperformance,profit

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System with Reinforcing andBalancing Feedback (cont’d)

Add orreducestaff

Actualstaffinglevel

−

−

Compare actual toneeded staff on thebasis of patientdemand

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Chemotherapy as an Example of Linkage of Partsof the Healthcare System

New paymentmethod forchemotherapyis created

Chemotherapy

treatmentneedsto be moreefficient to meetpayment levels

Changesare madein careprocessandsupportsystems tomaintainqualitywhilereducingcosts

Payers wantto reducecosts forchemotherapy

Environment Organization Clinical Microsystem —Patient

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Framework for Effective OperationsManagement in Healthcare

Setting Goalsand StrategyExecution

PerformanceImprovementTools,Techniques,

and Programs

FundamentalHealthcareOperationsChallenges

HighPerformance

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Vincent Valley Hospital (cont’d) • Two major competitor hospitals• Surgeons from all three hospitals recently joined

together to set up an independent ambulatorysurgery center

• Three major health plans provide most of theprivate payment to VVH• Plans, along with the state Medicaid system,

have recently begun a pay-for-performance

system• VVH has a strong balance sheet and a profitmargin of approximately 2 percent but feelsfinancially challenged

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End of Chapter 1