Saturday, September 23, 2006

Future of Healthcare in America Looks Bleak

The U.S. health care non system is slated for a one two punch courtesy of the Bush administration and employers. Both continue their entrenched trend of cutting health insurance benefits, in some cases eliminating coverage altogether. The number of uninsured has grown by some 8 million people under the President’s watch.

The Bush team has more in store than just adding to soaring deductibles and co-pays for those lucky enough to still have coverage. They want to incentivize physicians to produce quality. Payments to providers will vary based on conformance to widely accepted standards of care.

Dr. Deming, the world renowned quality guru, would have several comments on such practices. He would be excited that physicians and insurers measured the quality of care provided yet simultaneously appalled by the financial rewarding. Let’s consider some of his teachings and how they might apply.

Managing by results is like looking in the rear view mirror. Managing by results only makes things worse.”

Focusing on variations from the standard usually occurs post production, after the patient has exited the system. Management is incapable of going back and correcting most problems. A better practice would involve focusing on the process and reducing variation with an understanding of special and common causes. Without an understanding of the types of variation present management frequently undertakes the wrong strategy for change. This often makes things worse.

“Suboptimization is when everyone is for himself. Optimization is when everyone is working on behalf of the company.”

Physicians will focus on optimizing their own pay. They will conform to widely accepted standards or crimp the data to show they have. One need only look as far as stock option plans to see widespread malfeasance. Industry leaders and board members purposely back dated stock option grants, such that they could be guaranteed a profit. The incentive to improve corporate performance was twisted by CEO’s and Board members. Over 2,000 companies engaged in this practice.

“The merit system will put us out of business.”

Merit pay or pay for performance encourages people to focus on their pay rather than their work. Ranking and grading people drives internal competition stifling the cooperation needed amongst team members working to produce complex services. Barriers to sharing knowledge for improvement are introduced under ranking systems.

“Meeting specifications is not enough.” & “You cannot plan how to make a discovery. You do not plan innovation.”

With a strong focus on conformance to standards, innovation could suffer. Numerous medical innovations have lingered due to lack of recognition and reimbursement.

“For Quality: Stamp out fires, automate, computerize, M.B.O., install merit pay, rank people, best efforts, zero defects. WRONG!!!! Missing ingredient: profound knowledge”

What theory does the Bush administration propose as the basis for incentivizing providers via pay for performance? Is it money is the number one motivator for all people? Is it conformance to standards or zero defects produces quality? If a flaw exists in either assumption, how are they reduced by their combination?

“Price is not the only cost.”

The greatest costs are unknown or unknowable, yet they can be managed with an understanding of profound knowledge. As Dr. Deming said:

“We are being ruined by best efforts.”

The Bush team certainly qualifies. How the Institute of Medicine jumped on board, I have no idea.

Medicare should use incentive payments, combined with the force of its $300 billion-per-year medical care budget, to improve the quality and efficiency of the U.S. health system, the IOM committee said Thursday. The committee said Congress and Medicare should move quickly to implement so-called "pay for performance" plans.

“It is a mistake to assume that if everybody does his job, it will be all right. The whole system may be in trouble.”

Yes, Dr. Deming it is….

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