The evolution of our healthcare system from a volume-based to a value-based model is driving provider organisations to adopt patient-centric, outcomes-based success metrics for operational processes in both acute and non-acute settings. Within this new paradigm, physician leadership is an essential component of traditionally ‘non-clinical’ healthcare entities, like supply chain. How to define, develop, and integrate these physician leaders into this model is a new challenge that all organisations must now face.
When the Institute of Medicine published ‘To Err is Human: Building a Safer Health System’ in 1999, the report received a broad range of responses. This was the first time most Americans had even heard of medical errors, let alone that preventable errors were the cause of almost 100,000 deaths and cost US$17-29 billion in unnecessary healthcare expenses.
The federal government acted swiftly, by holding Congressional hearings, creating task forces, and appropriating US$50 million to the Agency for Healthcare Research and Quality (AHRQ) to study ways to reduce errors. The goal was to reduce errors by 50 per cent within five years by implementing improvement programmes and establish a culture of safety in the US healthcare systems.
Physicians, on the other hand, initially retorted with skepticism, arguing essentially that the data is faulty and dependent on how the terms ‘error’ and ‘preventable’ are defined.
Despite the initial denial, the fact that preventable medical errors is still the third highest cause of deaths in the United States (behind heart disease and cancer) is indisputable and serves as the cornerstone for a monumental reform in the way we deliver and pay for healthcare.
Sixteen years later, however, there has been no significant improvement in healthcare quality despite all the work that has been put in by thousands of very dedicated people in the industry. So-called ‘never events,’ healthcare-associated infections, socioeconomic disparity in access to care, and wide variations in practice still occur daily at alarming levels.
A study published in 2013 estimated that over 4000 surgical never events still occur annually.
Furthermore, the cost of healthcare is still climbing uncontrollably with no correlation to improvement in the quality of care. According to the Centers for Medicare and Medicaid Services, healthcare spending accounted for 17.5 per cent of Gross Domestic Product in 2014 and is expected to increase each year. This is the highest rate amongst all developed nations (Netherlands is second at 12.9 per cent).
New Medicare payment models, including Value-based Purchasing, are placing greater emphasis on patient safety and outcomes. Hospitals and providers are assuming a larger share of risk for the populations they serve. Hence, the need to integrate physician leaders into financial and operational strategies is greater than ever before.
The role of physicians in controlling the cost of care is not well defined in most healthcare organisations, but can be described through these functions:
• Improving quality of care
• Reducing unnecessary variation
• Creating a culture of high reliability.
Improving the quality of care has greater meaning than just becoming a better doctor or safer hospital. To quote former CMS Administrator Donald Berwick, MD, "Most of what you do in your life is better today and less expensive because we have figured out a better way to do it. The same applies in healthcare.”
This suggests that focusing primarily on quality improvement will result in considerable reduction of cost; however, the opposite is not necessarily true.
For physicians, quality improvement is achieved through a variety of strategies. These may include a more robust process for credentialing and privileging physicians, a structured effort to analyse physician-specific performance and cost data, implementing standardised evidence-based care pathways and participating in quality registries like the National Surgical Quality Improvement Program (NSQIP).
A recent study reported that hospitals that participated in NSQIP for at least three years saw an estimated annual reduction of 0.8 per cent, 3.1 per cent, and 2.6 per cent for mortality, morbidity, and surgical site infections, respectively.
Reducing unnecessary variation can be a challenge in the surgical culture, where the surgical training environment has often encouraged residents to take pride in the unique approaches taught by their institutions. While this practice creates fodder for much name-dropping and social exchanges of folklore at surgical society meetings, there is a potent risk in promoting variation in practice among surgeons.
For example, surgeon-specific practice variation in spine surgery has been shown to be a significant factor in patient outcomes, including hospital length of stay and blood transfusions. Also, a recent survey showed significant variation in the reporting of adverse patient events by residents and that remarkable improvements can be achieved by using a multifaceted intervention approach.
From a financial standpoint, variation in practice also leads to unnecessary inventory needs that cause waste and squander opportunities to use large scales of economy as leverage when negotiating with vendors.
Clearly, the need for standardisation to improve patient safety and reduce costs by addressing unnecessary variation in surgical practice is paramount to the success of healthcare providers, but these efforts are challenged by surgeons’ (mis) education, experience, inertia and misaligned interests that often cause resistance to change, despite the lack of clinical evidence to support these differences.
This is where physician leadership is needed. Medical staff leadership, for example, can utilise the Ongoing Professional Practice Evaluation, a mandatory process required by the Joint Commission for physician credentialing, since one of the core competencies is ‘System-based Practice.’ This process can be used as a tool to incentivise physicians to practice evidence-based, cost-conscious care for their patients.
As acute care organisations are beginning to transform into population health management organisations or accountable care organisations, a new role for physician leadership is arising in the supply chain.
To simplify, ‘value’ can be defined as a simple equation of quality and outcomes divided by cost. Historically, physicians have ignored or have been shielded from cost, focusing mostly on the quality of their care and the products they use to treat patients. Although the medical education culture has traditionally scoffed at the idea of considering cost as a factor in medical decision-making, the transition to value-based care is bringing cost to the forefront of medical practice.
Traditionally seen as a cost-cutting tool for supply chain, Value Analysis has focused on finding ways to cut costs by standardising materials and medical products wherever possible, typically within the walls of the hospital. Commodities such as gauze, IV supplies and bedpans can easily be reduced to a single vendor, but products that physicians commonly request (the so-called “physician preference items,” or PPIs) are more difficult to standardize because hospitals often lack the skills or leadership to engage physicians in supply chain discussions.
Additionally, physicians are generally excluded from supply chain activities. One study showed that while 95 per cent of hospitals have a Value Analysis team, only 20 per cent of these teams are led by physicians, and they tend to have better performance than those without physician leaders.
In general, most hospitals offered no significant incentives for physicians to help improve supply chain efficiency. Furthermore, not all value analysis teams addressed PPIs. A 2012 survey of 4,500 hospitals showed that 64 per cent of hospitals were using such teams to evaluate and select PPI’s.
The future of physician leadership in value analysis is already written on the walls.
In its recent white paper, ‘Value Analysis—A New Model for Healthcare’, Strategic Marketplace Initiative (SMI), a collaboration of healthcare providers and suppliers, stated that, “Value Analysis programmes focused solely on cost reduction may not be optimally positioned to produce sustainable benefits over the long term, as modern supply chain and Value Analysis leaders recognise that a programme must balance its focus on cost, quality and outcomes.”
Many healthcare organisations realised that Physician Leadership was necessary to manage PPI standardisation.
However, they generally approached the issue in one of three ways:
1. They engaged the chief medical officer in cost-cutting initiatives or in product evaluation committees
2. They asked the service line medical director to standardise a particular medical product being used by that speciality
3. They engaged a high-volume surgeon to use his or her influence to persuade other surgeons to use his or her preferred product.
Perhaps a major fallacy that sets them up for failure is that hospital administrators generally believe that physicians do not wish to be‘bothered’ with business issues. However, a survey by Physician Wellness Services (now Vital WorkLife for Physicians) in 2014 showed that most physicians want to be engaged in hospital operations and that they felt a large gap existed in their ability to have a voice in clinical operations and processes.
Another survey of 2300 physician leaders conducted by the American Association for Physician Leadership revealed that 90 per cent of respondents felt the business knowledge in understanding finances and access to capital is important or very important.
A bigger factor in this gap may be the lack of cost-transparency. A survey of 503 orthopaedic surgeons at seven major medical centres in the United States showed that only about 21 per cent of the surgeons were able to correctly estimate the cost of implants within 20 per cent of the actual cost. Hospital administrators have long understood that cost is a major factor of value, but sometimes have not realised that the quality of a particular category of products varied in ways beyond just workmanship and materials.
In 2002, Virginia Mason Medical Center in Seattle was the first healthcare organisation to officially adopt the ‘lean principles’ of the Toyota Production System. Other hospitals soon followed, and ‘lean’ rapidly became the hot topic in patient safety and cost reduction in healthcare.
Lean, simply stated, is the creation of value through elimination of waste. Everything from reducing inventory to eliminating unnecessary motion leads to improved patient outcomes and savings for the hospital.
On one hand, this is an incredibly powerful tool for hospitals that are trying to meet the regulatory requirements for value-based purchasing and other pay-for-performance programs. On the other hand, implementing lean requires a total cultural change and support from physicians, which can be difficult to achieve.
Organisations that focus on supply chain, such as the Association for Healthcare Resource & Materials Management, Association of Healthcare Value Analysis Professionals, Strategic Marketplace Initiative and others, are driving healthcare supply chain toward a maturation model that leads to a patient-centred, value-creating network.
What this means is that ultimately, as healthcare organisations evolve into population health management companies, the total cost of care will be determined by patient outcomes.
Already, metrics such as length of stay, 30-day readmission rates, complications, hospital-acquired conditions and mortality rates are being used to determine reimbursements. Hospitals will need to look beyond just the price of their supplies and labor costs to determine the true cost, and thus the true value of the care they provide.
Physicians must take the lead in this new model, as no one else is better positioned and trained to manage patient outcomes. Indeed, as physicians, it is our duty to take ownership of patient outcomes.
Much has been written about the direct relationship between quality improvement and cost reduction. physician leaders can lead quality improvement programmes for the sake of their patients, which in turn will lead to overall cost reduction and vice versa. In the context of supply chain management, value analysis must be primarily a clinical quality improvement strategy, not a cost reduction strategy.
It is not entirely clear what this best-practice model of physician leadership should be for supply chain management. physician leadership in supply chain value analysis is itself not a “standard’ role. There are very few physicians actually in supply chain leadership roles, and their titles and reporting structures vary significantly.
Some positions are that of part-time advisors whereas others are full-time senior executives. However, supply chain administrators have historically led value analysis programmes. In the new world of patient-centred, value-based care, it is now up to physicians to step up and take ownership of the process to optimise the value of healthcare for our patients.