Reforming the healthcare system from within. - GE Healthcare Partners

Reforming the healthcare system from within. Mark Vachon, CEO, GE Healthcare, Americas

Mark Vachon, CEO, GE Healthcare, Americas

At the risk of sounding like a hopeless optimist, I believe this is a great time to be in healthcare. Yes, health reform is ta k in g s h a p e an d t he rep ercu s sio ns will unfold for many years to come. Sure, the reces sion has battered investment portfolios, dried up revenue streams, and brought us all back to the basics of rebuilding our balance sheets. True, we are not better off now than we were three years ago. Or maybe we are. The fact is it’s human nature to wait until our backs are against the wall to make the changes we know we need to make. The recent downturn—a kind of global timeout—has given the healthcare industry an unusual opportunity to gain perspective, rethink strategies, and be more innovative in our solutions. Frankly, this is a wake-up call to finally get serious about addressing the quality, access, and cost issues that have been plaguing the U.S. healthcare system since long before the recession took hold in 2008. I say this with all due respect: As the CEO of an organization that works with thousands of hospitals, I’ve witnessed the

back-breaking challenges that healthcare leaders face and the hard work and long hours they put in to serve patients, employees, stakeholders, and their communities. While preserving cash and freezing spending have been the priority over the last year, those tactics will not drive more sustainable, long-term competitive advantages in an organization. In many cases, there just has not been the stomach for making core changes that would disrupt the “usual and customary” ways of operating—disruption that leads to true transformation. In that spirit, we offer four areas ripe for improvement in most healthcare organizations—aggressive cost control, diligent capacity management, radical improvement in quality and safety, and much more robust strategic planning—and suggest ways to approach them from a new perspective. Leadership expert Stephen Covey makes a valuable point that speaks to our current collective need to re-examine the fundamentals of healthcare. Management works in the system, he says, but leadership works on the system.1 It’s time for us to work together on our healthcare system and lead it to a better place.

1.

The last several months have been interesting theater in Washington as we watched the “health reform” The game of debate unfold. In reality, what we cost shifting is witnessed is an insurance reform over exercise; there’s been very little debate on fundamentally attacking the underlying cost and quality foundation of our healthcare system. While hospitals will likely benefit from incremental volume as people currently outside the system gain coverage, that volume is going to come at the Medicare and Medicaid rates the industry routinely

Healthcare organizations have a limited window of opportunity right now—before key reform provisions become reality—to address the systemic quality, cost, and access issues that continue to plague our industry. We believe core operational changes in four key areas have the potential to transform the U.S. health system and the outlook for every organization within it: COST CONTROL: The game of cost shifting is over. CAPACITY MANAGEMENT: Better decisions, not brick and mortar, will improve capacity and financial performance. QUALITY AND SAFETY: It’s time to take a lesson from aviation’s approach to safety. STRATEGIC PLANNING: If you’re not scenario-planning, you’re not planning.

The traditional response to Medicare/Medicaid reimbursement issues has been to offset shortfalls via the commercial payers— the familiar cost shift equation. While politicians and many in the industry vilify the insurance companies to justify the cost shift, the reality is that there are many companies on the other side of that equation that are the true payers. Companies like GE, a corporation that employs hundreds of thousands of people in the United States and pays almost $3 billion annually for employee health costs. In 2009, a year that saw the worst economic cycle since the Great Depression, GE employee health costs surged almost 10% even though utilization of services was virtually flat. That should concern all of us, because it is becoming an issue of national competitiveness. At GE, we are thinking long and hard about whether to expand employment in communities where we see this spiraling cost equation. We have launched a CEOled company-wide initiative to hold our health cost inflation to the level of CPI, or about 3%, which is roughly one-third the rate we are currently experiencing. Other companies are watching GE and will be sure to follow. The cost shift equation will not be a viable long-term strategy for dealing with Medicare/Medicaid. With the right strategic planning and initiative, we believe this dynamic can be a great opportunity for providers. Those that aggressively drive productivity measures, rigorously manage capacity, and continuously improve quality will be able to differentiate themselves with employers looking to do business with health systems that provide the highest value equation: that is, value = cost and quality. In industry, we seek to build relationships with suppliers that provide us with the bestquality goods/services at the best prices, and forward-thinking providers should be able to leverage this model. Employers also are looking to keep their workforces healthy and productive— another opportunity for health systems to play a valuable role. Building community partnerships and coalitions with local employers, civic leaders and, in some cases, competitors should be an essential part of every provider’s strategic plan. At GE, we have launched this concept in markets where we have large concentrations of employees. Clearly, incentives will need to change and stakeholders will need to engage in give-and-take to drive alignment and win-win outcomes. But ultimately, what is good for the employers will be good for the community and for providers, leading to more jobs and more commercial-pay customers. This will be how real health reform happens.

2.

Better decisions, not brick and mortar, will improve capacity and financial performance

Reform legislation and governmental intervention will strain the industry in ways that are just beginning to emerge. With 30+ million uninsured Americans gaining health coverage as a result of reform, how will health systems handle this influx? Capacity management is a key vulnerability in our industry.

Simply trying to scale up current care delivery processes to meet post-reform challenges will backfire. Costs will continue to increase, and there will be no progress toward making healthcare more affordable. The opportunity is now to put a critical eye on system logistics, patient flow, and asset management—factors that together have a significant impact on capacity, quality, and cost. Attacking these issues in the “breathing space” before the next reform provisions become reality will give organizations time to develop, learn, and embed new processes that will be essential to their success. First and foremost, providers need to take a hard look at how they are utilizing inpatient capacity. More than three-quarters of U.S. hospitals operate below 80% utilization. Just as the airlines can no longer fly planes that aren’t close to full, we believe hospitals need to move utilization to 90% or higher—and do so in a way that is safer for patients and more sustainable for staff than current performance. Important to note is that many of our nation’s hospitals “feel” full. This false sense of working at or beyond capacity is due to ineffective workflow processes: because the ICU is oversubscribed early in the week; because variation in the elective surgical schedule creates a chaotic environment that unnecessarily strains the staff; because misaligned discharge and admission cycles drive up ED length of stay; and so on. Improving utilization is the single most powerful lever available to hospital leaders to improve financial performance. In some cases, this means caring for more patients with existing staff

Reforming the healthcare system from within

grumbles about. Given the surging deficits and trillion-dollar price tag that will accompany reform, it is not a big leap to assume that over the next decade those reimbursement rates will head only in one direction—down—and private payers are sure to follow.


and infrastructure. For example, GE’s work with one hospital delivered millions to the bottom line by improving operating room utilization: caring for more patients with the same staff, same number of ORs, and less overtime. Similarly, a recent article in The Boston Globe described another hospital’s sixyear journey to improve utilization—and the $100+ million benefit realized. We have worked with a number of community hospitals that have significantly increased their utilization, even with flat volumes, by re-engineering their infrastructure. This usually involves improving performance and then slowly rightsizing capacity over time. Improving utilization is not easy; doing so requires specialized approaches and new tools. We use the framework of scheduling, governance, and process improvement to organize our work with clients. In many cases, providers have internal capabilities to improve process, but scheduling and governance lag behind and limit success. The challenges of scheduling are underappreciated. Allocating block schedule time for a large surgical department, for example, is far more complex than designing Major League Baseball’s annual schedule. Yet hospitals almost always attempt it by using manual processes rather than the sophisticated computerbased simulation and constraint-management models that, in our experience, are more suited for the task. Governance refers to the systems and structures through which change is driven, decisions are made, and performance

is measured. This includes the network of committees that govern each department and service line and the operational control systems that guide their decisions. To succeed, both retrospective and prospective information must be available to relevant decision-makers. This is possible by combining three classes of information: (1) real-time information about the location of staff, patients, and devices with room-level specificity, (2) clinical workflow information, including the patient’s care plan and pathways, and (3) predictive information about the likely status of hospital capacity, looking many shifts ahead. The last category—predictive planning—holds great promise, and research at the GE Global Research Center is being piloted with key partners in the provider community. It involves using sophisticated simulation modeling to constantly predict, update, and re-predict the state of the hospital, ideally in real time. Providing this information to front-line decision-makers— such as charge nurses and bed coordinators—gives them a global perspective on what is happening within and beyond their units, and how activities will impact the overall workflow of the hospital. Such predictive information enables better decisions every day. Better decisions create more capacity. And, by giving hospital staffs the technological means to be smarter rather than asking them to work harder, we increase the time and energy available to focus on patient care. Similar improvement opportunities exist in clinical asset utilization. In what industry outside of healthcare is 40% asset utilization acceptable or even sustainable? The simple answer

• Insist on a full understanding of asset utilization in the organization. If utilization rates are less than 50% in any category, immediately challenge and rethink any replacement plans you have. Compounding the waste issue with new excess capacity will continue the industry’s inability to evolve and thrive. • E xamine internal workflow processes around asset management. When a healthcare organization discovers a problem with clinical asset utilization, there is often a desire to either (a) cut inventory drastically and instruct employees to make do, or (b) buy more units, hoping the problem will resolve itself. Neither approach is effective. Typically, the underlying distribution and par-level management processes are broken. Identifying the bottlenecks that thwart maximum utilization and implementing new workflow processes that comfortably increase utilization per asset will allow an inventory reduction without negatively impacting patient care. • Develop an action plan with clear deliverables and accountability. Creating a defined action plan that aligns resources against clear priorities will help you tackle the waste problem systematically and increase the likelihood of success. As hospitals focus on improving the utilization of clinical assets, they often find that they can make significant gains in controlling waste and inefficiency. By redesigning their distribution and management processes and, in some cases, adding real-time location technologies, they are able to simultaneously reduce assets and improve their availability for more effective patient care, saving millions of dollars in capital and operating expenditures each year.

3.

We must act now to make serious improvements in quality and patient safety. Despite a decade It’s time to of intensive efforts by industry take a lesson organizations to reduce the high from aviation’s rate of preventable medical errors, approach to tremendous issues still exist. For safety example, according to the 2008 Leapfrog Group Hospital Survey, only 7% of hospitals fully meet Leapfrog’s medication error prevention CPOE standard and few hospitals are fully meeting mortality standards. The survey also indicates that 65% of hospitals do not have all of the recommended policies in place to prevent many of the most common hospital-acquired infections.2 It is time now for all of us in healthcare to commit to making our industry as safe as the aviation industry. To set a goal any less ambitious is to let down every patient we serve. For inspiration, it’s helpful to consider one of the key safety programs within aviation. Pilots, crews, and air traffic controllers are able to report near-miss events to NASA through

the Aviation Safety Reporting System (reference the tool at http://asrs.arc.nasa.gov/). The information from that system is one reason that air travel is so incredibly safe. The system works because it is easy to use, culturally embraced, and voluntary. Its success hinges on the fact that the reporter is protected from negative consequences of inputting the near miss. Similarly, in GE factories around the country, we have worked hard to create an underlying culture of safety, leveraging the OSHA Voluntary Protection Program (VPP) framework. By setting the expectation that everyone will be diligent about what could cause injury or harm, we capture hundreds of near-miss events for every incident in which an employee actually gets hurt. Learning from voluntarily reported near misses enables us to proactively and continuously make our environments safer. In the healthcare industry, Patient Safety Organizations (PSOs) can offer the same protection—and may begin a virtuous cycle toward creating a similar culture of safety. Everyone shares the common goal of reducing medical errors. First and foremost, healthcare leaders need to personally engage in building an authentic, no-blame, open environment around quality and safety. Every employee needs to feel committed to a safety culture and empowered to act when issues arise. Next, healthcare organizations need tools that bring together relevant data and insights from across the enterprise to enable better decision-making at all levels. In our experience, when hospitals implement user-friendly technology to capture this information, they can aggregate enough data to recognize patterns, pinpoint causes, and create actionable outputs that can be used to reduce error and mitigate risk. Giving staff members a global view of the interactions affecting patient care and hospital administration a keen understanding of caregivers’ daily challenges can help the two groups come together to make real advances toward the common goal of patient safety. My belief is that a new era of patient safety has begun with the creation of PSOs by the Agency for Healthcare Research


is none; companies would not survive, let alone thrive, with that level of inefficiency. Here are some immediate steps leaders can take to release the anchors of waste and inefficiency in clinical asset utilization:


and Quality (AHRQ). To step up our cultures of safety, we must embrace PSOs, improve our ability to capture near misses, and learn the essential lessons necessary to pinpoint the nuanced root causes of every type of error. This will set us on the right path so that one day we’ll see the safety record of the healthcare industry rivaling that of aviation.

4.

At GE, we experienced our share of challenges after the financial crisis hit in late 2008. Given the If you’re not economy and the uncertainty scenarioplanning, you’re of health reform, we could have circled the wagons and waited not planning for the external environment to change before launching any big initiatives. In fact, we saw a lot of healthcare organizations do just that, and many are still frozen in place. We opted for a different approach, and instead came out playing offense and investing in healthymagination, a six-year, $6 billion program to improve healthcare costs, quality, and access globally. We were able to do this with confidence due to our discipline around scenario-planning. Here’s how it works: • We look at key trends that may play out over our strategic planning horizon. Positioning combinations of those trends, we look at the implications to create various “scenarios.” • A ssessing these scenarios and their probabilities, we determine where to place big bets or where to plant some

seeds that will allow us to grow quickly if a particular scenario comes to fruition. • Initiatives that will have benefit across all scenarios are called “must-dos” and we invest in them accordingly. Scenario-planning provides a tremendous framework for driving action in a time of uncertainty, and my recommendation to healthcare providers is to plan and act now around the must-dos that will likely prevail in all scenarios: • P repare for the multi-generational doughnut hole. According to the American College of Healthcare Executives (ACHE), the 2009 CEO turnover rate was 18%, the highest ever. 3 Much of this is due to retirement, and we simply do not have enough Generation X leaders to replace the baby boomers as this trend continues. Must-do: Invest now in building your leadership pipeline. • Take advantage of the shift in care settings. We know that regardless of external drivers, outpatient volumes will continue to increase and more chronic patients will be accessing care through their homes and retail outlets, all at the expense of inpatient volumes. With that shi f t come s ne w opp or tuni t y, and we s e e m any organizations already providing alternative services outside the hospital. Must-do: Build new business models that go where the patients will be.


• B uild a model that requires a dif ferent caregiver skill mix. The economy provided a breather on the nursing shortage, but we are already beginning to see nursing resources tighten as nest eggs recover. A look at medical school graduation rates highlights the impending need around many specialties. Factor in a reimbursement system that will focus more on quality and we all need to be thinking now about how we can leverage technology and different pathways and protocols to deliver better care with different clinical resources. Must-do: Launch innovations that increase patients’ access to the right caregivers at the right time at the right cost. Change is the new constant In my business, I meet with executives at hospitals and health systems across the country. Academic. Urban. Rural. Large and small. And those that are most successful share one commonality. They are constantly in the process of re-inventing themselves and adjusting their operations to deal from a position of strength with new competitive, regulator y, payer, consumer, and technological realities. Rather than react to change, they have made the pivotal decision to anticipate and lead change. Let’s start a discussion We’re interested in learning how you’re leading your organization to the next level—the steps you’re taking to solve challenges and find opportunities in the new world of healthcare, to ensure long-term success for your organization. We invite you to share your thoughts with us at nextlevel.gehealthcare.com. You’ll find blogs on the topics in this article and an invitation to have an online conversation in which you can share ideas with your peers regarding the most significant challenges your health system is facing. Please join us in leading change.

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©2010 General Electric Company — All rights reserved. GE and GE Monogram are trademarks of General Electric Company. Major League Baseball is a trademark of Major League Baseball Properties, Inc. GE Healthcare, a division of General Electric Company. 1 Covey SA, et al. First Things First. Simon & Schuster, 1994. 2 L eapfrog Hospital Survey Results 2008. The Leapfrog Group. ht tp://w w w.leapfroggroup.org/media/f ile/ leapfrogreportfinal.pdf 3 A nnual CEO Turnover Rates for Nonfederal, General Medical/Surgical, Short-Term Hospitals. American College of Healthcare Executives. http://www.ache.org/Pubs/ Releases/2010/CEOTurnover_2010.pdf

About GE Healthcare GE Healthcare provides transformational medical technologies and services that are shaping a new age of patient care. Our broad expertise in medical imaging and information technologies, medical diagnostics, patient monitoring systems, drug discovery, biopharmaceutical manufacturing technologies, performance improvement and performance solutions services helps our customers to deliver better care to more people around the world at a lower cost. In addition, we partner with healthcare leaders, striving to leverage the global policy change necessary to implement a successful shift to sustainable healthcare systems. Our “healthymagination” vision for the future invites the world to join us on our journey as we continuously develop innovations focused on reducing costs, increasing access and improving quality and efficiency around the world. Headquartered in the United Kingdom, GE Healthcare is a $16 billion unit of General Electric Company (NYSE: GE). Worldwide, GE Healthcare employs more than 46,000 people committed to serving healthcare professionals and their patients in more than 100 countries. For more information about GE Healthcare, visit our website at www.gehealthcare.com. GE Healthcare nextlevel.gehealthcare.com