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WhiteGriffithTheWellManagedHealthcareOrganizationNinthEdition-JohnR.GriffithThe.pdf
ORGANIZATION
THE
WELL-MANAGED
KENNETH R. WHITE
JOHN R. GRIFFITH
NINTH EDITION
HEALTHCARE
HAP/AUPHA Editorial Board for Graduate Studies
Carla A. Stebbins, PhD, Chairman Rochester Institute of Technology
Kevin Broom, PhD University of Pittsburgh
Erik L. Carlton, DrPH University of Memphis
Daniel Estrada, PhD University of Florida
Edmond A. Hooker, MD, DrPH Xavier University
LTC Alan Jones, PhD, FACHE US Army
Christopher Louis, PhD Boston University
Peggy J. Maddox, PhD George Mason University
Donna Malvey, PhD University of Central Florida
Brian J. Nickerson, PhD Icahn School of Medicine at Mount Sinai
Stephen J. O’Connor, PhD, FACHE University of Alabama at Birmingham
Maia Platt, PhD University of Detroit Mercy
Debra Scammon, PhD University of Utah
Tina Smith University of Toronto
James Zoller, PhD Medical University of South Carolina
Health Administration Press, Chicago, Illinois
Association of University Programs in Health Administration, Washington, DC
White-Griffith.indd 3 2/6/19 10:11 AM
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The statements and opinions contained in this book are strictly those of the authors and do not represent the official positions of the American College of Healthcare Executives, the Foundation of the American College of Healthcare Executives, or the Association of University Programs in Health Administration.
Copyright © 2019 by Kenneth R. White and John R. Griffith. Printed in the United States of America. All rights reserved. This book or parts thereof may not be reproduced in any form without written permission of the publisher.
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Library of Congress Cataloging-in-Publication Data Names: White, Kenneth R. (Kenneth Ray), 1956- author. | Griffith, John R., author. Title: The well-managed healthcare organization / Kenneth R. White, John R. Griffith. Description: Ninth edition. | Chicago, Illinois : Health Administration Press; Washington, DC : Association of University Programs in Health Administration, [2019] | Series: AUPHA/HAP editorial board for graduate studies | Includes bibliographical references and index. Identifiers: LCCN 2018049544 (print) | LCCN 2018050390 (ebook) | ISBN 9781640550599 (ebook) | ISBN 9781640550605 (xml) | ISBN 9781640550612 (epub) | ISBN 9781640550629 (mobi) | ISBN 9781640550582 (print : alk. paper) Subjects: LCSH: Health services administration. Classification: LCC RA971 (ebook) | LCC RA971 .G77 2019 (print) | DDC 362.1068--dc23 LC record available at https://lccn.loc.gov/2018049544
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v
BRIEF CONTENTS
Preface ....................................................................................................xvii
Section I Introduction and Overview
Chapter 1. Foundations of Well-Managed Healthcare Organizations ..3
Chapter 2. Creating and Sustaining a Transformational Culture ........35
Chapter 3. Building Continuous Improvement .................................63
Chapter 4. Establishing Strategic Governance ...................................99
Section II Clinical Excellence
Chapter 5. Foundations of Clinical Excellence ................................139
Chapter 6. The Clinical Staff Organization .....................................173
Chapter 7. Nursing .........................................................................209
Chapter 8. Clinical Support Services ...............................................241
Chapter 9. Population Health .........................................................273
Section III Logistic and Strategic Support
Chapter 10. Knowledge Management ...............................................307
Chapter 11. Human Resources .........................................................337
Chapter 12. Environment of Care ....................................................369
Chapter 13. Financial Management ..................................................401
Chapter 14. Internal Consulting .......................................................439
Chapter 15. Marketing and Strategy .................................................471
Glossary .................................................................................................507 Index .....................................................................................................515 About the Authors ..................................................................................557
vii
DETAILED CONTENTS
Preface ....................................................................................................xvii
Section I Introduction and Overview
Chapter 1. Foundations of Well-Managed Healthcare Organizations ..3 Purpose: Mission of Healthcare Organizations ..................4 Defining Excellence ............................................................5
Excellence in Patient Care ..............................................5 Excellence in Population Health .....................................6 Sources for The Well-Managed Healthcare Organization .6
Team Structure of Twenty-First-Century Care ...................7 Clinical Teams—Interprofessional Care and Clinical
Support .....................................................................7 Clinical Support Teams ..................................................9 Logistic and Strategic Teams ..........................................9 Current Trends ............................................................10
Stakeholders ....................................................................10 Patients and Families ....................................................11 Associates .....................................................................12 Other Customer Partners .............................................12 Other Provider Partners ...............................................15 Stakeholder Influence: Networking, Coalition Building,
and Legal Controls ..................................................15 The Healthcare Marketplace ............................................16
The Origin and Development of HCOs .......................16 The Current American Marketplace ..............................17 The Hospital Sector .....................................................18 Physician and Other Health Services.............................20 Post-Acute and Specialty Care ......................................20 Other Sectors of the Healthcare Economy ...................21
Achieving Excellence in HCOs ........................................21
Detai led Contentsviii
Transformational Culture .............................................22 Continuous Improvement ............................................23 Commitment to Evidence ............................................23 Leaders ........................................................................24 The Role of Strategic Teams ........................................25
Managing and Leading Excellent Healthcare Organizations .............................................................25
Reducing Variation in Healthcare Organization Performance ............................................................26
Meeting the Needs of Clinical Care Teams ...................27 Supporting Continuous Improvement ..........................28
Practice Applications .......................................................29 Notes ..............................................................................30
Chapter 2. Creating and Sustaining a Transformational Culture ........35 Purpose ...........................................................................36 Functions ........................................................................37
Empower HCO Associates ...........................................37 Promote Service Excellence ..........................................39 Communicate ...............................................................43 Define and Model Values..............................................46 Reward-Associated Contribution ..................................48 Protect HCO Assets .....................................................50 Improve Continuously .................................................53
People .............................................................................53 Measures .........................................................................55 Managerial Leadership .....................................................56
Explaining the Culture .................................................57 Practice Applications .......................................................59 Notes ..............................................................................60
Chapter 3. Building Continuous Improvement .................................63 Purpose ...........................................................................64 Functions ........................................................................64
Monitor Stakeholder Needs and Identify Responsive Goals .......................................................................66
Provide Evidence-Based Information ............................68 Long- and Short-Term Forecasts ..................................74 Coordinated Goals, Logistics, and Support: The Annual
Planning Calendar ...................................................78 Design Corporate Structure .........................................79
Detai led Contents ix
Support HCO-wide Process Analysis ............................83 Improve Continuously ..................................................88
People .............................................................................89 Measures .........................................................................90 Managerial Leadership.....................................................92
Making the Case for Continuous Improvement ............92 Enhancing Transformational Culture and Continuous
Improvement ...........................................................93 Practice Applications .......................................................95 Additional Resources .......................................................96 Notes ..............................................................................97
Chapter 4. Establishing Strategic Governance ...................................99 Purpose .........................................................................100 Functions ......................................................................101
Maintain Leadership Capability. ..................................103 Establish the Mission, Vision, and Values ...................105 Ensure Quality of Clinical Care ..................................105 Approve the Corporate Strategy and Annual
Implementation .....................................................107 Monitor Performance Against Plans and Budgets .......111 Improve Continuously ................................................113
People ...........................................................................114 Board Membership .....................................................114 Membership Qualifications .........................................117 Board Selection ..........................................................119 Board Organization....................................................121 Education and Information Support for Board
Members ...............................................................127 Measures .......................................................................128 Managerial Leadership...................................................128
Operating Discipline ...................................................128 Legal and Ethical Issues of Board Membership ...........130
Practice Applications ......................................................132 Additional Resources .....................................................132 Notes ............................................................................133
Section II Clinical Excellence
Chapter 5. Foundations of Clinical Excellence ................................139 Purpose .........................................................................140
Detai led Contentsx
Functions ......................................................................141 Ensure Accurate Diagnosis .........................................141 Provide Excellent Care ...............................................145 Individualize Patient Care Planning and Treatment ....153 Improve Community Health ......................................155 Improve Clinical Performance ....................................156
People ...........................................................................157 Building an Engaged Workforce .................................157 Organizing Clinical Units ...........................................158 Interprofessional Conflicts ..........................................159
Measures .......................................................................160 Scorecards for Clinical Services ...................................160 Value-Based Purchasing ..............................................163
Managerial Leadership...................................................164 Sustaining the Platform of IPOCs, Guidelines, and
Protocols ...............................................................164 Sustaining a Culture of Teamwork and Respect ..........165 Maintaining Continuous Clinical Improvement ..........166
Practice Applications ......................................................167 Additional Resources .....................................................168 Notes ............................................................................168
Chapter 6. The Clinical Staff Organization. .....................................173 Purpose .........................................................................174 Functions ......................................................................175
Achieve Excellent Care ...............................................175 Review Credentials and Recommend Privileges. ..........179 Determine, and Recruit for, Clinical Staff Need ..........186 Provide Clinical Education .........................................191 Negotiate Compensation Arrangements .....................193 Improve Continuously ................................................195
People ...........................................................................197 Clinical Staff Organization..........................................198 Clinical Staff Leadership .............................................199
Measures .......................................................................199 Managerial Leadership...................................................200
Building Supportive Relationships ..............................200 Representing Clinical Staff on the Governing Board ...202 Ensuring Adequate Clinical Staff Supply .....................203
Practice Applications ......................................................203 Additional Resources .....................................................204 Notes ............................................................................204
Detai led Contents xi
Chapter 7. Nursing .........................................................................209 Purpose .........................................................................210 Functions ......................................................................211
Deliver Excellent Care ................................................211 Coordinate Interprofessional Care ..............................217 Educate Patients, Families, and Communities .............219 Maintain the Nursing Organization ............................220 Improve Continuously ................................................223
People ...........................................................................225 Team Members ..........................................................225 Organization ..............................................................230
Measures .......................................................................231 Managerial Leadership...................................................233
Sustaining the Nurse Supply .......................................233 Providing Adequate Training .....................................234 Supporting Empowerment .........................................234 Delivering Continuous Improvement .........................235
Practice Applications .....................................................235 Additional Resources .....................................................236 Notes ............................................................................236
Chapter 8. Clinical Support Services ...............................................241 Purpose .........................................................................242 Functions ......................................................................243
Provide Excellent Care ...............................................243 Maintain Patient Relationships. ...................................245 Maintain Consultative Relationships ...........................247 Plan and Manage Operations ......................................249 Improve Continuously ................................................253
People ...........................................................................260 Team Members ..........................................................260 CSS Leadership ..........................................................261 The HCO Manager ....................................................261 Organization ..............................................................262 HCO–CSS Relationships ............................................263
Measures .......................................................................263 Managerial Leadership...................................................265
Should the HCO Offer the Service? ...........................266 How Big Should the CSS Be? .....................................266 What Are the Continuous Improvement Goals the
CSS Should Meet? .................................................267
Detai led Contentsxii
What Is the Best Contractual Form for the HCO–CSS Relationship?. .........................................................267
Does the CSS Have the Coordination It Needs? .........268 Are CSS Activities Correctly Assigned to Professional
and Nonprofessional Associates?. ............................268 What Are the Longer-Term Trends and Implications
for the CSS? ...........................................................269 Practice Applications .....................................................270 Additional Resources .....................................................271 Notes ............................................................................271
Chapter 9. Population Health .........................................................273 Purpose .........................................................................274 Functions ......................................................................276
Quantify Population Health Needs .............................277 Establish a Population Health Strategy .......................284 Operationalize a Population Health Strategy ..............290 Improve Continuously ...............................................292
People ...........................................................................292 Measures .......................................................................294
Operational ................................................................294 Strategic .....................................................................294
Managerial Leadership...................................................295 Promote and Teach Population Health .......................296 Extend Management Concepts to Population Health
Care Teams ............................................................297 Expand and Integrate Primary Care ............................298 Maintain the Infrastructure for Population Health .....299 Manage the Impact of Population Health on Acute
Care Services .........................................................300 Practice Applications .....................................................300 Additional Resources .....................................................301 Notes ............................................................................302
Section III Logistic and Strategic Support
Chapter 10. Knowledge Management ...............................................307 Purpose .........................................................................308 Functions ......................................................................309
Provide Prompt and Useful Access to Management Information ...........................................................310
The EHR and “Meaningful Use” ...............................314
Detai led Contents xiii
Ensure the Reliability and Validity of Data ..................316 Maintain Communications and Software Support .......320 Ensure the Appropriate Use and Security of Data .......321 Improve Continuously ................................................324
People ...........................................................................326 Chief Information Officer...........................................326 KM Planning Committee. ...........................................327 Organization ..............................................................327
Measures .......................................................................327 Managerial Leadership...................................................328
Achieving an Effective Knowledge Management Planning Committee..............................................328
Expanding the Use of the EHR and Clinical Data ......331 Practice Applications ......................................................332 Additional Resources .....................................................333 Notes ............................................................................333
Chapter 11. Human Resources .........................................................337 Purpose .........................................................................338 Functions ......................................................................339
Plan Workforce Needs ................................................341 Develop Workforce Contribution. ...............................341 Provide Workforce Services .........................................348 Manage Compensation and Benefits ...........................350 Conduct Collective Bargaining ...................................358 Improve Continuously ................................................359
People ...........................................................................359 Human Resources Professionals .................................359 Organization of the Human Resources Department ...360
Measures .......................................................................361 Managerial Leadership...................................................363
Associates’ Perceptions ...............................................363 Adequate Human Resources Funding .........................364 Consistent Leadership ................................................364
Practice Applications ......................................................365 Additional Resources .....................................................366 Notes ............................................................................366
Chapter 12. Environment of Care .....................................................369 Purpose .........................................................................370 Functions ......................................................................370
Design and Plan Facilities and Allocate Space .............370
Detai led Contentsxiv
Maintain Facilities and Provide Guest Services ............376 Comply with Regulatory and Safety Requirements .....381 Manage Supply Chain and End-User Satisfaction .......384 Plan for Emergency and Disaster Response .................386 Improve Continuously ................................................388
People ...........................................................................389 Leadership and Professional Personnel ........................389 Outside Contractors ...................................................390 Training .....................................................................391 Incentives and Rewards ..............................................391 Organization ..............................................................391
Measures .......................................................................392 Resource Consumption and Effectiveness ...................393 Quality .......................................................................393
Managerial Leadership...................................................394 Facilities Planning and Space Allocation ......................395 Selection and Management of Outsourcing
Contracts ...............................................................396 Integration of Environmental Services with Other
Activities ................................................................397 Practice Applications ......................................................397 Additional Resources .....................................................398 Notes ............................................................................399
Chapter 13. Financial Management ...................................................401 Purpose .........................................................................402 Functions ......................................................................402
Record and Report Transactions That Change the Value of the Firm ...................................................402
Assist Operations in Setting and Achieving Performance Improvements ...................................407
Manage Future Financial Status ..................................411 Manage Cash, Financing, and Debt ............................418 Protect Corporate Assets Against Loss, Distortion, or
Conversion ............................................................423 Improve Continuously ................................................427
People ...........................................................................427 Chief Financial Officer ...............................................427 Other Professional Personnel......................................428 Organization of the Finance System ...........................428
Measures .......................................................................430
Detai led Contents xv
Quantitative Performance Measures ...........................430 Subjective Quality Assessment ....................................430
Managerial Leadership...................................................432 Supporting an Atmosphere of Honesty and
Transparency..........................................................432 Maintaining a Collegial, Supportive Culture ...............433 Continuously Improving Finance. ...............................433
Practice Applications ......................................................436 Additional Resources .....................................................436 Notes ............................................................................437
Chapter 14. Internal Consulting .......................................................439 Purpose .........................................................................440 Functions ......................................................................440
Support the Organization as a Whole .........................443 Support Process Improvement Teams .........................452 Support Routine Capital Investment Requests ............455 Implement and Integrate Recommendations ..............461 Improve Continuously ................................................461
People ...........................................................................462 Internal Consulting Team Members ...........................462 Organization ..............................................................462
Measures .......................................................................463 Managerial Leadership...................................................465
Sustaining Continuous Improvement and the Effectiveness of PITs ..............................................465
Ensuring Quality of Work ...........................................467 Sizing Internal Consulting ..........................................468
Practice Applications ......................................................469 Additional Resources .....................................................470 Notes ............................................................................470
Chapter 15. Marketing and Strategy. .................................................471 Purpose .........................................................................472 Functions ......................................................................473 Marketing Functions. .....................................................473
Identify and Segment Markets ....................................475 Listen to Stakeholder Needs .......................................477 Develop Brand and Media Relations ...........................480 Convince Potential Customers ....................................482 Attract and Motivate Associates ..................................484
Detai led Contentsxvi
Manage Collaborative and Competitive Stakeholder Relationships .........................................................485
Improve Marketing Continuously ...............................488 Strategic Functions ........................................................488
Maintain the Mission, Vision, and Values ...................489 Define the Strategic Position ......................................489 Implement the Strategic Position ................................495 Improve Continuously ................................................495
People ...........................................................................495 Associates ...................................................................495 Organization ..............................................................496
Measures .......................................................................497 Strategic Measures ......................................................497 Operational Measures .................................................498 Establishing Strategic, Marketing, and Internal
Consulting Expenditure Goals ...............................499 Managerial Leadership...................................................500
Commitment to Respect. ............................................501 Commitment to Strategic Listening ............................501 Commitment to Fact ..................................................502 Commitment to Excellence ........................................503
Practice Applications ......................................................503 Additional Resources .....................................................504 Notes ............................................................................504
Glossary .................................................................................................507 Index .....................................................................................................515 About the Authors ..................................................................................557
xvii
PREFACE
The challenge in managing any healthcare organization (HCO) is to inte- grate individuals into multiple teams to deliver care that is safe, effective, patient centered, timely, efficient, and equitable. The solution to this chal- lenge lies in two core thrusts:
• Maintaining a culture that empowers and supports each person and each team
• Improving work processes with measurement, benchmarks, process analysis, negotiated goals, and rewards
In excellent HCOs, professionals communicate as equals, everyone is treated with respect, and authority is derived from knowledge rather than rank. Measurement is central and improvement is constant. Managers meet team members’ needs and respond directly to patients, those serving patients, or those supporting patient care providers. The record of excellent HCOs shows quite clearly that the approach is successful in all provider settings, including doctors’ offices, general and specialty hospitals, continuing care, long-term care, home care, and hospices. Performance excellence is built on a comprehensive and well-supported theory of management:
1. An HCO is supported by many stakeholders who benefit from its success. In general, stakeholders are patients, community members, employees and volunteers, providers, suppliers, regulators, or others involved in the life of the organization. Stakeholders have competing demands, and a key organizational issue is balancing and optimizing the rewards to each group. The purpose of the HCO is stated in its mission. HCO missions are similar because all HCO stakeholders share the common desire to extend the length and quality of life.
2. Mission achievement is monitored using evidence-based, objective measures of performance. Benchmarks—the best known performance— are used to identify goals for improvement. Continuous improvement— the formal, diligent review of opportunities for improvement (OFIs) and rigorous, team-oriented pursuit of the best outcomes—is a given. To achieve the goals, managers and leaders stay informed about the best practices of other HCOs.
Prefacexviii
3. The resulting improvement benefits all stakeholders (whether they are patients, families, community citizens, care providers or other workers, or volunteers) and encourages them to view the HCO as their preferred affiliation.
These elements are reinforced throughout this book. The ninth edition of The Well-Managed Healthcare Organization tracks evidence-based practices that lead to high performance built on these principles. It is based on docu- mented excellence by Baldrige Award winners, Lean users, and peer-reviewed publications. Numerous HCOs have contributed to the best practices described in the text.
The now well-documented path to excellence balances measured per- formance and continuous improvement with systematic listening and respon- siveness to the needs of patients, care providers, and other individuals. The authors believe it fairly describes the standard of practice for all organized healthcare delivery. Healthcare organizations following the path can reach and document excellence in quality, patient satisfaction, individual engage- ment, and sound financial performance.
Chapter Descriptions
Chapter 1: Foundations of Well-Managed Healthcare Organizations
• Emphasizes the team structure of modern care • Defines “excellence in care” and “population health” missions, with
performance measures and strategic implications for each • Explains the stakeholder model for HCOs, stressing the role of
managers in optimizing overall stakeholder needs • Describes the US healthcare marketplace • Outlines the organizational model that excellent HCOs share—a
culture of empowerment and servant leadership and a commitment to evidence, measured performance, and continuous improvement
• Identifies the managerial role in developing consensus, building consistent teamwork, and implementing continuous improvement
Chapter 2: Creating and Sustaining a Transformational Culture
• Emphasizes the transformational culture used by excellent HCOs to attract and retain broad stakeholder support
• Develops individual empowerment as a central theme of excellence— what it means, how it works, why it works, and how management facilitates it through servant leadership and a supportive culture
Preface xix
• Emphasizes rewards as a dominant force for high performance • Specifies the auditing and enforcement activities protecting the
organization from internal disruption • Describes management’s leadership role in sustaining the culture:
addressing individual concerns, modeling, explaining, and rewarding
Chapter 3: Building Continuous Improvement
• Focuses on how excellent management uses quantitative data to guide the organization, ranging from clinical teams to the governing board
• Explains team-level and strategic-level multidimensional scorecards used to identify, negotiate, monitor, and achieve improvement goals
• Shows how excellent HCOs forecast measures, use benchmarks to identify opportunities, and use team-oriented continuous improvement to redesign processes
• Stresses negotiation of realistic improvement goals for every team • Describes a communication structure linking each worker with
important colleagues and the governing board • Emphasizes process improvement, training, measured goals, negotiated
agreement, and rewards replacing the command-and-control style of management
• Provides examples of how management implements this system to produce excellent care, high patient and worker satisfaction, and financial success
Chapter 4: Establishing Strategic Governance
• Identifies the governing board role as optimizing stakeholder service by working intimately with senior management
• Emphasizes setting mission, vision, and values, as well as implementing them through an annual cycle evaluating strategic needs and opportunities, reviewing management’s quantified forecasts and plan, monitoring balanced scorecard performance, and expecting complete implementation
• Describes the board role in approving clinical staff, monitoring quality of care, and identifying and evaluating strategic alternatives
• Emphasizes board self-improvement—membership recruitment, selection, learning, and self-evaluation
• Highlights the management role in fact finding, training, and negotiating with other community agencies
• Addresses legal issues protecting tax exemption
Prefacexx
Chapter 5: Foundations of Clinical Excellence
• Emphasizes correct and complete patient diagnoses while supporting a team-oriented integrated plan of care tailored to individual patient needs
• Describes how training and electronic access implement the plans through diagnosis-specific clinical guidelines and protocols for completing specific clinical tasks
• Explains case management for complex patients and supporting a population health mission by expanding chronic and preventive care
• Describes scorecards for clinical teams that are consistent with risk- sharing payment systems
• Outlines a managerial style devoted to building care provider skills and satisfaction through empowerment and systematic listening, a culture of teamwork and respect, and benchmarking to build excellence across multiple teams of care
Chapter 6: The Clinical Staff Organization
• Identifies the managerial role in building and maintaining the clinical staff, establishing performance and cultural expectations, managing guidelines and protocols, and rewarding high reliability
• Explains how excellent HCOs recruit and retain effective clinicians, support professional skill development, and maintain effective credentialing and peer review
• Outlines the multiple forms of clinician contracts, emphasizing the trend toward employment in multispecialty groups or the HCO
• Reviews strategies to prevent burnout and support clinicians’ personal needs
• Outlines the contributions and the limits of the physician role on the governing board
Chapter 7: Nursing
• Describes nursing contributions to patient care and how excellent HCOs support these contributions, continually educating, recognizing and rewarding, and retaining nurses at multiple practice levels so that no shortages occur
• Identifies the nursing contribution to the plan of care and the nursing role in ensuring prompt, thorough completion of the plan
• Stresses the nurse’s role in patient education and in overcoming cultural, literacy, and linguistic barriers
Preface xxi
• Describes how excellent HCOs avoid being short-staffed by forecasting their need for nurses, working to recruit people to nursing careers, and retaining committed nurses
• Outlines scheduling systems to meet patient needs while reducing overtime and eliminating float personnel
• Describes community and non-HCO nursing contributions
Chapter 8: Clinical Support Services
• Identifies clinical support services (CSSs) roles in care, guideline and protocol development, and consultation to care providers
• Outlines scheduling systems, design and use of protocols, and methods of resolving inter-CSS conflict
• Explains how HCOs establish their array of CSSs and arrange support for CSSs not offered
• Outlines contracting with independent CSS providers • Identifies multidimensional measures for unit scorecards, goal
negotiation, and integration of CSSs into performance improvement • Describes a tested process for generating and competitively reviewing
capital requests • Identifies six critical questions in CSS excellence and demonstrates how
high-performing HCOs approach and resolve these questions
Chapter 9: Population Health
• Identifies population health as an expansion of the mission of excellence
• Explains forecasting of population health needs • Outlines and illustrates a strategy emphasizing continued clinical
excellence, expanded primary care, and collaboration with multiple community agencies to support population wellness
• Emphasizes the patient-centered medical home model for primary care • Stresses collaborative goal setting, measurement of success, and
continuous improvement for community-wide effort • Describes management of the financial implications for an HCO and
its caregivers
Chapter 10: Knowledge Management
• Describes knowledge management (KM) as an essential resource, emphasizing convenient, universal, and routine use of a data warehouse, including web access, videos, text, and quantitative data
Prefacexxii
• Describes best practices for supporting electronic health records and removing barriers to reduce user frustration
• Emphasizes KM support of statistical analysis and documentation • Explains training and support of users • Endorses a multidisciplinary committee to control terminology and
statistical definitions • Outlines protection of data and KM operations
Chapter 11: Human Resources
• Emphasizes retention and improvement of individual associates, including ten days’ training per associate per year, ongoing evaluation of associates’ learning, and systematic improvement of individual performance
• Identifies the human resources (HR) department’s role in maintaining a safe, comfortable work environment, building cultural competence, and reducing implicit bias
• Describes traditional HR functions such as position control and wage, incentive, and benefits management (including collective bargaining)
• Provides measures for the improvement of the workforce as a competitive asset and for an HR balanced scorecard
Chapter 12: Environment of Care
• Explains how excellent HCOs plan, operate, and improve all aspects of the physical environment, including supplies, safety, and convenient services for associates and guests
• Shows how space allocation and planning decisions are made • Details systems for reaching benchmark performance in safety, security,
and degree of environmental damage • Provides measures for facility operation and improvement • Discusses how controversial space issues are resolved, outside
contractors are effectively integrated, and environmental service changes are incorporated into performance improvement
Chapter 13: Financial Management
• Emphasizes accounting and finance as sources of data and funds • Describes accounting’s role in the planning cycle, supporting
multidimensional goal negotiation that replaces the traditional budget • Describes long-range financial planning, pricing and revenue
contract negotiation, revenue cycle management, multicorporate
Preface xxiii
accounting, and financial evaluation of both long-term investments and replacement capital
• Describes protection of assets against common threats
Chapter 14: Internal Consulting
• Describes how management supports the planning cycle by conducting an environmental assessment; forecasting demand; and identifying benchmarks, statistical issues, and regulation
• Shows how management supports performance improvement, develops criteria for modeling processes, manages outside consultants, and tests proposed improvements
• Describes a rigorous, competitive process for evaluating routine capital requests in terms of scorecard improvements
• Reviews how capital investments are managed and implemented to achieve scorecard improvements
• Discusses how internal consulting sustains organization-wide continuous improvement, ensures quality work by outside consultants, and benchmarks its own size and effectiveness
Chapter 15: Marketing and Strategy
• Develops marketing around the four Ps (product, placement, pricing, promotion) and shows why the order is essential
• Identifies the importance of marketing to caregivers and of marketing “health” as opposed to “care”
• Identifies collaboration with other organizations as an important marketing function
• Approaches strategy through wide-ranging and thorough listening, rigorous forecasting, and systematic review of multiple alternatives
• Argues for deliberate risk taking, supported by thorough analysis; identifies many successful examples but notes that too many HCOs fail to implement their basic commitments to seeking measured excellence through empowered workers and continuous improvement
New to This Edition
The ninth edition describes the new standard of practice for HCO of all kinds. Every chapter does the following:
• Provides five practice application questions, offering beginner and current managers the opportunity to learn responses to common
Prefacexxiv
issues and designed to promote active learning in the “flipped classroom”
• In the final chapter sections, Managerial Leadership, addresses flashpoints and critical areas where responsive leadership makes a difference
Chapter 1: Foundations of Well-Managed Healthcare Organizations
• Supports financial success under risk-based payment • Describes value-based insurance design and the important role of
patient-centered involvement and satisfaction, as well as quality outcomes and their impact on reimbursement
• Shows reasons and implications for moving to a population health mission
• Updates Healthy People 2030 for a healthcare organization focus to eliminate health disparities, achieve health equity, and attain health literacy to improve the health and well-being of all
• Expands descriptions of post-acute care delivery models, including long-term care, home care, palliative care, hospice care, and end-of-life care
• Explains the importance of recruiting and retaining a diverse and inclusive workforce
• Describes and emphasizes team-based care in twenty-first-century HCOs and the importance of meeting the needs of clinical care teams and addressing the prevention of burnout
• Emphasizes manager and leader visibility and the importance of leadership rounding in a transformational culture
• Includes nonphysician providers by using a more inclusive term— licensed independent practitioner (LIP)—for a better description of physicians’ and nonphysicians’ scopes of practice and their ability to provide and bill for services independently
Chapter 2: Creating and Sustaining a Transformational Culture
• Describes the increased usage of Lean methods to sustain continued improvements in quality and outcomes
• Expands the focus on transformational culture • Focuses more on management’s leadership role in sustaining the
culture • Adds additional content on communication and messaging and
provides suggested responses—explanations and justifications—for common situations
Preface xxv
• Provides more examples of measures commonly used for tracking in a transformational culture
Chapter 3: Building Continuous Improvement
• Details the proven systems that support excellent care and high patient satisfaction and that reduce care provider turnover to less than 10 percent per year
• Strengthens emphasis on identifying and implementing processes that will move patient care to excellence and that will support ongoing, long-term market success (measured by growth in patient and associate loyalty and satisfactory financial performance)
• Describes how to base care delivery on best practices and evidence- based information
• Stresses negotiation of realistic improvement goals for every team
Chapter 4: Establishing Strategic Governance
• Expands the definition of the governing board’s legal and regulatory requirements, including IRS regulations and the avoidance of private inurement
• Expands the focus of governance and strategy—not only on clinical care excellence but also on meeting community health needs
• Describes the qualities and commitments of a good board member
Chapter 5: Foundations of Clinical Excellence
• Emphasizes a greater focus on population health and comprehensive ambulatory care delivery
• Focuses on care team organization in clinical service lines, interprofessional care planning, and rounding
• Expands on the importance of team communication, care handoffs, conflict resolution, and ways to enhance continuity of care
• Outlines how case management has become more important in navigating care for complex patients with chronic conditions
• Bolsters content on the role of managers in providing interprofessional education to improve knowledge, skills, and teamwork
• Expands the definition of functional protocols to include standard work • Updates resources for the development of clinical guidelines • Updates information about access to guidelines, protocols, patient
data, and the interfaces between the electronic health record and resource databases
Prefacexxvi
• Describes the reporting system required by the Patient Safety and Quality Improvement Act of 2005
• Updates patient safety goals and regulatory and consumer accountability
• Conveys a greater focus on patient satisfaction and associate engagement as it relates to quality, which, in turn, improves financial performance
Chapter 6: The Clinical Staff Organization
• Expands the section titled Elements of Privilege to include specialization criteria and American Board of Medical Specialties Maintenance of Certification requirements
• Outlines criteria beyond specialization that must be considered in appointing and reappointing LIPs to maintain excellence in clinical care
• Adds new information about the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which created the Quality Payment Program and streamlines multiple quality programs under the Merit-based Incentive Payments System (MIPS)
• Adds best practices for dealing with LIP burnout with nine recommended organizational strategies
Chapter 7: Nursing
• Updates educational pathways and trends in specialization • Describes the growing numbers and roles of advanced practice nurses • Identifies managerial leadership strategies for sustaining the nursing
supply, reducing turnover, and providing an environment that promotes interprofessional teamwork
• Recommends increased focus on continuing education for clinical skills and teamwork
• Adds recommendations for burnout and more professional autonomous control over nursing practice
Chapter 8: Clinical Support Services
• Updates citations and resources
Chapter 9: Population Health
• Describes potential for radical change with population health • Outlines effective measures for population health
Preface xxvii
• Suggests explicit advance care planning and end-of-life teaching strategies; recommends more robust programs to educate communities about advance directives
• Discusses the impact of population health on acute care services • Clarifies quantification of population health needs • Recommends ways to expand and integrate primary care
Chapter 10: Knowledge Management
• Updates electronic health record requirements for meaningful use • Describes meaningful use as a requirement of MIPS, a part of MACRA • Describes best practices for the implementation of meaningful use • Recommends guidelines for the appointment of a knowledge
management committee and an effective deliberation process • Suggests ways to expand use of the electronic health record and clinical
data • Details the experiences of Memorial Hermann, Intermountain, and
Sharp HealthCare
Chapter 11: Human Resources
• Highlights examples of best practices from Henry Ford Health System • Underscores organizational consistency and its relationship to
associates’ perceptions of fairness • Emphasizes the need for a focus on diversity and inclusion in the
workforce and for policies and training that affirm fairness, equity, and nondiscrimination
• Encourages training for cultural humility and implicit and explicit bias
Chapter 12: Environment of Care
• Explains the United States Department of Homeland Security’s National Incident Management System, which facilitates coordination between all responders to emergencies and disasters
Chapter 13: Financial Management
• Updates citations and resources • Streamlines and integrates financial functions • Emphasizes greater transparency in financial reporting • Describes oversight authority for accounting standards for HCOs
controlled by local and state governments
Prefacexxviii
Chapter 14: Internal Consulting
• Emphasizes a greater support for balanced scorecards and negotiated goal setting
• Focuses on the increased support to internal stakeholders evaluating capital investments and service expansion
• Outlines management of external consultants • Supports the effectiveness of process improvement teams • Recommends sizing strategies and evaluation of effectiveness of
internal consulting
Chapter 15: Marketing and Strategy
• Increases the emphasis on a comprehensive, data-based approach to marketing and strategy
• Updates citations and resources for strategic planning
Using The Well-Managed Healthcare Organization
We believe that this book gives current and future managers a foundation for engaging in meaningful dialogue with team members who contribute directly or indirectly to the HCO’s mission, to evaluate their contribution and activ- ity outcomes, and to help teams identify their OFIs and translate them to actual improvement.
All managers should strive to learn continuously. A manager who does so will grasp the totality and interdependence of the HCO. Excellence demands comprehensiveness, because failure in one activity contributes to failure in another. For example, an HCO cannot have clinical excellence without corporate excellence and logistic excellence. All managers and lead- ers must also understand the application of this book’s crosscutting themes— the role of the mission, evidence-based decisions, measured performance, continuous improvement, and rewards. Importantly, all managers should be able to explain these issues to others, including customers, newly promoted supervisors, and new employees.
After chapter 1, each chapter begins with a list of critical actions. Informed by the high-performance practices of Baldrige Award–winning HCOs and other high-caliber HCOs, each chapter identifies and lays out the purpose of functions that lead to high performance. Then, guidelines are pro- vided for optimal performance and engagement by staff, affiliated physicians, and other LIPs. Measures for progress are spelled out. Managerial Leadership sections address commonly encountered issues—flash points—and how they can best be managed. Each chapter concludes with five practice applications.
Preface xxix
These sections describe realistic situations that require management action and are well-suited for group or class discussion.
Experienced managers and clinicians transitioning to management can use this book as a checklist and a guide to best managerial practice. Begin- ning students might best master this book with a deliberate approach to each chapter, such as the following:
1. Study Critical Actions sections, making an effort to relate the issues to your previous experience.
2. Review the details of the Functions section to understand how each function contributes to the whole and how the functions are best implemented.
3. Explore the various people—their qualifications, credentials, scope of work—who are represented in the People section.
4. Study the exhibit that shows performance measures and review the Measures section to understand what drives the goal-setting and continuous improvement process.
5. Check the Managerial Leadership section for insights that relate the HCO’s purpose to a conglomeration of activities that all need to be managed well in order to achieve and sustain high performance.
6. Review Practice Applications for suggestions on how managers convey the right knowledge to the right people—that is, how knowledge is summarized in formal policies and procedures, in training programs, and in day-to-day interactions.
Acknowledgments
As the editions of The Well-Managed Healthcare Organization mount, keep- ing track of all who have contributed to this text by their examples becomes difficult. The applications of the HCO recipients of the Malcolm Baldrige National Quality Award are the only comprehensive, audited documentation of the transformational and evidence-based approach. Our visits to Catholic Health Initiatives, Henry Ford Health System, Intermountain Healthcare, Legacy Health, Mary Washington Healthcare, MedStar Health, Cone Health, Sentara Healthcare, and University of Virginia Health System have helped us understand how excellent processes are designed and implemented. Many high-performing HCOs have published detailed descriptions of their work, often relying on Lean practices that parallel the Baldrige approach. We are indebted to all.
Over time, both of us have worked with specific organizations, includ- ing Summa Health System in Akron, Ohio; Allegiance Corporation (a physi- cian–hospital organization) in Ann Arbor, Michigan; Mercy Health Center in
Prefacexxx
Oklahoma City, Oklahoma; Mercy International Health Services in Farming- ton Hills, Michigan; and Bon Secours Health System in Marriottsville, Mary- land. We are grateful to these HCOs. We are also grateful for the assistance of our colleagues at the University of Michigan, Virginia Commonwealth University, and the University of Virginia.
We are especially grateful to Nicholas Mendyka, chief financial officer with the University of Virginia Medical Center, for his contribution to chapter 13.
Kenneth R. White, PhD, APRN-BC, FACHE, FAAN University of Virginia Charlottesville, Virginia
John R. Griffith, MBA, LFACHE University of Michigan Ann Arbor, Michigan
Instructor Resources
This book’s Instructor Resources include a test bank with application- oriented multiple choice questions (new to this edition), presentation PowerPoint slides (new to this edition), PowerPoint slides of all the book’s exhibits, instructor notes for the book’s Practice Applications sections, and additional applications questions.
For the most up-to-date information about this book and its Instructor Resources, go to ache.org/HAP and search for the book’s order code (2381).
This book’s Instructor Resources are available to instructors who adopt this book for use in their course. For access information, please email [email protected].
SECTION
I INTRODUCTION AND OVERVIEW
CHAPTER
3
1 CRITICAL ACTIONS1
FOUNDATIONS OF WELL-MANAGED HEALTHCARE ORGANIZATIONS
1. Emphasize mission, vision, and values:
• Be prepared to state your healthcare organization’s mission, vision, and values (MVV).
• Know how to explain how MVV were developed by a stakeholder consensus.
• Be prepared to answer questions such as “Why are MVV important?”, “Do people really believe that?”, “What if I see things that do not reflect the MVV?”, and “How do we use the MVV in decision-making?”
2. Recruit and support a diverse and inclusive workforce:
• Establish recruitment programs that encourage underrepresented groups to attain technical and professional skills.
• Ensure that evaluations and promotions are free of bias.
• Uphold respect as an organizational value, so that every associate is comfortable in the workplace.
3. Guide coordinated action of interprofessional care teams and support teams. Describe excellence and identify worker actions that deserve encouragement.
4. Relate to stakeholders. Know which dimensions of excellence each stakeholder group focuses on and how HCO leadership should listen to its concerns.
5. Build a transformational culture:
• Seek best practices rather than fixing problems.
• Define what constitutes a “constructive response” to associates’ and stakeholders’ concerns.
• Practice rounding by managers and senior leaders can improve the performance of associates.
6. Use measured performance, seeking benchmarks and continuously improving. Know the following terms and be able to explain clearly to any stakeholder how they contribute to excellence: scorecard, goal, current performance, benchmark, 90-day plan, opportunity for improvement (OFI), process improvement team (PIT).
The Wel l -Managed Healthcare Organizat ion4
Purpose: Mission of Healthcare Organizations
Patient care is a central purpose of any healthcare organization (HCO). Excellent care to each and every patient is often stated as the HCO’s mission. HCOs provide care in a variety of inpatient and out- patient settings, using their organizational strength to meet patient needs. Many started as acute care hospitals and then grew as care sites broadened and specialized.
Many HCOs now expand their mission to “sustaining population health,” a substantially broader mission seeking the World Health Organi- zation (WHO) goal: “a state of complete physical and social well-being and not merely the absence of disease or infirmity.”2 For HCOs, “not merely” is the operative phrase. Population health includes
• excellence in care to individual patients, including preventive care; • fulfillment of needs that go beyond healthcare—the housing, food,
and social support that are essential to sustaining health and managing chronic disease; and
• meeting the needs of people who are not patients to help them stay well and avoid becoming patients.4
The US Department of Health and Human Services specifies national goals and objectives for population health in the Healthy People program. The goals for 2030 are the following:
• Attain healthy, purposeful lives and well-being. • Attain health literacy, achieve health equity, eliminate disparities, and
improve the health and well-being of all populations. • Create social and physical environments that promote attaining full
potential for health and well-being for all. • Promote healthy development, healthy behaviors, and well-being across
all life stages. • Engage with stakeholders and key constituents across multiple sectors
to take action and design policies that improve the health and well- being of all populations.5
Healthcare organization (HCO) A corporation providing the services of mul- tiple patient care teams, such as a hospital or clinic, supporting care providers with clinical, logistic, and strategic services.
Mission The central purpose of an organization; its reason for existence.
Population health The health of a defined group of individuals, such as a state or civil division, or insured group, measured by the incidence and preva- lence of disease or infirmity.3
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 5
“Healthy, purposeful lives” is deliberately ambitious. HCOs that adopt a population health–focused mission create collaborative systems that encompass public health, safety, education, housing, and urban planning organizations to move their communities toward the WHO goals. The HCO is only one participant. Its patient care contribution is central, but healthcare disparities may be created by variations in income, race, ethnicity, and geo- graphical dwelling place. Persons with lower incomes have greater challenges to their health and fewer resources to respond to those challenges. Housing, safety, and food supplies are often inadequate. People of color are often vic- tims of less desirable health outcomes than white counterparts.
HCOs must address disparities and develop goals that are consistent with Healthy People 2030. Fortunately, leadership concepts that create excellence in care are also successful in the population health mission.6 The transformational culture and continuous improvement themes that create the best possible patient care also support the interagency collaboration that drives population health. Chapter 9 describes HCO actions that can form the foundation for this expanded mission.
Defining Excellence
Excellence in Patient Care Excellence occurs when every patient care act is the right thing, only the right thing, and delivered as soon as the patient needs it, creating the best possible outcome for every patient. The challenge is formidable. Most seri- ous patient health events—a birth, a heart attack, or ongoing diabetes care, for example—require hundreds of specific acts. An error in diagnosis can cascade into a series of problems that sometimes leads to fatality. An error by an early team can create problems for downstream teams. A strategic failure or a logistic failure—a staff or supply shortage, for example—can force a care team to improvise or delay care.
Excellence is a multidimensional concept. It is achieved by measuring, analyzing, and improving performance on each dimension of exhibit 1.1 and by striving for bench- mark, the best-known performance. “Benchmark” is a realistic comparison—a value that a similar organi- zation has achieved. It is often a moving target, as better processes are designed and implemented, but it marks the achievable frontier.
Benchmark The best performance on a specific measure of which the organization is aware.
The Wel l -Managed Healthcare Organizat ion6
Excellence in Population Health Excellence in population health is also measured and benchmarked, but the measures are of population, not patients. Population health is measured by
the incidence and prevalence of disease, disability, or premature loss of life.
The definitions of incidence and prevalence illustrate the need for collaboration to achieve the population health mission. Although any HCO can calculate its exhibit 1.1 measures, the population- based incidence and prevalence measures must be approached as a community-wide project.
Sources for The Well-Managed Healthcare Organization The Well-Managed Healthcare Organization describes excellence in proven processes used by HCOs with top-tier outcomes. It focuses on the patient care
mission (recognizing that excellence in patient care is an essential founda- tion) and on the HCO’s unique contribution to the broader mission of
Incidence “Incidence is the number of newly diagnosed cases of a disease. An incidence rate is the number of new cases of a disease divided by the number of persons at risk for the disease. If, over the course of one year, five women are diagnosed with breast cancer out of a total female study population of 200 who do not have breast cancer at the beginning of the study period, then we would say the incidence of breast cancer in this population was 0.025 (or 2,500 per 100,000 women-years of study).”8
Care Is . . . Elements Measures
Safe Care is free of accident or error.
Medication errors, infections, wrong-site surgery, falls, and other accidents, with an ultimate goal of zero.
Effective Patients’ diseases and condi- tions are fully and accurately diagnosed and improved to the limit of current knowledge.
Freedom from disease, free- dom from pain, recurrence of need, and residual disability.
Patient centered
The patient’s needs and goals are established with the patient and the family.
Surveys of patient and family satisfaction with care.
Timely Care is given without avoidable delay.
Delays for care, waiting times, length of stay, and reports of unexpected interruptions.
Efficient The previous four criteria are achieved at minimum cost.
Cost per episode and annual cost of care for a population.
Equitable The first five criteria are achieved regardless of the patient’s national or ethnic background, geographic loca- tion, age, gender, or income.
Discrepancies and disparities between population groups.
Source: Adapted from Academy of Medicine (2000).7
EXHIBIT 1.1 Criteria for
Excellence in
Patient Care
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 7
population health. It describes tested processes that have achieved superior results with real patients. Much of the text is based on reports of HCOs that have received the Malcolm Baldrige National Quality Award.9 Award recipients have carefully documented their culture, processes, and results. Their documen- tation has been independently audited. Their results are typically in the highest quartile and often in the highest decile. Collectively, they provide a full range of care, from preventive to palliative, to a broad spectrum of US communities. The processes they use constitute the Baldrige model, an integrated set of best practices and work processes that produce benchmark results.11 While there are many excel- lent HCOs that do not explicitly follow the Bald- rige model, there are no comparable documented, audited descriptions of HCO excellence.
Team Structure of Twenty-First-Century Care
Modern healthcare is complex, expensive, and enormously successful. It has added decades to countless lives, as well as the health to use those decades productively. Its success, complexity, and cost arise from the diversity of sci- entific advances in treatment and the need to tailor treatment to individuals with varying needs. Healthcare delivery is almost always a team activity. Cases in which individual care providers change the course of disease are real but rare. Excellent HCOs have committed to diversity, equity, and inclusiveness in their workforce. They select individuals based exclusively on the skills they bring, independent of ethnicity, gender identity, sexual orientation, religious affiliation, or other identifying features with the goal of associates that repre- sent the communities being served.
Clinical Teams—Interprofessional Care and Clinical Support Interprofessional (also called interdisciplinary) care teams, shown in the top triangle of exhibit 1.2, deliver virtually all twenty-first-century healthcare. As shown in the upper left box, they provide highly specialized technical responses to diverse patient needs. They include physicians, nurses, other allied health professionals, and nonprofessional caregivers. A sequence of several interprofessional teams is often necessary as a patient’s needs evolve. It is not unusual for a lifesaving event—cardiopulmonary resuscitation, cancer cure, or treatment of an endangered pregnancy, for example—to require several teams with different skill sets and several dozen different care providers.
Prevalence Prevalence is “the total number of cases of disease existing in a population. A prevalence rate is the total number of cases of a disease existing in a population divided by the total population. So, if a measurement of cancer is taken in a population of 40,000 people and the result is that 1,200 were recently diag- nosed with cancer and 3,500 are living with cancer, then the prevalence of cancer” is
(1,200 + 3,500) ÷ 40,000 = 0.118 (or 11,750 per 100,000 persons).10
Best practices Work processes that have been proven to achieve benchmark.
The Wel l -Managed Healthcare Organizat ion8
Clinical support teams
Logistic support teams
Strategic support teams
Strategic Support Teams Maintain the organization culture and support continuous improvement. Provide stakeholder relations, long-term planning, and �nance. Manage relations with other population health resources.
Interprofessional care teams
Interprofessional Care Teams Provide speci�c clinical services, re�ecting professional training and certi�cation (e.g., ambulatory care, pediatrics, oncology, long-term care).
Clinical Support Teams Provide speci�c diagnosis and treatment (e.g., clinical laboratories, pharmacy, surgery).
Population health teams
Logistic Support Teams Provide information, associate support, facilities, equipment, and supplies (e.g., information services, human resources, security, food services).
Population Health Teams Integrate HCO services with other community agencies. Teams include the HCO but are not managed solely by its strategic teams.
EXHIBIT 1.2 Components of Healthcare Organizations
Note: HCO = healthcare organization.
The care teams in the top triangle have three major duties:
1. They assess and diagnose, a crucial first step and an ongoing process. Diagnosis labels symptoms and complaints as illness, indicating possible disease and its prognosis. Effective and efficient therapy—including reassurance, watchful waiting, and supporting patient self-efficacy— depends to a large extent on an accurate interpretation of (early) symptoms and the outcome of the diagnostic process.12
2. They provide and coordinate treatment, integrating drugs, surgery, rehabilitation, and other activities into a plan of care that involves the patient in key decisions and maximizes the patient’s safety, recovery, and comfort.
3. They monitor the patient’s response and adjust treatment interventions as indicated.
Excellence of care teams is measured by their performance on the factors shown in exhibit 1.1.
Care teams are almost always small and interdisciplinary, including a licensed independent practitioner (LIP), a nurse, and other professional and supportive care provid- ers as needed. Teams are organized to treat similar patient needs. Primary care—the patient’s first con- tact—includes teams for general internal medicine,
Licensed independent practitioner (LIP) “Any practitioner permitted by law and by the [HCO] to provide care and services, without direction or supervision.”13
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 9
family medicine, obstetrics and gynecology, mental health, and emergency care. Clinical specialty teams provide surgery, intensive care, and other spe- cific therapeutic interventions. Other teams address rehabilitation, manage- ment of continuing disability, and palliative care.
HCOs approve privileges for LIPs based on their credentials, specifying their role within the scope of their license and assigned clinical responsibilities.
Clinical Support Teams Frontline care-providing teams are supported by other clinical teams providing specialized profes- sional services, such as laboratories, pharmacies, anesthesia, imaging, surgery, rehabilitation therapies, and home health. Treatment plans developed by the primary care team call for specific requests and services for specific patients. The team’s excellence is also measured by the six exhibit 1.1 dimensions, and the support services they provide often use powerful and potentially dangerous technology. The terms safe and effec- tive are not trivial where small errors can be fatal. Rigorous protocols and extensive training, often professional certification, are the key drivers of clini- cal support excellence.
Logistic and Strategic Teams Both interprofessional care and clinical support teams are supported by logistics teams providing information, training, supplies, facilities, food, and financing. These teams contribute to excellence by furnishing patients, guests, and clinical teams with critical resources. The dimensions discussed in exhibit 1.1 measure excellence for logistics teams, broadening “patient cen- tered” to “customer centered.” Safety remains important; HCOs are open to numerous threats, from dangerous substances to catastrophic events. Timely, efficient, and equitable care depends on these systems.
Strategic teams are responsible for achieving long-term excellence, for maintaining the teamwork structure, and for sustain- ing the HCO’s relations to its stakeholders (indi- viduals or groups who have a direct interest in the organization’s success and whose needs shape its mission and strategies), customers, payers, and the community at large. These activities are the central functions of leadership. They are measured by the exhibit 1.1 measures and by additional dimensions, such as the extent of HCO services, unmet needs in the HCO’s marketplace, and the long-term sustainability of performance.
A population health mission requires a fifth level that goes beyond the HCO itself. As noted earlier, population health is measured by incidence and prevalence of disease, disability, and premature death.
Stakeholders Individuals or groups who have a direct inter- est in the organization’s success.
Credentials “Documented evidence of licensure, education, training, experience, or other qualifications; used to assign specific care privileges to an LIP, consistent with the scope of their license and assigned clinical responsibilities.”14
The Wel l -Managed Healthcare Organizat ion10
Real HCOs have used a wide variety of relationships to assemble the exhibit 1.2 teams. Historically, not-for-profit community HCOs served most of the nation, contracting with LIPs as credentialed affiliates who operated their own small corporations rather than being employed. Volunteers, usually including governing board members, have served without compensation and continue to be an important resource.
Current Trends The current trend, however, has been toward centralization and employment. Most care is now provided by large HCOs with a full array of exhibit 1.2 ser- vices. LIPs are now mostly employed, rather than independent contractors. For example, Kaiser Permanente, the largest nongovernmental HCO in the United States, uses a formal employment structure for almost all of its needs.
Clinical support teams are now employed or organized as corporations contracting with the HCO. Many logistic and some strategic needs are met by contracts with corporations providing specialized services to many HCO customers. It is still true that many thousands of small care teams operate as independent corporations, focused on specific patient needs such as psycho- logical counseling, dialysis, and long-term care. They refer patients to larger HCOs to meet any needs outside their expertise.
Stakeholders
All organizations, including HCOs, exist because they fulfill a need that individuals working alone cannot meet, and they thrive because they fulfill that need better than competing alternatives. Organizations serve stakehold- ers. HCO stakeholders are patients, patient families, insurers, workers, sup- pliers, regulators, and owners, as shown in exhibit 1.3. Most stakeholders can choose to participate with a specific HCO or not. Any HCO’s survival depends on attracting sufficient numbers of each kind of stakeholder; other- wise it fails and disappears.
Stakeholders’ desires are inherently conflicting. Patients want immedi- ate service; insurers want low costs; workers and suppliers want high com- pensation. HCOs and other organizations exist by negotiating solutions to those conflicting desires. Business can be understood as a set of relationships among groups that have a stake in the activities that make up the business. Business is about how customers, suppliers, employees, and managers inter- act and create value. To understand business is to know how these relation- ships work.15
HCOs represent one of the most complex applications of the stake- holder model. Stakeholders in each of the four categories actively express their needs and can “vote with their feet”—that is, change their affiliation to a different HCO. Leadership’s basic obligation is to identify and meet the
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 11
stakeholders’ important concerns and to negotiate unmet needs as opportu- nities for improvement (OFIs). The following sections identify the princi- pal concerns of the major groups in each stakeholder category: patients and families, associates, other cus- tomer partners, and owners and community groups.
The exhibit 1.1 criteria fulfill most stakeholder needs. HCOs that excel on exhibit 1.1 measures thrive in the stakeholder marketplace. They become “great places to get care” and “great places to give care,” easily passing governmental and accreditation requirements. Their finances are strong, and their owners have no cause for concern.
Patients and Families Patients seek accurate diagnosis and effective treat- ment but also confidentiality and as much com- fort as possible for themselves and their families.
Opportunities for improvement (OFIs) (usually pronounced “oh-fees”) Any situation where current performance is in- ferior to benchmark. Excellent HCOs seek and resolve OFIs, creating an environment where improvement is a central part of the culture.
Patient-centered care Care that is respectful and responsive to individual patient preferences, needs, and values.16
C us
to m
er s/
B uy
er s
HCO
Patients and families differentiated by age, gender, and clinical need
Health insurers and payment agencies differentiated by carrier and kind of coverage
Buyers differentiated by individual, employer, and government
Caregivers differentiated by professional credentials
Other employees differentiated by job description
Contract providers differentiated by purpose of contract
Suppliers
Volunteers
Local, state, and federal licenses, permits, and certi�cations
Private certi�cations and accreditations Healthcare-speci�c laws and regulations General corporate laws and regulations
Trade associations, professional organizations, unions, customer associations, lobbies,
and other collectives in�uencing healthcare transactions
Owners
Not- for-pro�t corporations, for-pro�t corporations, and government entities
S uppliers/
W orkers
EXHIBIT 1.3 Model of Stakeholder–Healthcare Organization Interaction
Note: HCO = healthcare organization
The Wel l -Managed Healthcare Organizat ion12
Patient-centered care increasingly involves patients and families in provid- ing “care that is respectful and responsive to individual patient preferences, needs, and values.”17
Web-based public sources such as HealthGrades (www.healthgrades. com) and WhyNotTheBest (www.whynotthebest.org) are increasingly influ- ential in forming customer opinions, although their validity is often question- able.18 They rely heavily on published values for exhibit 1.1 measures.
Associates Associates seek comfortable working conditions and fair compensation. Trustees and a great many others volunteer their time to not-for-profit HCOs; their compensation is the satisfaction they achieve from the work. However, most associates are salaried or earn hourly wages. Their compensation is often an
important issue, but it is largely driven by national or regional markets; indi- vidual HCOs have little choice but to follow the market. Collective bargain- ing and unionization is limited in HCOs. The use of rewards (compensation for specific goal achievement) allows excellent HCOs to share the financial gains with associates. Rewards are usually in addition to a competitive wage or salary.
Working conditions may be the more important consideration in attracting and retaining workers. Respect, a value universal in excellent HCOs, has two clear and important meanings: (1) that associates feel their voices are heard and their employers make reasonable efforts to accommo- date them, and (2) that associates know they will not be harassed (that is, no other worker, at any level, will make inappropriate sexual or personal com- ments). As chapter 2 discusses, excellent HCOs systematically solicit associate input, identifying and meeting realistic needs.
Government agencies of various kinds monitor the rights of associ- ate groups. Occupational safety agencies, professional licensure groups, and equal employment opportunity agencies are among those entitled to access to the HCO and its records. The National Labor Relations Board and various state agencies establish rules for relations with unions. HCOs must comply with all those requirements.
Other Customer Partners
Health Insurers and Government Payment Agencies Health insurers and government payment agencies provide most of the revenue to HCOs, making them essential stakeholders. Two large govern- mental insurance programs—Medicare and Medicaid—are essential partners for most HCOs. The federal Medicare program deals with HCOs through
Associates People (employees, trustees and other vol- unteers, medical staff members, and agents of contract suppliers) who give their time and energy to the HCO and its activities.
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 13
payment agencies called fiscal intermediaries. Medicaid, a state and federal program that finances care for the poor, is run by the state Medicaid agency or an intermediary.
Payment organizations seek the lowest possible price. Recent changes establishing incentive payments have allowed them to press for improvements in quality and safety as well. The Affordable Care Act (ACA) encouraged new approaches to addressing chronic disease care and HCO accountability for the cost and quality of care. Payers increasingly use value-based insurance design, which rewards HCOs for performance.19
Buyers Much health insurance is provided through employment, making employ- ers important stakeholders. Employers pay a large share of health insurance premiums. They must meet the demands of their own stakeholders, so they have encouraged value-based insurance design. They often also serve on HCO governing boards, where they must balance the HCO needs of the community with the needs of their companies’ stakeholders.
Regulatory and Accrediting Agencies Regulation of HCOs and their associates is provided by a wide variety of groups and agencies, both public and private. For example, all states license HCOs that provide any inpatient care. LIPs and many support specialists are licensed through state-administered examinations and programs that estab- lish national qualifications. Many states have certifi- cate-of-need laws requiring HCOs to seek permission for construction or expansion. Quality improvement organizations are external agencies that review the quality of care and use of insurance benefits for Medicare and other insurers.
HCOs are subject to many consumer protec- tion laws, including the Health Insurance Porta- bility and Accountability Act, which addresses major issues of privacy and security of protected health information. The Emergency Treatment and Labor Act requires all HCOs providing emer- gency care to accept all patients, regardless of abil- ity to pay, until they are stabilized and can be safely moved. HCOs are subject to antitrust law; large mergers or consolidations are reviewed by the Department of Justice and the Department of Commerce. Not-for-profit HCOs often occupy facilities that, if taxed, would add noticeably to local revenues. The community may hold the
Value-based insurance design Linking financial incentives to the quality and efficiency of care provided.
Certificate of need Approval for new services and construction, expansion, or renovation of hospitals or re- lated facilities; issued in many states.
Health Insurance Portability and Accountability Act Federal law that addresses issues of health insurance but also requires HCOs and their workers to protect patient information and confidentiality diligently.
Emergency Treatment and Labor Act Federal act requiring all HCOs that provide emergency care to accept all patients, regard- less of ability to pay, until the patients are stabilized and can be safely moved.
The Wel l -Managed Healthcare Organizat ion14
organization to certain conditions, such as a certain level of charity care, in return for nonprofit status. Provisions of the ACA require not-for-profit
hospitals to review community needs and report the community benefit value of the HCO contribution.
The Centers for Medicare & Medicaid Ser- vices (CMS), as well as most payment organizations, mandate external reviews of HCO performance through accreditation and financial audits.20 Essen- tially, all HCOs must comply. Many small hospitals are approved directly by CMS,21 but CMS also allows several other organizations to grant accredi- tation (these organizations have what is referred to as deemed status). Most large HCOs choose accreditation by The Joint Commission (TJC). The National Commission on Quality Assurance accredits ambulatory care and disease management programs (as well as insurance programs). Financial audits are provided by external auditors, firms certified to attest to the accuracy of major financial reports for CMS and the Securities and Exchange Commission.
HCOs interact extensively with local governments. They require land- use and zoning permits and are subject to environmental regulations. Their demands on water, sewer, traffic, electronic communications, fire protection, and police services are often unique in the community.
HCOs may be sued for malpractice or negligence—harmful conduct that is unintentional but avoidable with reasonable care. Suits are brought by individuals in specific cases, but the court findings establish the standards of practice for future actions. Thus, the courts can also be viewed as regulatory organizations.
Owners and Community Groups Owners and community groups are vital customer partners. HCOs are responsible to their owners through governing boards (see chapter 4). Not- for-profit HCOs are legally owned by the groups they serve and are obligated to use their capital for their mission fulfillment. The obligation is usually interpreted as sustaining the long-term existence of the HCO. Not only must current expenditures be mission-oriented and compliant with tax and licensing law, but funds must be found to continue operation, replacing worn facilities and meeting new technological needs. For-profit HCOs, owned by their stockholders, are expected to earn a competitive return on their capital.
HCOs must make numerous and varied exchanges with community agencies and groups. For example, patient and associate needs draw HCOs into exchanges with law enforcement and social service agencies. In addition,
Community benefit Services provided gratis by HCOs to their sur- rounding communities. Current law requires hospitals to satisfy a community benefit standard to qualify as tax-exempt charities under section 501(c)(3) of the Internal Rev- enue Service code. The standard addresses charitable care, educational services, and other benefits.
The Joint Commission (TJC) A voluntary consortium of professional provider organizations that evaluates and ac- credits a wide range of HCOs.
External auditor A firm certified to review corporate financial statements and attest to their accuracy.
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 15
HCOs work with United Way and other charities. HCOs facilitate religious observances of associates and patients. They provide educational facilities to improve community health and well-being. Such activities often make HCOs partners of cultural, religious, educational, and charitable organiza- tions. Population health activities, including prevention and outreach, draw HCOs into formal alliances with governmental organizations, such as public health departments and school boards, and with local employers, churches, and civic organizations.
Other Provider Partners
Suppliers and Financing Agencies HCOs must work with a variety of organizations to obtain goods and ser- vices. Goods ranging from drugs to artificial implants are purchased from outside suppliers. They also purchase banking, utilities, and many similar services from outside entities as well; in order to strengthen their bargaining with suppliers, HCOs join purchasing collaboratives. They often also pur- chase services from specialized vendors, such as food service, legal counsel, or strategic planning consultants. In addition, HCOs need the assistance of financing partners to acquire capital through a variety of equity, loan, and lease arrangements. The relationships between HCOs and their suppliers of goods and services are commercial contracts.
Other Provider Organizations In the course of meeting patient needs, HCOs have considerable contact with other HCOs, such as primary care clinics, mental health and substance abuse services, home care agencies, hospices, and rehabilitation and long- term care facilities. Many HCOs incorporate and own these services. Others may have formal relationships, such as referral agreements, affiliations, stra- tegic partnerships, and joint ventures. It is not uncommon for two HCOs to collaborate on some activities, such as medical education or care of the poor, and to compete on other activities.
Stakeholder Influence: Networking, Coalition Building, and Legal Controls The ultimate source of stakeholders’ power is the marketplace—their ability to participate in a specific exchange. Exchange partners attempt to identify and meet their needs by negotiation, rather than shifting their allegiance. Each exchange partner of the HCO has relationships with exchange partners of their own. Individuals and families affiliate with employers, businesses, schools, churches, and community groups. Stakeholder coalitions form among these relationships based on shared values or common needs. Many are more or less permanent, while others are temporary alliances to work toward a specific goal.
The Wel l -Managed Healthcare Organizat ion16
Buyer- and consumer-oriented networks are stakeholder coalitions that address broad issues. The National Business Group on Health and AARP, for example, have worked to change problems such as the cost of insurance, lack of insurance, and inequalities in well-being. Stakeholders and their organizations can lobby politicians, but they can also effect change by suing in courts.
HCOs also form coalitions. The American Hospital Association is one of the largest. It lobbies for HCOs at the federal level, and its state-level asso- ciation partners lobby state governments. TJC is a coalition of the American Hospital Association and four organizations representing physician and den- tist caregivers. The National Quality Forum is a coalition of buyer and pro- vider organizations that evaluates and standardizes measures of quality.22 Its work has been essential to the development of HCO performance measures.
The government is another stakeholder that has a profound influence on healthcare. Governmental regulation almost always reflects good inten- tions—safety, quality, individual rights, equity, or efficiency. Accomplishment of these standards is another matter. It is fair to conclude that both the regulatory agencies dealing with healthcare delivery and the contracts of the health insurers and intermediaries have generally fallen short of expectations. Safety, quality, access, and cost remain problems despite decades of activity in these areas.23 In part, this situation reflects the complexity of the goal and the difficulty of measurement. In part, it reflects the limitations of the market and governmental systems. In part, it reflects the failure of HCO management.
The Healthcare Marketplace
The Origin and Development of HCOs Until the late nineteenth century, much patient care was delivered by indi- vidual professionals. Hospitals were refuges for the impoverished and dying. The technological advances that began with anesthesia and control of bac- teria in the mid-nineteenth century started rapid growth in the field that continues to the present; that growth is matched by ongoing shifts in how care is organized.
Throughout the twentieth century, hospitals provided inpatient care that was more complex than could be delivered in physicians’ offices or patients’ homes. Physicians typically practiced in small private corporations with a few colleagues in the same specialty.24 Licensure of hospitals arose as
their technical capability increased, then became mandatory for Medicare payment. Critical access hospitals, HCOs with 25 beds or fewer and without nearby competition, were established in 1997 by the Balanced Budget Act (Public Law 105-33) to
Critical access hospitals HCOs with 25 beds or fewer, and without nearby competition, established to provide support for rural communities.
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 17
provide support for rural communities. Safety net hospitals were distin- guished under Medicare and Medicaid to compensate hospitals with a dispro- portionate share of low income, uninsured patients. Chronic care facilities, often called nursing homes, emerged and were separately licensed. Home care became a valuable service. Patient and family com- fort, the consumer rights movement, and the cost of dying stimulated the rise of a palliative care specialty and a pursuit of patient self-determination and “a good death.”25 Many other healthcare services were provided by specialists in pharmacy, dentistry, mental health, and other fields.
Though HCOs typically began with one or more twentieth-century hospitals, near the end of the twentieth century these independent organiza- tions began merging. They aggregate services as well as individual care sites, aiming to serve comprehensive health needs rather than a single specialty. They provide emergency services, ongoing ambula- tory care, extended outpatient surgery, and rehabili- tation. Many now operate nursing home services, home care, and palliative and hospice care. Local HCOs are organized in interstate and intrastate health systems, often around religious affiliations.
The trend has been for independent healthcare providers to join HCOs. By 2017, more than half of practicing physicians had become employees of HCOs.26 HCOs now provide the majority of care, and many have moved to address population health as well.
HCOs organize service lines around the specialties of interprofes- sional care teams. They serve a geographic population, limited by the need for hands-on care and travel times. The growth of electronic communication has allowed primary and continuing care teams to work at locations conve- nient to patients, including home care. Specialty, inpatient care, clinical support, and logistic support teams can be located centrally and serve many care sites. Strategic support might be provided from the system headquarters in another state.
The Current American Marketplace Almost every community has one or more HCOs and several continuing care and specialty healthcare services. This fact means that healthcare is one of the largest sectors in the US economy, consuming $3.1 trillion in 2016, almost one-fifth of the total gross domestic product. A breakdown of how health- care dollars are spent is provided in exhibit 1.4. The growth of expenditures is a matter of constant political concern because of its impact on other sec- tors. However, the rise of healthcare has been a two-edged sword—the sector
Safety net hospitals Hospitals with a disproportionate share of low income, uninsured patients (as defined by Medicare and Medicaid).
Health system A set of HCOs in several geographic sites, under central strategic leadership.
Service line Patient care teams organized and coordinated around a set of similar diseases or patient needs.
The Wel l -Managed Healthcare Organizat ion18
is also one of the nation’s largest employers, including many unskilled jobs. It is notable that HCOs (or, as the federal government would still term HCOs providing acute inpatient care, hospitals) are the largest single expenditure and that public health is among the smallest. It is also important that the number of nonhospital providers is shrinking as physicians and other caregiv- ers move to hospital employment.
The Hospital Sector Despite upheaval and uncertainty in the American healthcare market, hospi- tals are still major players. They are structured and administered in a variety of ways (organization and ownership of hospitals are shown in exhibit 1.5). Community hospitals (nonfederal HCOs with licenses for inpatient care that are open to the public) constitute about 90 percent of the total expendi- tures. Three-quarters of that care is provided by nongovernment, not-for- profit hospitals. Investor-owned, for-profit hospitals provide 10 percent. In the 1970s, a movement to investor-owned hospitals quickly reached about 10 percent of all community hospital expenditures. It increased to 15 per- cent by 2010 but has declined since. For-profit hospitals have a presence in 45 states, with the highest concentration in Florida, Texas, Tennessee, and Virginia.28
Hospitals owned by state and local governments provide 13 percent of care. They are operated and financed similarly to nonprofit hospitals. They are also exempt from most taxes. Virtually all federal hospitals are in four systems (Department of Defense, Department of Veterans Affairs,
U.S. Healthcare Expenditures, 2016
1%4%
3%
9%
8%
14%
27%
34%
Hospital
Physician and Other Professional Services
Prescription Drugs and Medical Products
Long-Term Care and Home Health
Administration and Insurance
Public Health
Capital Structures and Equipment
Research
EXHIBIT 1.4 How Healthcare
Money Is Spent
Source: CMS (2018).27
White-Griffith.indd 18 2/13/19 1:32 PM
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 19
Indian Health Services, and federal prison hospitals). Although the number of federal hospitals has been stable, federal expenditures on healthcare have climbed less rapidly than the national average.
Little evidence exists that ownership type changes the quality of care. All hospitals are organized around interprofessional care teams, as shown in exhibit 1.2, and almost all are accredited or certified under rules controlled by CMS. Thus, they tend to operate similarly.
Most hospitals are small; more than 2,000 have fewer than 100 beds. These small organizations consume only 10 percent of expenditures. Conversely, only 7 percent of hospitals have more than 500 beds, but they constitute one-third of expenditures. Large hospitals have a broader array of services, including many expensive specialties. Teaching hospitals, which fall under many of the categories listed in exhibit 1.5, are an important element of the mixture as well. They are almost exclusively large and not-for-profit, with government, religious, and nonreligious owners.
Healthcare reform has increased pressure for both vertical integra- tion (across services) and “horizontal” integration (linking similar services). Advantages of scale—such as the ability to gain debt financing or access to advanced knowledge management systems—drive both horizontal and verti- cal integration.
Most for-profit hospitals are in large national systems. More than two- thirds of community hospitals are members of multihospital integrated deliv- ery systems. The average medium-sized healthcare system generated around $2 billion of annual revenue in 2010; an independent hospital of medium size generated $30 million. The median independent hospital had about 150 associates, and the median HCO system about 10,000.30
Hospital Type Count Revenue (billions)
Nongovernment not-for-profit 2,849 $ 677
Investor-owned (for-profit) 1,035 $ 95
State and local government 956 $ 132
Psychiatric, long-term, and other special-purpose hospitals
485 $ 20
Federal government hospitals 209 $ 68
Nonfederal psychiatric hospitals 397 $ 19
All US registered hospitals 5,931 $ 1,011
Source: American Hospital Association (2018).29
EXHIBIT 1.5 Ownership and
Specialization
of US Hospitals,
2016
The Wel l -Managed Healthcare Organizat ion20
Many HCO systems operate in multiple markets and states; most provide services beyond acute hospital care. Their size provides numerous operating advantages, and they are growing. The trend is likely to continue— additional small, independent HCOs will join HCO systems. HCO systems will expand outpatient services and become the dominant source of personal healthcare. Specialty hospitals (e.g., cancer hospitals) and specialized services (e.g., urgent care centers, retail clinics, nursing homes, hospices) will still exist, but many of these will join systems as well.
Physician and Other Health Services The values shown in exhibit 1.4 are payments for caregiver services, indepen- dent of the caregiver’s organization or the physical site of care. In addition to independent practitioners and HCOs, community health centers—often federally qualified health centers—are not-for-profit clinics addressing the
needs of the poor and uninsured, and they have grown in recent decades. They have independent local governing boards but often affiliate with local HCOs. Accountable care organizations (ACOs), created by the ACA, are operated by large HCOs, affiliating with group practices and community health centers to provide comprehensive care.31 The patient-centered medical home is a mechanism for providing primary care that can be applied in any of these organizations.32 It emphasizes careful listening, close adherence to patient wishes, and flexible deliv- ery models.
Post-Acute and Specialty Care The current US healthcare marketplace also includes post-acute and specialty care. Many patients require support that is more intensive than primary care but less intensive than acute inpatient care. The providers filling these needs can have any of a variety of corpo- rate structures. Post-acute rehabilitation facilities are operated both by hospitals and by national for-profit
chains (e.g., HCR Manor Care) that also operate nursing homes. HCOs in this sector expanded rapidly in the late twentieth century, but growth has slowed. DaVita, a national chain of kidney dialysis centers, and several corpo- rations offering bariatric or plastic surgery facilities are specialized for-profit systems. Some for-profit HCOs limit their practice to specific kinds of patient needs, such as urgent care or physical therapy. It is not clear whether these or similar systems will grow.
Specialty end-of-life healthcare—chronic care, home care, palliative care, and hospice care—present a patchwork of owners and structures in the
Federally qualified health center Services for underserved areas or popula- tions that offer a sliding fee scale, provide comprehensive services, and have an ongoing quality program and have a board of directors; funded with grants under Section 330 of the Public Health Service Act.
Accountable care organization (ACO) Group of healthcare providers that works collaboratively and accepts collective ac- countability for cost and quality of care for a specific population. The patient-centered medical home is an accepted model for be- coming an ACO.
Patient-centered medical home “Mechanisms for organizing primary care to provide high-quality care across the full range of individuals’ health care needs.”33
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 21
marketplace. Chronic care facilities, or nursing homes, are operated both by not-for-profit hospitals and by a few large national for-profit chains. Inde- pendent local corporations are declining in number. Home care is provided by HCO systems and by specialty not-for-profit and for-profit corporations. Historically, palliative care and hospice services have been provided both by HCOs and by small, independent not-for-profit corporations. In the future, it is likely that HCOs will acquire these organizations or form joint ventures with them, improving patient access to palliative care.
Other Sectors of the Healthcare Economy Exhibit 1.4 shows that HCOs receive about one-third of the consumer spending for healthcare. HCOs influence expenditures on physician com- pensation, prescription drugs, and medical products. More than half of drug and product expenditures require prescription by an LIP. The insurance sector accounts for only 9 percent, which may seem minimal. This percent- age results from the fact that insurance payments are recorded in the sector receiving them—much of the capital expenditure goes to HCOs. That 9 percent is the cost of operating health insurance companies. Research, rep- resenting only 1 percent of the expenditures, is principally money spent by the National Institutes of Health. Many large HCOs also participate, usually through a university affiliation. Though small, this portion is vital; it supports healthcare’s continuous advancement.
Achieving Excellence in HCOs
Excellence with the team structure of exhibit 1.2 requires the following:
• Individual team members who are trained, supported, and motivated • Teams that work well together, integrating each
individual’s contribution • Coordination of multiple teams to meet each
patient’s unique needs
The Baldrige Performance Excellence Model achieves excellence by creating a transformational culture— one that systematically encourages individuals and teams to use continuous improvement, the ongo- ing, evidence-based study and improvement of work processes.34 Transformational culture and continuous improvement are each important departures from tradition. Baldrige recipients have universally con- cluded that both are essential to excellence.
Transformational culture An environment of relationships between as- sociates and between associates and leader- ship that emphasizes every associate’s right to question or criticize a work-related process or decision and that requires every leader to respond constructively to concerns or ques- tions raised by any associate.
Continuous improvement An ongoing organizational system that identifies improvement opportunities, rank- orders them, and systematically analyzes and improves work processes to move team performance closer to benchmark.
The Wel l -Managed Healthcare Organizat ion22
Transformational Culture The culture of an HCO is major determinant of its overall excellence. Cul- ture is “how we act here” in terms of relationships between associates and with their leaders. Culture is built by repetition, particularly the repeated actions of leaders, who have daily opportunities to reinforce or revise habits. Truly outstanding organizations tend to have a Baldrige-style transforma- tional culture (described in detail in chapter 2). Such a culture is dedicated to meeting associates’ needs and to creating a stable, committed workforce that continues to learn and improve.
Focus on transformational culture introduces many innovations to the workplace. It replaces rigid professional hierarchies and domains of author- ity with collaboration and open discussion. It commits leaders at all levels to providing constructive answers to any associate’s concern. A constructive answer can be judged in two dimensions, and transformational culture uses both to improve excellence: the objective (“Was the process changed or the problem removed?”) and the subjective (“How did the asker feel about the response?”). The open environment makes associates capable of identifying many valuable improvements. In addition, and possibly more important, associates are confident that they are supported by their teams and the HCO.
Transformational management, an essential component of transforma- tional culture, is sustained by three elements:
1. Training. Managers at all levels are trained in the reasons for sustaining the transformational culture. They know why constructive answers are important and how to answer common questions. Their training is supplemented by coaches who can assist and reinforce the principles. Managers and leaders at all levels are obligated to seek a constructive answer.
2. Rounding. Baldrige healthcare managers and leaders are expected to spend at least five hours a week with associates in the teams outlined in exhibit 1.2. The result is that members of frontline teams will often see not only their team leader but also senior leaders. They can ask senior leaders directly about their concerns.
3. Rewards and recognition. All Baldrige recipients make heavy use of nonmonetary rewards: verbal and written thanks, recognition, prizes. All provide cash incentives for their leaders. Most also reward each associate for achieving the negotiated goals.
The transformational culture is also reinforced in the annual planning pro- cess, described in detail in chapter 3. The goals are negotiated over several months, searching for goals and processes that associates believe are realistic. “Best practices” show that the proposed goals are realistic. Once negotiated, if a goal appears to be endangered, an action team is assembled to work out
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 23
a solution. The result is that objectively, almost every goal is achieved, and subjectively, every associate accepts the goals as realistic.
Continuous Improvement Continuous improvement is one of the practices that can help HCOs attain excellence. It is supported by measurement and sophisticated process analysis tools, such as Lean and Six Sigma, that became available in the 1980s and have substantially increased in quality since. Improvement requires routine, accurate reporting of measures for each exhibit 1.1 criterion to each care team and each support team. The measures are compared to similar opera- tions inside and outside the HCO, identifying benchmarks and best practices. Any actual performance that is lower than the benchmark is an OFI. Even the best HCOs have several thousand OFIs. They achieve excellence because each team continuously reviews its measures, ranks its OFIs, and pursues continuous improvement to address them.
Commitment to Evidence The discussions that support change are not simply expressions of feelings and desires—they must be undergirded with proof. Excellent HCOs insist on evidence-based medicine, requiring caregivers to provide the latest scientifically proven treatments and preventive activities. Similarly, leadership must adhere to evidence-based management, implementing proven developments in management practices and information technology. “It comprises four funda- mental activities that can be applied in the everyday exercise of management judgment and decision mak- ing: (i) use of the best available scientific findings; (ii) gathering of and attending to organizational facts, indicators, and metrics in a systematic fashion to increase their reliability and usefulness; (iii) ongoing practice of mindful, reflective judgment and use of decision aids to reduce bias and improve decision quality; and (iv) consideration of ethical issues, including the short-term and long-term impact of decisions on stakeholders.”36
Evidence-based medicine and evidence-based management are interrelated ethical commitments. Although rarely stated in the HCO’s values, they are the foundation of continuous improvement. In excellent HCOs, they also influence the transformational culture. They are made clear to all professional associates and all leaders and become the ground rules for every meeting and conversation.
Evidence-based medicine “The conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients.”35 The central concept of judicious use is that what is justifiable or reasonable to believe depends on the trustworthiness of the evidence.
Evidence-based management Management that incorporates well-estab- lished scientific findings regarding critical thinking, human judgment, decision-making, and learning to aid managers in acquiring quality information and putting it to use. The set of practices that make up evidence-based management achieve better-quality results in organizations by improving the practitioner’s knowledge, judgment, and competencies.
The Wel l -Managed Healthcare Organizat ion24
Leaders Leaders have an instrumental role in organizational excellence and they are needed at all levels of the organization. They are HCO associates who accept
responsibility for implementing the mission and goals of the organization—they carry out its commitment to discussion, evidence, and improvement. Each team has a leader, usually expert in the team’s specific function. Leaders make sure that the right teams are present, that all team needs are met, and that the teams are achieving improvement goals. Leaders must also be managers, and in the context of this
book, the terms are often used interchangeably. Organizations usually have senior leaders who form coordinating
groups focusing on strategic support. A governance body oversees the inte- gration of decisions with the desires of stakeholders. Leaders were called “managers” in the twentieth century. The change in terminology reflects a broadened concept of professional responsibility. That concept, expanded in chapter 2, emphasizes understanding and responding effectively to team and individual associate needs.
Many care providers have leadership roles in HCOs. Regardless of whether they have been medical providers, however, all HCO leaders should be professionals dedicated to the core commitments of the Hippocratic Oath, which have guided health caregivers for almost 2,500 years. Two commit- ments of the original oath remain central: First, do no harm; second, help the sick.
The Academy of Medicine’s goals, discussed in exhibit 1.1, expand these commitments. The American College of Healthcare Executives Code of Ethics extends them to leadership. Among other duties, its members strive to do the following:
1. Conduct professional activities with honesty, integrity, respect, fairness, and good faith in a manner that will reflect well on the profession.
2. Work to ensure the existence of procedures that will safeguard the confidentiality and privacy of patients or others served.
3. Promote a culture of inclusivity that seeks to prevent discrimination on the basis of race, ethnicity, religion, gender, sexual orientation, age, or disability.
4. Work to identify and meet the healthcare needs of the community. 5. Work to support access to healthcare services for all people.37
Leadership for excellence begins with a personal commitment to this Code of Ethics. In terms of the national healthcare system, these goals are important OFIs, and they form a checklist for every HCO.
Leaders Associates who accept responsibility for achieving and maintaining excellence by supporting team efforts and team coordina- tion. Many leaders were historically called “managers.”
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 25
The Role of Strategic Teams Leaders and governance at excellent HCOs often serve on strategic teams. These teams, which form the base level of exhibit 1.1, ensure the following:
1. The necessary resources are at hand:
• Each team member has the training, tools, and facilities that her role requires, including training in effective teamwork.
• The team’s performance measures and benchmarks are correctly calculated and promptly available.
• The correct teams are available for each patient. • Every clinical team has up-to-date knowledge of patient needs.
2. The transformational culture is maintained:
• Each team member is encouraged to do his best. • Team leaders are trained in maintaining collaborative team
behavior. • Individual team members work effectively together. • The teams work well with other teams. • The culture meets individual workers’ needs, engenders
collaboration, and celebrates improvement effort.
3. Continuous improvement is implemented:
• Performance is measured in multiple dimensions, always including quality, user satisfaction, provider satisfaction, and cost.
• Benchmarks are sought for each measure. • OFIs are identified, ranked, and systematically pursued. • New processes are designed after thorough analysis and with careful
attention to associates’ needs. • Realistic goals are carefully negotiated, supported, and achieved.
Managing and Leading Excellent Healthcare Organizations
This book focuses on requirements for managing and leading excellent HCOs. Thus, every chapter concludes with a discussion of important man- agement and leadership opportunities—commonly occurring situations where individuals make a difference through professional responses that promote excellence. Three opportunities are universal and overarching, in the sense that they create a foundation for all success: reducing variation, meeting the needs of teams, and continuous improvement.
The Wel l -Managed Healthcare Organizat ion26
Reducing Variation in Healthcare Organization Performance Regional variation in health and healthcare is a major leadership opportunity. Health outcomes, costs, and patient satisfaction differ from community to community; where you live in the United States has an important impact on your health insurance premium, your out-of-pocket costs, your safety, and even your survival. Using 2016 information from WhyNotTheBest.org, a website for comparative data, exhibit 1.6 compares three communities with substantial differences. The communities are hospital referral regions, each including several HCOs and at least one multispecialty referral center. Several points are notable:
• None of these communities reaches benchmark, the national top 10 percent, in any measure.
• Chances of dying in the hospital are all almost 20 percent higher than benchmark.
• Chances of being readmitted within 30 days are 10–13 percent higher. • Although for technical reasons there is no national cost benchmark,
cost of care per capita is 28 percent higher in Tampa, Florida, than Portland, Oregon, and 17 percent higher in New Brunswick, New Jersey, than in Portland. Local insurance premiums and patients’ out- of-pocket payments reflect these differences.
• Increased expenditures do not necessarily lead to better outcomes.
Mortality Composite
(%)* Readmissions
(%)** Risk-Adjusted
Per Capita Costs ***
Tampa, FL 13.1 19.9 $9,967
New Brunswick, NJ 12.6 20.3 $9,127
Portland, OR 13.0 19.0 $7,815
US Top 10% 11.0 17.6 N/A
Source: Data from WhyNotTheBest.org (2017).38
* Deaths within 30 days from all causes after an initial hospitalization with a principal diagnosis of
heart attack, heart failure, or pneumonia.
** Patients readmitted to a hospital within 30 days of discharge from a previous hospital stay for
heart attack, heart failure, or pneumonia.
*** Total annual Medicare payments per beneficiary, standardized to remove geographic differ-
ences in payment rates for individual services and adjusted for differences in beneficiaries’ health
using CMS’s risk-adjusted model.
EXHIBIT 1.6 Examples of
Variability in
Healthcare
Organization
Performance,
2016
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 27
HCOs are far from the sole cause of these variations. Population edu- cation and income account for about half of the difference. However, more detailed analyses, conducted for the whole population rather than just Medi- care, reveal that these results understate the problem. Using data available from about half the nation, and adjusting rigorously for conditions outside the HCOs’ control, a recent study found that hospital mortality risks differed by a ratio of two to one and patient safety differed by a ratio of ten to one.39
HCO leadership is obligated to work on these OFIs. How might lead- ers proceed?
• Post performance data, with the national benchmarks, for all to see and discuss.
• Seek and copy best practices. Look for benchmark communities that resemble yours, and invite their leaders to discuss how they achieve and sustain their results.
• Analyze the detail available on the HCO’s intranet or other data sources to identify OFIs for specific interprofessional care teams using data for the diseases they treat. Leaders begin the conversation by asking the teams for their opinions and suggestions.
• Support associates’ efforts, providing resources for implementing best practices and rewards for tangible progress. Rigorously keep the focus on improvement, not correction.
At Baldrige-winning institutions, leadership will create process improve- ment teams (PITs) in each service line to pursue OFIs. It will provide expert advice and support for the PITs to identify root causes and design new, more effective processes. Leaders will retrain all workers in the new processes and put descriptions of them on the HCO’s intranet. Finally, it will identify and celebrate every gain and every best practice. Notably, it will focus on copying the best. The weakest performers will be encouraged rather than criticized.
Meeting the Needs of Clinical Care Teams Clinical care teams deal with “the beginnings of life, the end of life, and the shadows of life.” (The phrase is on the Health and Human Services Admin- istration Building in Washington.) They plunge daily into intimate, highly personal details and family relationships. Their jobs are emotionally and intellectually demanding. Excellence requires not simply their skill, but their emotional commitment. Strong evidence exists that across the United States, many team members are fatigued, frustrated, and struggling to fulfill their obligations to patients—a condition described in the literature as “burnout.” Studies have reported physician burnout as high as 50 percent. Nurse burn- out is also serious, leading to high turnover as well as ongoing struggles for individuals and HCOs.40
The Wel l -Managed Healthcare Organizat ion28
Caregivers at Baldrige Award–recipient HCOs are substantially hap- pier. Most caregivers say they are satisfied with their work; turnover is below 10 percent per year. Best practice—what leaders in other HCOs should emu- late—calls for the following:
• Close, quantitative monitoring. The HCO tracks caregiver satisfaction, turnover, absenteeism, and on-the-job injuries. Managers and leaders institute measures in every work unit to monitor indicators of associate engagement and measures of a safe, healthy, and stable work environment.
• Leadership rounding. Senior leaders working for Baldrige winners spend a minimum of five hours per week at clinics, nursing stations, physicians’ offices, kitchens, billing offices, laboratories, loading docks—all the places where basic work is done. In the sort of transformational culture discussed in chapter 2, leaders are encouraged to join in the work where they are qualified. This activity gives the leaders visibility among workers and an understanding of their experiences. It also gives lower-level associates direct access and helps middle- and lower-level managers sustain servant leadership.
• Carefully negotiated goals. The processes of goal setting and continuous improvement described in chapter 3 are intertwined. Every goal is known to be achievable. The path to achieving it is often new work processes. These are carefully developed, reviewed by associate teams, and put in place with full training for all involved associates.
The result creates a great place to give care. Current associates remain, learn, and increase in skill. The reputation makes recruitment easier.
Supporting Continuous Improvement Excellence is learned. HCOs do not leap from mediocrity to excellence. Using continuous improvement, they get better every year by careful, delib- erate effort. At award-winning HCOs, leadership pursues a specific path, developed in detail in chapter 3 and applied in subsequent chapters. Leaders ensure the following:
• Local, regional, and national benchmarks and best practices are identified.
• PITs give every associate an avenue to understand the best practices and help adapt them to the local situation.
• Every associate understands that the goals are realistic and achievable. (“Stretch goals,” an effort to go beyond benchmarks, are more challenging.)
• Success is celebrated and rewarded.
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 29
Excellence is achieved when these needs of both customer and pro- vider stakeholders are optimally met, in ways such as the following:
• Care is safe, effective, patient centered, timely, efficient, and equitable (exhibit 1.1).
• The HCO participates actively with other community organizations to meet population health needs.
• Caregivers and other associates are attracted to the HCO, and they are given support to do their best.
• Expenditures are controlled so that the total cost is in the community’s economic reach.
The Well-Managed Healthcare Organization describes how excellence is achieved by large HCOs. The following chapters identify the essential func- tions, their integration, measures, and personnel qualifications for essential components, describing the work of HCOs that have achieved and docu- mented excellence.
Practice Applications
These questions are about applying the chapter content. It’s often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. HCOs are strongly oriented toward healing the sick, one person at a time. The first word of the body of this chapter—“patient”—is consistent with that tradition. Consider the following reasons for seeking care:
• Your grandmother, well into her eighties, wants a checkup. She has many of the limitations of age—her hearing, eyesight, and mobility are not what they were, and she has diabetes.
• Your father, 55, has acute chest pain that started a half hour ago and seems to be getting worse.
• You (or your partner) might be pregnant.
What constitutes an excellent result for each of these events? What care teams and clinical support teams are likely to be involved? How do the strategic teams help the clinical teams achieve excellence? If the HCO delivers that excellence, what other factors would be important to continued good health?
2. Mercyhealth (Janesville, Wisconsin) has two rewards recognizing associ- ates’ exceptional effort, Above and Beyond the Call of Duty and Someone to Admire and Respect. Nominations come from patients, colleagues, or guests. A committee reviews them and selects winners. Personal letters are sent to
The Wel l -Managed Healthcare Organizat ion30
home addresses, and recipients are recognized in departmental meetings. Similar programs at other HCOs often involve small prizes, such as a gift cer- tificate for dinner for two. Bronson Healthcare (Michigan) has a lottery for recipients with a substantial cash prize. Should every well-managed health- care organization have a similar program? Can you describe to a customer stakeholder why the program is (or is not) a good idea?
3. Evidence-based management relies heavily on numbers. Benchmarks, goals, and unit performance are established in order to measure performance and outcomes. The quantitative approach raises many questions, and a com- petent professional leader must be able to answer them at several levels of sophistication. (The chief of surgery and the chair of the board will expect more specifics than frontline service associates do, but the transformational culture obligates leaders to answer both to the questioners’ satisfaction.) For chapter 1, let’s answer them at the simplest level, say for a smart high school graduate.
• Are these the right measures? (Why are these goals important? How were the measures selected?)
• How do I know my team can achieve these goals? (Do they include a lot of things outside our control?)
• Can we really get better? (If we set a goal, how do we know we can reach it?)
• Will we be punished for not reaching our goals? (Why should I make an extra effort to reach the goals?)
4. Five similar nursing stations have very different results on medication errors. How will you approach the OFI? Go to the worst, and tell them they must improve? Go to the best, and give them a prize? Go to the second best, and ask them to copy the best? Do all of these? Something else? What’s the right approach, and why is it best?
5. Select an HCO where you might serve a summer internship or graduate fellowship and look it up in WhyNotTheBest.org or healthcostinstitute.org. Identify three to five OFIs that you think the HCO should be addressing. What questions should you ask when you interview, and what answers would you look for?
Notes
1. The “Critical Actions” section for each chapter summarizes the actions a healthcare organization’s (HCO’s) leadership must complete to sustain its operations. Lead- ers’ actions usually involve building and working with teams to support or improve
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 31
the HCO’s culture, worker capability, and work processes. Leaders supply insight and guidance drawing on their broad understanding of the HCO’s role, structure, governance, and strategy. Reviewing Critical Actions will help students identify what leaders do and how they do it—the approaches and methods they use that contrib- ute to long-run excellence.
2. Office of Disease Prevention and Health Promotion. 2018. Healthy People 2030. US Department of Health and Human Services. Accessed April 2. www.healthypeople .gov/2020/About-Healthy-People/Development-Healthy-People-2030.
3. Etches, V., J. Frank, E. Di Ruggiero, and D. Manuel. 2006. “Measuring Popula- tion Health: A Review of Indicators.” Annual Review of Public Health 27: 29–55 . doi:10.1146/annurev.publhealth.27.021405.102141.
4. Eggleston, E. M., and J. A. Finkelstein. 2014. “Finding the Role of Health Care in Population Health.” Journal of the American Medical Association 311 (8): 797–98. https://dx.doi.org/10.1001/jama.2014.163.
5. Etches, Frank, Di Ruggiero, and Manuel 2006. 6. Cassel, C. K., and R. S. Saunders. 2014. “Engineering a Better Health Care System:
A Report From the President’s Council of Advisors on Science and Technology.” Journal of the American Medical Association 312 (8): 787–88. https://jama network .com/journals/jama/article-abstract/1889028.
7. Kohn, L. T., J. M. Corrigan, and M. S. Donaldson (eds.). 2000. To Err Is Human: Building a Safer Health System. Washington, DC: National Academies Press.
8. New York State Department of Health. 1999. “Basic Statistics: About Incidence, Prevalence, Morbidity, and Mortality.” Accessed April 2, 2018. www.health.ny.gov/ diseases/chronic/basicstat.htm.
9. National Institute of Standards and Technology. 2018. “Baldrige Award Recipients Listing.” US Department of Commerce. Accessed April 2. www.nist.gov/baldrige/ award-recipients.
10. New York State Department of Health 1999. 11. Griffith, J. R. 2017. “An Organizational Model for Excellence in Healthcare Deliv-
ery: Evidence from Winners of the Baldrige Quality Award.” Journal of Healthcare Management 62 (4): 328–42.
12. Knottnerus, J. A. (ed.). 2006. The Evidence Base of Clinical Diagnosis. London: BMJ Books/Blackwell Publishing.
13. The Joint Commission. 2015. “Standards Q&A.” In Touch 1: 1–2. Accessed April 2, 2018. www.jointcommission.org/assets/1/23/InTouch_Issue_One_2015.pdf.
14. The Joint Commission. 2018. Ambulatory Care Program: The Who, What, When, and Wheres of Credentialing and Privileging. Accessed April 2. www.joint commission .org/assets/1/18/AHC_who_what_credentialing_booklet.pdf.
15. Freeman, R., J. Harrison, A. Wicks, B. Parmar, and S. de Colle. 2013. Stakeholder Theory: The State of the Art. New York: Cambridge University Press.
16. Institute of Medicine and Committee on Quality of Health Care in America. 2001. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academies Press.
17. Ibid. 18. Hu, J., J. Jordan, I. Rubinfeld, M. Schreiber, B. Waterman, and D. Nerenz.
2017. “Correlations Among Hospital Quality Measures: What ‘Hospital Com- pare’ Data Tell Us.” American Journal of Medical Quality 32 (6): 605–10. doi:10.1177/1062860616684012.
19. Centers for Medicare & Medicaid Services. 2017. “CMS’ Value-Based Programs.” Modified November 9. www.cms.gov/Medicare/Quality-Initiatives-Patient - Assessment -Instruments/Value-Based-Programs/Value-Based-Programs.html.
The Wel l -Managed Healthcare Organizat ion32
20. Centers for Medicare & Medicaid Services. 2018. “Medicare Financial Management Manual: Chapter 3—Overpayments.” Accessed April 2. www.cms.gov/Regulations -and-Guidance/Guidance/Manuals/downloads/fin106c03.pdf.
21. Griffith, J. R. 2017. “Is It Time to Abandon Hospital Accreditation?” American Journal of Quality Management 33 (1): 30–36. http://journals.sagepub.com/doi/ full/10.1177/1062860617707578.
22. Burstin, H., S. Leatherman, and D. Goldmann. 2016. “The Evolution of Health- care Quality Measurement in the United States.” Journal of Internal Medicine 279: 154–59. https://dx.doi.org/10.1111/joim.12471.
23. Rosenberg, B. L., J. A. Kellar, A. Labno, D. H. M. Matheson, M. Ringel, P. VonAchen, R. I. Lesser, Y. Li, J. B. Dimick, A. A. Gawande, S. H. Larsson, and H. Moses. 2016. “Quantifying Geographic Variation in Health Care Outcomes in the United States Before and After Risk-Adjustment.” PLoS ONE. Published December 14. doi:101371/journal.pone0166762. See also Madison, K. 2004. “Hospital- Physician Affiliations and Patient Treatments, Expenditures, and Outcomes.” Health Services Research 39 (2): 257–78.
24. Starr, P. 1982. The Social Transformation of American Medicine. New York: Basic Books. See also Stevens, R., C. E. Rosenberg, and L. R. Burns (eds.). 2006. His- tory and Health Policy in the United States: Putting the Past Back. Piscataway, NJ: Rutgers University Press. See also Rosenberg, C. E. 1995. The Care of Strangers: The Rise of America’s Hospital System. Baltimore: Johns Hopkins University Press.
25. Brooksbank, M. 2009. “Palliative Care: Where Have We Come From and Where Are We Going?” Pain 144 (3): 233–35.
26. Adler-Milstein, J., C. Salzberg, C. Franz, E. J. Orav, J. P. Newhouse, and D. W. Bates. 2014. “Erratum: Effect of Electronic Health Records on Health Care Costs (Annals of Internal Medicine (2013) 159 (97–104). DOI:10.7326/0003-4819 -159-2-201307160-00004).” Annals of Internal Medicine 161 (7): 535.
27. Centers for Medicare & Medicaid Services. 2018. “Historical.” Updated Janu- ary 8. www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and -Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html.
28. Federation of American Hospitals. 2018. “United States FAH Member Facilities.” Accessed April 2. https://docs.fah.org/website/documents/FAH-USA.pdf.
29. American Hospital Association. 2018. Hospital Statistics. Chicago: American Hos- pital Association.
30. Ibid. 31. Lewis, V. A., K. Schoenherr, T. Fraze, and A. Cunningham A. 2016. “Clinical Coor-
dination in Accountable Care Organizations: A Qualitative Study.” Health Care Management Review. Published December 6. See also Gorbenko, K. O., T. Fraze, and V. A. Lewis. 2016. “Redesigning Care Delivery with Patient Support Person- nel: Learning from Accountable Care Organizations.” International Journal of Care Coordination 19 (3–4). https://dx.doi .org/10 .1177/2053434516676080.
32. Jackson, G. L., B. J. Powers, R. Chatterjee, J. P. Bettger, A. R. Kemper, and V. Has- selblad. 2013. “The Patient Centered Medical Home: A Systematic Review.” Annals of Internal Medicine 158 (3). doi:10.7326/0003-4819-158-3-201302050-00579.
33. Ibid. 34. Griffith 2017. 35. Sackett, D. 1997. “Evidence-Based Medicine.” Seminars in Perinatology 21 (1): 3–5. 36. Olivas-Luján, M., and D. Rousseau. 2013. “Evidence-Based Management.” In
Encyclopedia of Management Theory, edited by Eric H. Kessler, 265. Los Angeles: SAGE.
Chapter 1: Foundations of Wel l -Managed Healthcare Organizat ions 33
37. American College of Healthcare Executives. 2017. “ACHE Code of Ethics.” Pub- lished November 13. www.ache.org/abt_ache/code.cfm.
38. Medicare data from WhyNotTheBest.org. Accessed August 2, 2017. 39. Rosenberg, Kellar, Labno, Matheson, Ringel, VonAchen, Lesser, Li, Dimick, Gawande,
Larsson, and Moses 2016. 40. Garcia-Sierra, R., J. Fernandez-Castro, and F. Martinez-Zaragoza. 2016. “Rela-
tionship Between Job Demand and Burnout in Nurses: Does It Depend on Work Engagement?” Journal of Nursing Management 24 (6): 780–88. doi:10.1111/ jonm.12382.
CHAPTER
35
CRITICAL ACTIONS
2 CREATING AND SUSTAINING A TRANSFORMATIONAL CULTURE
1. Create the best place to give care in order to be the best place to get care:
• Use systematic listening and service excellence to identify what each associate needs to fulfill the mission and provide it; improve the patient experience.
2. Implement service excellence to build and sustain the culture:
• Use training, selection, communication, modeling, and meaningful recognition to create an environment where the mission is the focus and the values become real.
3. Measure and continuously improve the HCO’s transformational culture:
• Use measures of associate engagement and team performance to improve relationships and communication.
4. Protect the HCO’s values and assets:
• Establish, publicize, and maintain systems that uphold ethical and legal integrity, and detect fraud, personal abuse, and theft.
The Wel l -Managed Healthcare Organizat ion36
Purpose
The purpose of transformational culture is to sustain an environment in which
• each team member is encouraged to do her best; • team leaders are trained in maintaining collaborative team behavior; • team members work effectively together; • teams set and achieve performance improvement goals; and • the culture supports individual workers’ needs, expects collaboration,
and recognizes improvement effort.
Transformational culture achieves that environment because it empowers associates, encouraging them to speak up about their workplace concerns and seeking improvements that address those concerns.1
Empowerment is supported by requiring managers at all levels to provide constructive answers to any associate’s concern. A constructive answer can be judged in two dimensions: the objective (“Was the process changed or the problem removed?”) and the subjective (“How did the asker feel about the response?”). Both are important.
Transformational culture replaces what was called transactional culture—less elegantly, command and control, a culture based on an authoritarian hier-
archy. In command and control, “bosses” gave orders to workers who were viewed as replaceable cogs expected to do what they were told. Not surpris- ingly, the workers often resisted, leading to expensive and unproductive conflict. Transformational culture produces substantially better performance for three reasons:
1. Goals are closely integrated with the mission and quantified, allowing benchmarking and measured improvement.
2. Goals are realistic, based on careful study that includes soliciting and responding to associate concerns. Associates’ insights about the job frequently improve the processes used, eliminating waste and inefficiency.
3. Associates are psychologically committed to the goals, rather than simply sellers of their services. They view their work as rewarding and use their experience to adjust to challenges that arise, enabling them to avoid many causes of failure.
Empowerment The practice of encouraging associates to speak out about opportunities to increase mission achievement, giving them the ability to change the workplace. Associates are em- powered when they believe they can change the workplace. Empowerment is sustained by managers’ constructive responses.
Chapter 2: Creat ing and Sustaining a Transformational Culture 37
A substantial consensus of both scholars and practitioners supports transformational culture.2 It is universal among Baldrige Award–winning HCOs and has widespread endorsement from other excellent organizations in other fields.3 It is a major component of Lean, a management system that focuses process improvement on expanded worker autonomy.4 It is a core part of the Magnet Recognition Program, which recognizes standards of excellence in nursing. A substantial body of business literature reports success with the transformational model.5
Functions
Leaders implement seven functions to achieve a transformational culture: empower associates, promote service excellence, communicate, model and reward values, reward associates’ contribution, protect HCO assets, and improve continuously. These functions are discussed at length in the follow- ing sections and summarized in exhibit 2.1. Many of them are implemented simultaneously; for example, saying thank you is a communication function, but it is also a reward. A training session inevitably contains more messages than simply the operation learned. Celebration and rewards for a successful new process builds confidence and enthusiasm for attacking another oppor- tunity for improvement (OFI). These seven functions are synergistic; the whole is substantially more than the parts.
Empower HCO Associates Empowerment is the central difference between transformational and trans- actional cultures. It deliberately gives all associates control of their work environment, enabling them to speak up about any work-related concern and rewarding them for efforts leading to improved results. It is created by clear statements of intent, management responses to associate concerns, rep- etition, rewards, and occasional punishment of violations. Managers cannot assume that associates will speak up about their concerns; they must repeat- edly remind associates that speaking up is part of their work. Cases where managers disempower should be identified and corrected.
Managers empower by doing the following:
• Asking frequently for affirmation. (“Do you think that’s a good plan? Do you have suggestions or concerns?”)
• Providing constructive responses to associates’ comments, questions, and suggestions. Constructive responses encourage problem solving. When the problems are complex, constructive responses clarify issues, encourage dialogue, and identify OFIs.
The Wel l -Managed Healthcare Organizat ion38
Function Intent Implementation Examples
Empower HCO associates
Increase associate engagement, satisfaction, and efficiency
Associates encouraged to express work- related concerns
Leaders respond constructively to all associate concerns
Eliminate delays Maintain supplies and
equipment Ensure a safe
workplace
Promote service excellence
Focus associate and leader attention on mission: safe, effective, patient- centered, timely, efficient, equitable care
Routine measurement and reporting of care outcomes, patient and family satisfac- tion, and associate satisfaction
Performance reports with benchmarks, goals, OFIs, and PITs
Communicate Equip associates with all the knowledge to complete their task, to understand the relation of task to mission, and to improve work practices
Extensive training Multiple channels
of two-way communication
Repetition of critical information
Web access to proto- cols and procedures
Clinical rounds Leadership rounds Training Group meetings
encouraging asso- ciate input
Social media
Model and reward values
Encourage constructive and mutually support- ive behavior
Clear, broadly com- municated, and universally enforced guidelines of desir- able, acceptable, and unacceptable actions
Recognition of extra effort
Appropriate corrective action on unaccept- able behavior
Reward associates’ contribution
Increase motivation to set and reach improvement goals
Celebrations of milestones and achievements
Monetary and non- monetary rewards for exceptional performance
Conversational recognition
Prizes Social media
recognition DAISY Award for nurses Bonuses for goal
achievement
Protect HCO assets
Encourage accuracy Discourage error and
divisive, destructive, or personally invasive actions or comments
Highly visible programs to identify and cor- rect behavior that violates values or deliberately impairs mission achievement
Reporting programs for safety, harassment, and discrimination
Visible audits to ensure accuracy and compliance
Improve con- tinuously
Implement best practice and move to benchmark
Review of measures of associate engagement and concerns
Identification of OFIs Pursuit of best practice
Training for new leaders
Coaching for leadership Implementation of
improved work practices
Note: HCO = healthcare organization; OFI = opportunity for improvement; PIT = process
improvement team.
EXHIBIT 2.1 Functions of
Transformational
Leadership
Chapter 2: Creat ing and Sustaining a Transformational Culture 39
• Including the obligation to speak up in all associates’ training, with emphasis in orientation.
• Negotiating annual improvement goals (chapter 3) rather than imposing them.
• Recognizing and rewarding extra effort or valuable suggestions that improve mission achievement.
• Supporting transformational leadership at all levels by training, coaching, or, if necessary, removal.
Applying these steps universally creates a transformational culture. Most associates grasp the core message, “Speaking up is what you are expected to do here,” but often doubt its reality. They test it by trying it. As their efforts are rewarded, they are convinced and become constructive partners. Managers’ repetition and consistency are essential.
Promote Service Excellence Managers build an organization by identifying teams, assigning associates to teams, coordinating team efforts, and promoting continuous improvement. Excellent HCOs follow a service excellence model to focus team structure (described in exhibit 1.2) on their mission. The model establishes the network of interdependent relationships between individuals and teams. It orients each associate toward a team, and each team toward specific customer needs. It specifies evidence as the guiding principle and commits lead- ership to supporting and improving team achievement.
The service excellence model diagrammed in exhibit 2.2 emphasizes the importance of associates and specifies management’s obligation to meet associates’ needs, including their knowledge needs. It says, in effect, “If managers fulfill associates’ needs, associates will serve customers profitably and the business will grow.” The model has gained wide support, particularly, in service industries.6 It is widely practiced by high-performing HCOs.7
The moral foundation is one of the most universal human values: serving others as one wishes to be served, which goes a step beyond simply fulfilling a contract. The precept is fundamental in most religions, moral philosophies (from Immanuel Kant to John Rawls), and judicial systems. The principle is consistent with the foundations of the Hippocratic oath, “Do no harm,” and meets the patient’s needs. It is the core of transformational culture, expanding the concept of agency (“I am doing this for you”) to one of shared commitment (“I am doing this with you”). All associates become partners in satisfying the patient as the ultimate customer.
Service excellence Consistently meeting and managing patient expectations through several means: using evidence as the guiding principle, strengthen- ing empowerment, and focusing leadership on supporting and improving team achievement. Alternately stated, doing the right thing, at the right time, for the right person, with the best possible outcome.
The Wel l -Managed Healthcare Organizat ion40
HCO applications of the model have proven to be extremely power- ful financially. Associates’ increased loyalty reduces turnover and recruitment costs. Improved teamwork eliminates error and rework, reduces operations costs, and delights customers.8 Delighted customers attract new customers. Both the cost reduction and the new revenue increase profits.
The service excellence model makes clear that associates work in teams, that each team contributes to the mission by identifying and fulfilling
their customers’ needs, that teams have quantified goals for improvement, and that team members share accountability for the results. The care teams in exhibit 1.2 have patient customers; most of the other teams have both patient customers and internal cus-
tomers, that is, other teams who need their services. This network of inter- dependent relationships between individuals and teams, as a whole, creates the organization.
Internal customers Associates and teams who rely on other as- sociates and teams in the HCO.
Satisfied Associates Associates know they can rely on each other and have the
resources they need, are loyal to the organization, and are effective in patient care.
Satisfied Patients Patients and families are impressed by caring and
effective associates and leave “delighted.”
Operational Support Day-to-day and strategic needs are met; a culture of commit-
ment to the mission and respect for individuals and evidence
prevails.
Strong Demand Well-planned services and high patient satisfaction will keep
demand high, providing a founda- tion for lower costs and better
quality.
Financial Support Strong demand and efficient
production generate profits that support up-to-date equipment, supplies, and other strategic
needs.
EXHIBIT 2.2 The Service
Excellence Chain
in Healthcare
Chapter 2: Creat ing and Sustaining a Transformational Culture 41
The concept of agency or accountability is the essential link that coordinates individuals and teams. It is also a critical limit on empowerment; associates are empowered to achieve the HCO mis- sion, not to pursue other goals. Perhaps most impor- tant, accountability is the bond that creates the team. It means not only “I know what to do, and I will do it,” but also “I know that I can rely on my teammates and on other teams.”
Supporting Evidence-Based Medicine and Evidence-Based Management Excellent healthcare is based on science. While patient needs and desires are an essential element, care-providing teams are expected to use up-to- date, evidence-based treatment. Evidence-based management extends that commitment to all HCO activities. Clinical support teams are expected to use evidence-based processes. Fact testing becomes a routine component of decision-making. Fact trumps opinion. It also trumps rank; the senior leadership and the governing board are expected not only to respect but to zealously defend fact-finding as part of the culture and the continuously improving organization.
The seven functions of exhibit 2.1 can be understood as shared moral commitments (“things we all believe”), rules of behavior (“how we work at our HCO”), or cultural expectations (“how things happen here”). The expectation that decisions will be evidence based is a critical departure from the rank-based transactional model. It strengthens empowerment and pro- vides a foundation for every interaction, from daily teamwork to the govern- ing board’s strategic debates. “Because I said so” is no longer acceptable.
Leadership Role in Service Excellence Maintaining a service excellence commitment, an evidence-based culture, and a network of teams are critical leadership functions. The combination is sometimes referred to as servant leadership.9 Servant leaders build trust and stewardship via empowerment, support the culture by providing evidence at every decision, and sustain the team network by using it extensively. Mercy- health (Janesville, Wisconsin), a 2008 recipient of the Baldrige Quality Award, described its implementation as follows:
[Our] approach inverts the traditional, top-down management style; thus, organizational leaders become facilitators whose role is to serve those who provide value to patients and other stakeholders. . . .
Senior leaders’ personal demonstration of commitment to the organization’s values is a critical element in the servant leadership approach. With this underlying philosophy, the executive council (EC) has adopted the following best practices:
Agency or accountability The notion that an individual or team commits to fulfill a specific, prearranged expectation, or conversely, that the organization can rely on their commitment.
The Wel l -Managed Healthcare Organizat ion42
• Frequent, open, and honest communication—EC members bring issues to weekly (or more often) EC meetings for full discussion, supporting integrated system strategies;
• “Cruising and connecting”—EC members engage in administrative rounding daily or weekly, connecting with partners to seek out new ways to better serve their needs;
• Personal renewal and connections with patients and customers—EC members perform line work alongside staff periodically and review patient complaints and adverse outcomes daily; and
• Monthly luncheons—EC members conduct small group sessions [with members of their accountability hierarchy] to promote two-way communication.10
The Mercy program is noteworthy for several reasons. First, it is delib- erately in contrast to the traditional command-and-control perspective. That perspective is so deeply rooted in the American workplace that most associ-
ates and all leaders must be carefully taught about the new model and how to work effectively within it. Second, the Mercy approach requires managers to make frequent, direct contact with workers and cus- tomers and to seek out new ways to serve their needs. Third, it expects the organization’s senior leaders to roll up their sleeves and work alongside their teams. Fourth, it includes systematic support for the leaders themselves. The executive council must respond to
its members’ concerns and seek integrated system strategies. Fifth, it expects all leaders to demonstrate commitment to the organization’s values.
The Mercy approach builds service excellence by trusting associates and making that trust explicit. Managers at high-quality HCOs work to remove the frustrations and conflicts that associates face, freeing associates’ energies to improve patient care. They convert HCOs from transactional to transformational cultures by focusing on the mission, promoting the values, increasing empowerment, and addressing the most promising OFIs (see chapter 3). They identify and copy excellence. By identifying teams that are ready to move forward and supporting them, management demonstrates the transformational potential and increases skill in making the transition. Lead- ers’ actions also provide compelling evidence of the strength of the HCO’s commitment and the power of the transformational approach. The transition snowballs. The bold volunteer, the perceptive follow, and the crowd joins in. The focus on identifying evidence-based excellence is central to transforma- tional culture and in contrast to the transactional focus on “fixing problems.” It has a profound effect on empowerment.
Rounding Face-to-face contact and a deliberate effort to communicate at the work site. Clinical rounding is an important part of ongoing care of patients; it occurs at the patient’s bedside. Administrative rounding occurs when leaders meet associates at the associates’ work site.
Chapter 2: Creat ing and Sustaining a Transformational Culture 43
Communicate The more that empowered associates know, the more valuable they are. Con- versely, many problems, small and large, arise because an associate did not know something, either a critical fact or a work process. So communication itself becomes a leadership function. Transformational culture is achieved and sustained by broadcasting, that is, widespread transmission of important facts; repetition, deliberate duplication of messages; training, where key underlying concepts are described and leaders are taught how to implement and sustain them; and reinforcement, leaders’ universal and day-to-day implementation. Communication goes beyond associates’ knowledge to support their self- confidence: “I know my job, and I know how to find out when I don’t, and I know that asking will be rewarded, not penalized.”
Messaging The answer to “How do we tell people?” is “Every way we can, with deliber- ate redundancy.” Charleston Area Medical Center details the array of com- munications expected of its senior leadership (see exhibit 2.3); six are daily and three are ongoing. The other 18 are less frequent or as needed.
Repetition and Reinforcement Important concepts must be communicated repeatedly. Mission and values are repeated enough to ensure daily reference. New ideas are circulated via several media, often with multiple exposures in each. An important topic, such as next year’s goals, will be approached several ways. In Charleston’s plan, the topic would appear in a Facebook post or blog; in the organiza- tional newsletter, Vital Signs; and on the agendas of the several committees. It would be mentioned at every rounding site. The point is to get the mes- sage understood by every associate.
Repetition, however, presents a problem of overload. Repetition must be designed to support continued interest. Johns Hopkins primary care phy- sicians use an astronomical analogy. Their “north star,” the mission, is uni- versal; the topics addressed in their weekly newsletter rotate like planets; and they encourage each of their care teams to review the contents in a weekly meeting or huddle.11 Overall, too much is less problematic than too little.
Actions speak louder than words. Transformational leaders reinforce key messages in their actions. All managers are trained in how to conduct per- sonal interviews and meetings and how to deal with recurring issues. Leaders promote shared values by asking questions. “How does this proposed action help achieve our mission?” “What services are our customers seeking?” “How can we best serve our community and patients’ health needs?” Leaders “mic- rotize” the HCO vision and values, breaking them down to describe how they affect each work unit and individual. Leaders ask associates to discuss the unit’s contribution to the larger HCO mission, encouraging each associate to think through the answer and building buy-in and commitment.12
The Wel l -Managed Healthcare Organizat ion44
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d S up
pl ie
rs
Board of trustees * M X
Senior leaders’ staff meetings
* W X X X X X X
Leadership staff meetings
* W X X X X X X
Department meetings
* M X X X X
Goal cascades/ strategic analysis
* A X X X X X X
“Top 5” boards (unit scorecards)
* D X X X X X X
Huddles * D X X X
Performance planners
* A X X X X
Orientation * O X X X X X
Leadership rounding * D X X X X X X
Management information meeting
* Q X X X X X X
Safety alerts * R X X X X X X
Manager forums * Bi-A X X X X
Nursing governance * M X X X
Medical staff executive committee
* Bi-M X X X
Medical staff departments
* M X X X
Physician advisory committee
* M X X X
Medical education committee
* Bi-M X X X X
EXHIBIT 2.3 Charleston Area
Medical Center
Senior Leader
Communication
Methods
Chapter 2: Creat ing and Sustaining a Transformational Culture 45
Transformational culture depends heavily on making communication with associates two-way, ensuring that every associate’s concerns are heard and understood and that they receive a constructive response. The construc- tive response is a major factor in associate satisfaction and essential to overall performance improvement. It begins with listening, a deliberate effort to hear all that is being communicated. Listening can be taught by example and learned by practice. Leaders learn to test their listening: “Let me say what I heard, and you tell me if it’s right.” In excellent HCOs, listening opportuni- ties are created by planned conversations such as individual reviews, process improvement teams (PITs) and goal setting, rounding, and town hall meet- ings. Baldrige recipients expect their senior leadership to spend five hours each week rounding. Listening can also include focus groups, where small, relatively homogeneous panels are recruited to discuss open-ended ques- tions. It can be supplemented with random sampling surveys, respondent- initiated comment cards, and review of social media.
Training Training is a critical form of communication. Baldrige winners report ten days of training per full-time associate per year, far higher than estimates of practice in traditional organizations. Much of training is mastering work processes, but some important sessions explain the mission- and value-driven transfor- mational culture. Job applicants are asked to read and accept the mission and values before completing an application. Sessions include proper forms of behavior, dress, and address, so that contacts with customers and other associ- ates are carried out consistently to professional standards. Many excellent
“Inside the boardroom”
M X X X X X X X X X
Employee surveys A X X X X
Contractors N X X X
Internet site * D X X X X X X X X X
Communication/ education network
D X X X X X X
Vital signs M X X X X X X X
Newspaper insert Q X X X X X X X X X
Marketing direct mail
O X X X X X X X
Social media * D X X X X X X X X X
Note: A = annually; D = daily; M = monthly; N = as needed; O = ongoing; Q = quarterly; R = real time;
W = weekly.
Source: Information from Charleston Area Medical Center (2015).13
EXHIBIT 2.3 Charleston Area
Medical Center
Senior Leader
Communication
Methods
(continued)
The Wel l -Managed Healthcare Organizat ion46
HCOs have the chief executive officer (CEO) or another senior leader meet all new associates to explain the mission and values and the HCO’s ways of expressing its commitment.
Define and Model Values Values are a fundamental document defining acceptable and unacceptable behavior to protect patients, associates, and the organization. They are
essential to empowerment, teamwork, and transfor- mational culture. Excellent HCOs make their values explicitly part of every associate’s contract. They are emphasized in orientation training and frequently repeated. Values should be as brief as possible, focus- ing on essential protections that reflect the law and
are broadly accepted, but may also be expanded on in standards or guide- lines. Leaders have a vital role in strengthening values, and they can call on a number of approaches to do so.
Religious HCOs often build their values around their faith, taking care to recognize their associates’ and their customers’ rights to disagree. Nonre- ligious HCOs usually list items such as the following:
• Excellence (or quality): a commitment to safe, effective, patient- centered, timely, efficient, and equitable care
• Compassion: sensitivity and responsiveness to the feelings of others • Community (or respect): understanding all humans to be of equal
worth, and acting in ways that protect and enhance every individual’s personal dignity
• Integrity: being honest in all relationships, honoring property and confidentiality rights, and encouraging others to do the same
Safety, learning, and stewardship (the protection and enhancement of the HCO’s assets) are also popular. The words sum up the underlying concepts. They are explained and illustrated in orientation training and by frequent reference. Leaders are expected to exemplify them at all times and to identify them in day-to-day actions, illustrating and reinforcing the cultural commitment.
Expanding on Values Many HCOs expand on their values with additional specific guidelines addressing common concerns. Sharp HealthCare (San Diego, California), for example, has developed three sets of guidelines: twelve behavior stan- dards, five must-haves, and the AIDET (acknowledge, introduce, duration, explanation, thank you) mnemonic device for working with patients. These standards, outlined in exhibit 2.4, are frequently copied by other HCOs. At Sharp, “Senior Leaders are expected to exhibit the Core Values, Behavior
Chief executive officer (CEO) The agent of the governing board who holds formal accountability for the entire organization.
Chapter 2: Creat ing and Sustaining a Transformational Culture 47
12 Employee Behavior Standards
1. It’s a private matter: Maintain confidentiality.
2. To “E” or not to “E”: Use email manners.
3. Vive la différence! Celebrate diversity.
4. Get smart: Increase skills and competence.
5. Attitude is everything: Create a lasting impression.
6. Thank somebody: Use reward and recognition.
7. Make words work: Talk, listen, and learn.
8. All for one, one for all: Teamwork.
9. Make it better: Service recovery.
10. Think safe, be safe: Practice safety at work.
11. Look Sharp, Be Sharp: Appearance speaks.
12. Keep in touch: Ease waiting times.
5 Must-Haves
1. Greet people with a smile and “hello,” using their name.
2. Take people where they are going.
3. Use key words at key times: “Is there anything else I can do for you? I have the time.”
4. Foster an attitude of gratitude.
5. Round with reason.
5 Fundamentals of Service (AIDET) for Patient Interactions
A: Acknowledge
Acknowledge people with a smile and use their names.
I: Introduce
Introduce yourself to others politely.
D: Duration
Keep in touch to ease waiting times.
E: Explanation
Explain how procedures work and whom to contact if they need assistance.
T: Thank you
Thank people for using Sharp HealthCare.
Source: Adapted from Sharp HealthCare (2007).14
EXHIBIT 2.4 Sharp
HealthCare’s
12 Behavior
Standards and 5
Must-Haves
The Wel l -Managed Healthcare Organizat ion48
Standards, and Five ‘Must Haves,’ and serve as role models for employees, volunteers, physicians, suppliers, and partners.”15 The behavior standards and must-haves are deliberately separated from values. Associates—and particu- larly all leaders—must comply with the values but make an honest effort to carry out the additional guidelines.
Leadership Role in Strengthening Values Collaborative development begins the process of widespread acceptance, as discussed in exhibit 2.5. Mission, vision, and values are periodically reviewed using hierarchies of focus groups to identify and build consensus, with a goal of offering every stakeholder an opportunity to comment. The process is often called a visioning exercise. Widespread discussion builds understanding and commitment. Work processes are reviewed to make them supportive. All leaders are expected to model values at all times. Responsiveness encour- ages associates to raise all concerns. Managers’ duties include a constructive response to every associate’s concern. Leadership failures are destructive to transformational culture; they prove that the values are phony. Thus Sharp, Mercy, and many other excellent HCOs hold their managers to higher stan- dard than associates in general.
Reward Associates’ Contribution Transformational culture relies almost exclusively on meaningful recognition and rewards with minimal commands, threats, and punishment. It seeks to copy the best, not fix the worst. It celebrates achievement rather than criticiz- ing weakness. It speaks of “opportunities,” not “problems,” rewarding suc-
cessful improvements and accepting a long list of OFIs as a path to progress, not evidence of weakness. The reward system is the substitute for the “control” of transactional cultures. It is a complex, multilayered system constituted as much by attitudes and behavior as by specific processes. Understanding how to trans- form a culture is essential to leadership.
Reward Any leadership action that is favorably received by recipients and that is offered for the achievement of or attempt at a desired result. Rewards include comment, encourage- ment, and recognition. They can also include payment or gifts.
Collaborative development
Mission, vision, and values are collectively developed, prominently displayed, and frequently cited.
Supportive work processes
Work processes are deliberately designed to encourage implementation of values.
Modeling Leadership’s behavior is uniformly consistent with mission, vision, and values.
Responsiveness Leadership responses to associate queries and requests apply and reinforce mission, vision, and values.
EXHIBIT 2.5 Actions
Reinforcing
Transformational
Values
Chapter 2: Creat ing and Sustaining a Transformational Culture 49
A reward is anything that is favorably received by the recipient and offered in response to a desired action. It can be tangible (a prize or cash) but is more commonly intangible (verbal encouragement and thanks, public recognition). Rewards have two important subjective elements. The impor- tance or value of the reward is a judgment of the recipient; the desired result is a judgment of the donor. Thus successful rewards (1) are valued by the recipient and (2) promote mission achievement.
Rewards used in a transformational structure are outlined in exhibit 2.6. Excellent HCOs use all the opportunities the exhibit lists, frequently and in combinations. Conversation is ongoing. Words of encouragement become universal in dialogue. Recognition and snack food are often weekly events for each work team. Monthly or quarterly public recognitions and prizes reward exceptional achievements and efforts at implementing the mission and values.
Some Baldrige awardees pay cash bonuses based on achievement of annual goals negotiated for team scorecards. They vary by institution, but are often substantial, two weeks’ pay or more, to all employed associates as well as leadership.
The goal-setting system described in chapter 3 is carefully integrated with the rewards. The goals are set to be meaningful but realistic improve- ments in mission achievement. Improvements are based on process analysis and revision, and they are pretested. As a result of the careful foundation, goals are achieved more than 90 percent of the time; rewards may be tangible or intangible. Some HCOs add “stretch goals” that offer extra rewards for unproven or exceptionally difficult changes and are less frequently achieved.
Type Examples Frequency
Intangible rewards and meaningful recognition
Conversation “Thank you,” “Good job!”, “Sarah helped us all when she . . .”
Constant
Recognition Recognition award, commendation or thank-you letter, applause, news- letter or social media item, DAISY Award for nursing excellence
Daily to monthly
Tangible rewards
Prizes Snack food, lotteries, parking privileges, gift cards, cash (usually $1,000 or less)
Daily, weekly, or monthly
Bonuses Cash payments to team members for achieving improvement goals
Annually
Promotions First-line management, advance- ment in management and leadership
Infrequent
EXHIBIT 2.6 A Taxonomy of
Rewards Used in
Excellent HCOs
The Wel l -Managed Healthcare Organizat ion50
Both intangible and tangible rewards are an important innovation to achieve excellence. Neither was common under the command-and-control culture of the traditional HCO. It is likely that their success in HCOs depends upon three factors: the overall strength of the transformational culture, the sophisticated process of negotiated goal-setting (as discussed in chapter 3), and the careful implementation of process analysis and improvement.
Protect HCO Assets All human systems are at risk for inadvertent error and deliberate destruction. HCOs must be systematically protected against these risks. Transformational culture depends on confidence that risks are low, and protection against risk begins with work processes that encourage compliance. For every kind of work, excellence begins with making the right action easy, and the wrong ones hard. Checklists replace handwriting. Hand tools have safeguards. Known hazards receive extra protection. Cash-handling processes discour- age theft and embezzlement. Medications are carefully processed, stored, and administered. Surgery time-outs verify the right patient, procedure, and anatomical location. Important records—invoices, performance statistics, payrolls, and the like—are double checked by a second associate. This level of protection—prevention by design—is by far the most effective. In addition, excellence requires auditing and well-designed processes for correction. Both are carefully thought out to support the transformational culture.
Auditing Auditing is a process by which completed work is systematically searched for error or departure from values. All the tangible assets of an HCO—its associ- ates, property, funds, and contracts—can be audited. Patient care, recorded work, and results can be audited to identify errors, omissions, and OFIs. Statistics and accounting records can be audited for error.
At least four different kinds of audits go on simultaneously in an excellent HCO: transparency, rounding, and performance review; service recovery, unex- pected event reporting, and communication and resolution programs; internal audits; and external reviews and oversight. All audits serve to strengthen both individual accountability and collective commitment to evidence.
Transparency, Rounding, and Performance Review Every permanent team has current goals and receives performance data frequently. Progress toward goals is widely disseminated. Every associate knows her team’s situation; it is posted on the web and often on a white- board. Ongoing transparency catches many errors, correcting them quickly and cheaply. It also creates an atmosphere that makes it difficult to carry out activities contrary to the mission and values. Governance and senior leaders routinely review progress and act when goal achievement is threatened.
Rounding is an important audit. Although its principal purpose is to encourage two-way communication, it also provides senior leadership with an
Chapter 2: Creat ing and Sustaining a Transformational Culture 51
opportunity to review and guide other leaders. Associates’ ability to confer directly with senior leaders encourages frontline and intermediate managers to maintain transformational approaches.
Service Recovery, Unexpected Event Reporting, and Communication and Resolution Programs In even the best HCOs, errors will occur, sometimes with injury to patients, guests, or associates. In cases when the event involves inconvenience but no injury to a patient or guest, the practice of service recovery authorizes associates to make immediate, on-the-spot small payments as expressions of apol- ogy. Free cafeteria meals, parking waivers, and certifi- cates for the HCO’s gift shop are commonly used.
Unexpected event reporting is universally required in HCOs of excellence. Associates report any event that caused, or might have caused, failure, injury, or loss or damage of property. The report comprises a brief description naming associates, patients, and guests involved, identifying what hap- pened and whether injury actually occurred. It is signed and dated. Any injury must be fully described along with the plan for treatment or follow-up; the report becomes the foundation of legal documenta- tion. High-performing HCOs emphasize what might have happened, delib- erately encouraging reports of near misses. Senior leaders respond promptly to reports, often creating an OFI to seek and correct the root cause.
Both unexpected event and service recovery reports are classified, counted, and pursued as indicated. They generate a rich file of OFIs. Reports are frequent enough in larger HCOs to allow statistical monitoring. The count can be tallied by type of risk, location, activity, or team. Excellent HCOs push for zero defect status. They systematically encourage reporting, including near misses. They avoid blame and often reward good catches, that is, successful efforts to avoid or ameliorate events. They establish PITs to analyze suspect work processes and eliminate recurring risks.
Communication and resolution is a program for more serious patient error or harm. A team including legal counsel and appropriate clinicians reviews the event in appro- priate depth, interviewing participants to establish exactly what happened, what harm resulted, what the causes were, and whether the HCO has been exposed to legal risk or liability. When the team concludes the HCO was at fault, an apology, explanation, and appropriate cash settlement is offered to the patient or family. Substantial sums can be involved. If the
Service recovery A program authorizing frontline associates to make small payments to patients or guests who have been inconvenienced. An unex- pected event report must record the event, the individuals involved, and the payment.
Unexpected event report Written documentation of any unusual event that caused, or might have caused, failure, injury, loss, or property damage. The report comprises a brief description naming associ- ates, patients, and guests involved, identify- ing what happened and whether injury actually occurred. It is signed and dated.
Communication and resolution A program investigating all unexpected events involving patient or guest harm. Events are carefully studied to identify causes. If the HCO is liable, victims are offered appropri- ate compensation and court trial is avoided. The organization then identifies and corrects process weaknesses.
The Wel l -Managed Healthcare Organizat ion52
victims accept the payment, they waive the right to further legal action. If they reject it, they may go to court. Reported data show that victims usually accept the offers, their net compensation is reasonably comparable to court settlements in similar cases, and the overall cost of settlement is substantially reduced. Both the victim and the HCO escape the costs and delays of trial.16
Internal Audits Excellent HCOs have regulatory compliance officers and internal auditors, who report regularly to governance and can investigate any process. They concentrate on known risks, like cash diversion or sexual harassment and on reports from customers, suppliers, or associates. Reports of potential prob- lems are encouraged and carefully handled in ways that protect people who report. The fact that audits can be conducted without warning, by auditors deliberately isolated from leaders, serves as a strong deterrent to malfeasance.
External Reviews and Oversight The operations of the organization are monitored by multiple groups, both internal and external. For example, the governing board, representing the owners and outside stakeholders, is an ongoing monitor for the organization. The services to customer stakeholders and owner stakeholders are regularly evaluated by accreditors, external financial auditors, and government agen- cies for compliance with health, safety, and employment regulations, as noted in chapter 1.
The actual power of audits diminishes as the formality increases. Thus, transparency is the most powerful; unexpected event reporting reveals valu- able OFIs; external reviews become more a confirmation of success than an identification of problems. High-performing organizations have made their audit structure more robust. They have built reviews into the governance process so that board members evaluate each other and their performance as a team. They have voluntarily implemented the standards of the Sarbanes- Oxley Act, calling for greater protection against fraudulent diversion of assets, fuller disclosure of actual performance, attestation to the accuracy of published results by board members and senior management, increased auditing, and avoidance of conflict of interest in all board decisions.
Correction The combined power of well-designed work processes, transparency, and audits reduces error. It makes malfeasance more difficult, but a correction program is still essential. Correction is begun by clarifying instructions and improving training. Associates are supported to prevent further problems; they are not criticized or punished unless their actions reflect a violation of values. When an associate’s performance violates values, excellent organiza- tions use a structured, escalating program like the following:
Chapter 2: Creat ing and Sustaining a Transformational Culture 53
1. Verbal warning, discussion of causes and corrections, and retraining as indicated
2. Retraining and a candid discussion about the consequences of failure for the individual as well as the organization
3. Repetition of step 2 with a warning; written record 4. Termination
Managers and leaders at all levels are trained in the program. When the behavior in question is dangerous, threatening, or deliberate, managers can move immediately to step 3. Lying, falsification of records, harassment of oth- ers, and criminal behavior can lead to immediate termination regardless of rank. In excellent HCOs, most corrective actions can be appealed by the associate, exemplifying the value of respect. When the cultural foundations for values are maintained, steps 3 and 4 are rare. Senior leadership should review all cases.
Improve Continuously Continuous improvement is another function that leaders implement to achieve transformational culture. Excellence requires that every process be subject to the formal system of continuous improvement described in chapter 3. The actions of exhibit 2.1—the functions of transformational leadership— are included in this improvement effort. Process effectiveness is measured by associate satisfaction, turnover, safety, and absenteeism, and, indirectly, the unit’s progress toward benchmark on its output performance. (See section titled “Measures” on p. 55) National benchmarks are available for the direct measures. Any shortfall is an OFI to be prioritized and pursued as described in chapter 3. Careful analysis is necessary to identify causes and correct them. It may reveal root causes in work processes or facilities rather than culture, just as analysis of patient care OFIs may identify improvements in the trans- formational culture.
OFIs appearing in individual units are often achieved by reeducating unit leadership. Connecting a challenged leader with a successful peer coach is often useful. Widespread OFIs involving many units usually require chang- ing the behavior of senior leadership. Command-and-control ideology is deeply rooted; changing every leader’s behavior takes several years. Progress should be steadily rewarded. A leader’s failure to achieve realistic improve- ment should lead to warning and, if necessary, termination.
People
As the team outlined in exhibit 1.2 shows, HCO associates include many different specialists with advanced professional training. In addition to physi- cians and nurses with varied specialties, therapists, pharmacists, psychologists,
The Wel l -Managed Healthcare Organizat ion54
microbiologists, and clergy provide care and clinical services. Accountants, lawyers, programmers, statisticians, and other professionals operate logistic and strategic services. Most are supported by technicians with specialized training. All have specialized vocabularies; communication can easily become a Tower of Babel. Transformational culture provides a strong platform for collaboration:
• Empowerment and values make clear everyone’s right to be heard. • Service excellence provides a clear focus for teamwork, commits
management to supporting teams, and empowers individuals to initiate service recovery when things do not operate as expected.
• Evidence-based medicine and management guide not only specific processes but also general conversation. Any statement can be challenged for empirical support. Authority—a core element of transactional management—cannot prevail against evidence, and neither can simple opinion.
• Values, particularly respect, create a cordial and supportive environment. They strongly discourage self-seeking or divisive behavior and unwanted sexual contact.
• Open communications, occasional corrections, and visible protection systems raise associates’ comfort and confidence.
• Negotiated goals are realistic, and the rewards are achievable by collective effort. Success encourages further effort.
Leading the teams is a skill in itself, rarely covered in the education for the HCO’s many professions. Excellent HCOs have recognized that additional training in leadership is essential. They supply leadership training systematically, making sure all team leaders understand the concepts and learn important techniques in simulations. Beginning leaders are assigned to role models in their field and given peer coaches. Intermediate- and senior- level leaders make a deliberate effort to train beginners and support success. Promotions reward leaders who have demonstrated skill in supporting the transformational culture. Promising candidates are provided with coaching, planned learning opportunities, and formal education. By the time they are promoted, they will have shown that they can support and strengthen trans- formational management, guiding real teams to real improvement.
Senior leaders must sustain the transformational culture by action, example, and coaching. They learn by practice, by coaching each other, and by review of published cases.17
Chapter 2: Creat ing and Sustaining a Transformational Culture 55
Measure Relation to Culture Benchmarking Opportunities
Patient care quality and cost
Cultural issues are known risks for patient care; programs for cultural improvement may be central to changing care practices and results.
None. Although the quality and cost measures are routinely benchmarked, the link to culture remains subjective.
Multi-rater leadership surveys
The team leader establishes the culture by action and example. Anonymous surveys of team members, colleagues, and superiors provide evidence of how these are perceived.
None. Although responses can be scored, comparison to other teams is dangerous. Yearly comparison is fruitful. Respondent comments are frequently valuable.
Associate engagement surveys
A positive global rating (e.g., “How satisfied are you with . . . ?”) is an indicator of sup- portive culture.
Specific questions can address specific values (e.g., “Do you feel that you are treated with respect?”).
Specific comments are encouraged and are useful to identify OFIs.
Comparison of similar units within a single HCO is useful.
Comparison of disparate units (e.g., nursing vs. accounting) is dangerous.
Comparison across different HCOs is dangerous because factors other than leadership behavior affect scores.
Patient satisfaction surveys
Strong team cultures support high patient satisfaction.
None. Benchmarking is common, but culture is not the only cause of lower scores. Applies only to clinical teams.
Associate turnover and absenteeism
Culture is a known contributor to both measures.
Opportunities exist within comparable units and at comparable skill levels.
Exit interviews Departing associates often identify cultural OFIs, such as ethical dilemmas and moral distress.
None.
Leadership impressions
Team leaders and rounding leaders can assess what they see and hear.
None.
Note: HCO = healthcare organization; OFI - opportunity for improvement
EXHIBIT 2.7 Measures
Commonly Used
for Tracking
Transformational
Culture
The Wel l -Managed Healthcare Organizat ion56
Measures
Culture is assessed by the bundle of direct and indirect measures listed in exhibit 2.7. Benchmarking, discussed in the third column, is challenging. Even if it is clear that team A has better results than team B, it is often not clear that the causes are under team B’s control. Moreover, changing results can have multiple causes both related and unrelated to the culture. Sound information processing removes measurement error and identifies random variation for the manager, although identifying OFIs still requires careful judgment. We recommend two strategies:
1. Review of patterns and changes across the full set of measures. Comparison to prior periods may be more valid than comparison to other teams. Any decline that exceeds random variation can be considered an OFI. Conversation with similar teams can reveal potential best practices, even if the performance measures cannot be directly compared. Individual comments and managers’ observations are often useful as hypotheses about culture.
2. Routine consideration of culture as a contributing cause to OFIs in product quality or cost. Considering cultural issues is a wise component in seeking root causes of any OFIs. Discussion of the OFI may lead to improvement without a full understanding of exactly why behavior changed.
Managerial Leadership
At Sharp HealthCare and other excellent HCOs, leaders are expected not only to understand the culture but to demonstrate skill in sustaining a trans- formational environment. They are carefully trained and coached so that they can empower associates, respond to arising OFIs, and systematically support both a transformational culture and continuous improvement. Managers and leaders emphasize a healthy work environment in all senses of the expression; they are good listeners; they empower people to take chances, be innovative, and fail as well as succeed. They reinforce training for excellent care. Their efforts are mutually supportive; encouraging one another and acting col- lectively on tougher OFIs creates and sustains the transformational culture.
Team leaders are selected by interview and observation of their work as team members, avoiding candidates who do not appear to understand and enjoy the culture. Once selected, they are trained to consider associates’ perceptions and feedback and to identify recurring situations where cultural issues may be at risk. After training, team leaders are observed in committees and on rounds, evaluated by their team’s goal achievement and the exhibit 2.7 measures, and coached to build skill. Those who excel will be candidates for promotion.
Chapter 2: Creat ing and Sustaining a Transformational Culture 57
Many professionals enter HCO leadership at middle and even senior levels, from graduate school or clinical training. Excellent HCOs train them as well, emphasizing example and coaching. Following are some representa- tive situations where the correct professional response enhances the transfor- mational culture, with discussion of what leaders in that culture might do. The leader encountering the situation learns to think quickly:
1. What are the OFIs here? Are there immediate consequences I should correct?
2. For each OFI, is it important enough to pursue with a PIT? (i.e., How does the OFI affect goal achievement? How serious is it? How likely is it to recur or get worse?)
3. Have I supported the associates involved, both to complete their jobs and to speak promptly about other work-related concerns?
Explaining the Culture Widespread acceptance and support of the transformational culture is a pow- erful factor in its success. To maintain it, senior leaders repeatedly explain the essentials, how and why empowerment and service excellence work, and why the HCO is committed to them. Questions are expected. Many listeners will have some doubts; they will check with others to validate what they heard. Conviction and sincerity are important. They are enhanced by putting the thoughts in your own words and remembering some examples from real life. Below are examples of the kinds of statements leaders make.
Situation: You are interviewing a potential new hire.
First, ask yourself . . .
What are the OFIs here? The central OFI is to identify a new associate who will support the HCO’s com-
mitment both to excellence and to a transformational culture.
For each OFI, is it important enough to pursue with a PIT? The statements listed under Potential Leaders Statements are best prac-
tice—well tested in many HCOs. A PIT to address one of them will have a hard time finding improvements, because so much study has already been done.
Have I supported the associates involved, both to complete their jobs and to speak promptly about other work-related concerns? A first step is to explain what we do and something about how we do it. The
explanation should be supported with examples, coaching, and reinforcement in the initial assignments. The following suggested text is common, including the sharp discouragement, “If you are not comfortable, please withdraw,” and a zero-tolerance statement about integrity.
The Wel l -Managed Healthcare Organizat ion58
Situation: You are presenting to a group of associates who have been recruited as candidates for team leadership.
First, ask yourself . . .
What are the OFIs here? The central OFI is to train every new leader in transformational leadership. The training will be ongoing—initial description, examples, coaching, counseling, and if necessary correction on the job.
For each OFI, is it important enough to pursue with a PIT? A PIT is unlikely to be successful.
Have I supported the associates involved, both to complete their jobs and to speak promptly about other work-related concerns? The HCO will assess associate reaction repeatedly, using issues arising, coach- ing, and the new leaders’ success measured by their associates’ satisfaction and performance.
Then, consider these potential leadership statements . . .
• “We are mission driven, and our mission is [quote it verbatim].” • “You will see and hear our mission every day, because it is important
everywhere.” • “Leaders at all levels are here to help you achieve the mission. If you have a
suggestion or an issue, ask about it.” • “If you are not comfortable with our mission, you won’t like working here. We
suggest that you withdraw your application.” • “Our values are essential to achieve our mission. By following them, we cre-
ate a workplace where everybody—patients, associates, and guests—is com- fortable, and of course safe. You will see our values many times. Let me run through them with a brief description.” – “Excellence: We think every patient should get what’s best for them. That’s sometimes complicated and hard to do, but it remains our goal. We mea- sure how well we do it and work hard to get better.”
– “Compassion: Our patients and their families are often stressed. Part of excellence is making them as comfortable as we can and making clear our desire to alleviate their suffering.”
– “Community: We all have rights as individuals—not to be touched or asked personal questions or be pressured to do something wrong. The HCO pro- tects those rights, so you can be comfortable. Please speak out any time you have concerns about your rights.”
– “Integrity: Let me be very clear: lying, theft, threats, inappropriate sexual conduct, or violence are not acceptable at our HCO. We have zero tolerance for that type of behavior.”
– “Respect: We uphold respect and dignity for all persons, genders, nationali- ties, and ethnicities, and we do not tolerate discrimination or hate in any of its forms.”
• “Together, our commitment to mission and values makes it possible to pur- sue our vision, [quote the HCO’s vision]. We hope that you will join us in that commitment.”
Chapter 2: Creat ing and Sustaining a Transformational Culture 59
Practice Applications
These questions are about applying the chapter content. It’s often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. What is the transformational leadership response to the following comments? .a From a patient: “Nobody is answering my call light.” .b From a physician: “The patient care team X isn’t as helpful as they
should be.” .c “[Patient]’s husband walks with a cane. She says he can’t visit her
because it’s so far from the parking lot.” .d From a classmate at an HCO in another city: “I’m looking for best
practices in inventory protection. What can you tell me?” 2. You’re rounding, and associates say the following things. What is the
best response to support the mission and the transformational culture? Your response should include what the leader should say, and at least the first round of any next steps that the leader should take. .a “So-and-so hit on me.” .b “We need more staff!” .c “So-and-so was late today and sick yesterday. Third time this
month!” .d “I disagree with the orders on this patient.” .e “Dr. So-and-so never washes his hands!”
3. A governing board member suggests that the board request an audit of the HCO’s record on disrespectful and discriminatory behavior toward associates, especially minority groups. “Given all the attention these issues have had recently, I want to be sure our HCO is living up to its values,” she says. The board agrees, and the chair asks senior leadership to provide a plan for the audit at the next board meeting. What should the major elements of the plan be?
Then, consider these potential leadership statements . . .
• “You’ve been successful working here. You know our culture, and you have learned some of how we implement it. You are comfortable with it, or you wouldn’t be here.”
• “Leadership starts by continually reinforcing our commitment to a culture that listens to everybody, understands their needs, and meets them to the extent possible.”
• “As you go through your leadership training, keep in mind that we achieve excellence by listening, not ordering. Every day, every associate should be able to say, ‘My leaders are great. They help me do my job better.’”
The Wel l -Managed Healthcare Organizat ion60
4. Discuss the following statements. Does an HCO where these statements are true gain a competitive advantage? Why or why not? .a Managers do not give orders. .b Managers do not make decisions. .c Managers spend a lot of time listening. .d Imagination is an important leadership skill. .e “We’ve always done it this way. Changing won’t accomplish
anything.” 5. Suppose a manager colleague at your HCO says, “I don’t think our
culture is where it should be.” Conversely, another leader says, “I disagree. I think our culture is fine, and we spend too much money on training and rounding.” What evidence would you review to validate or clarify their concerns? How would you reach a consensus on defining “where our culture should be”? On “too much money,” or, better yet, on “the right amount of money”?
Notes
1. Vogus, T. J., and D. Iacobucci. 2016. “Creating Highly Reliable Health Care: How Reliability-Enhancing Work Practices Affect Patient Safety in Hospitals.” ILR Review 69 (4): 911–38.
2. Ibid. See also Sutcliffe, K. M., L. Paine, and P. J. Pronovost. 2017. “Re-examining High Reliability: Actively Organizing for Safety.” British Medical Journal of Quality and Safety 26 (3): 248–51.
3. Batalden, P. B., E. C. Nelson, J. J. Mohr, M. M. Godfrey, T. P. Huber, L. Kosnik, and K. Ashling. 2003. “Microsystems in Health Care: Part 5. How Leaders Are Leading.” Joint Commission Journal of Quality and Safety 29 (6): 297–308.
4. Graban, M. 2011. Lean Hospitals: Improving Quality, Patient Safety, and Employee Engagement, 2nd ed. New York: Productivity Press. See also Toussaint, J. S. 2015. Management on the Mend: The Healthcare Executive Guide to System Transforma- tion. Appleton, WI: ThedaCare Center for Healthcare Value. See also Shortell, S. M., J. C. Blodgett, T. G. Rundall, and P. Kralovic. 2018. “Use of Lean and Related Transformational Performance Improvement Systems in Hospitals in the United States: Results from a National Survey.” Joint Commission Journal on Quality and Patient Safety, in press.
5. American Nurses Credentialing Center. 2018. “Announcing a New Model for ANCC’s Magnet Recognition Program.” Accessed July 13. www.nursingworld .org/organizational-programs/magnet/magnet-model/. See also Glasgow, J. M., J. R. Scott-Caziewell, and P. J. Kaboli. 2017. “Guiding Inpatient Quality Improve- ment: A Systematic Review of Lean and Six Sigma.” Joint Commission Journal of Quality and Patient Safety 36 (12): 533–40. doi:10.1016/S1553-7250(10)36081-8. See also van Leijen-Zeelenberg, J. E., A. M. J. Elissen, K. Grube, et al. 2016. “The Impact of Redesigning Care Processes on Quality of Care: A Systematic Review.” BMC Health Services Research 16 (1): 19. doi:10.1186/s12913-016-1266-0. See also Mazzocato, P., C. Savage, M. Brommels, H. Aronsson, and J. Thor. 2010.
Chapter 2: Creat ing and Sustaining a Transformational Culture 61
“Lean Thinking in Healthcare: A Realist Review of the Literature.” Quality and Safety in Health Care 19 (5): 376–82.
6. Schaefer, C. 2015. “Baldrige Fellow Engages Employees via a ‘Galactic Com- munication Strategy.’” Blogrige: The Official Baldrige Blog. Published June 9. https://www.nist.gov/blogs/blogrige/baldrige-fellow -engages-employees - galactic -communication-strategy.
7. Gerhart, B., S. L. Rynes, and I. S. Fulmer. 2009. “Pay and Performance: Individu- als, Groups, and Executives.” Academy of Management Annals 3 (1): 251.
8. Glasgow et al. 2017. 9. Studer, Q. 2007. Results That Last: Hardwiring Behaviors That Will Take Your
Company to the Top. Hoboken, NJ: J. Wiley & Sons Inc. 10. Gerhard, Rynes, and Fulmer 2009. 11. Studer 2007. 12. Mercy Health System. 2007. “Mercy Health System: Providing Exception
Health Care Services Resulting in Health in the Broadest Sense.” Malcolm Bal- drige National Quality Award, National Institute of Standards and Technology. Accessed July 31, 2018. https://www.nist.gov/sites/default/files/documents /2017/10/11/2007_Mercy_Application_Summary.pdf.
13. Charleston Area Medical Center. 2015. “2015 Malcolm Baldrige National Qual- ity Award Application.” Accessed September 6. www.nist.gov/sites/default/ files/documents/2017/10/11/CAMC%20Health%20System%20Application%20 Summary.pdf.
14. Sharp HealthCare. 2007. “Sharp HealthCare: The Best Place to Work, Practice Medicine, and Receive Care.” Malcolm Baldrige National Quality Award, National Institute of Standards and Technology. Accessed July 31, 2018. www.nist.gov/ sites/default/files/documents/2017/10/11/2007_Sharp_Application_Summary .pdf.
15. Ibid. 16. Mello, M. M., R. C. Boothman, T. McDonald, J. Driver, A. Lembitz, D. Bouw-
meester, B. Dunlap, and T. Gallagher. 2014. “Communication-and-Resolution Programs: The Challenges and Lessons Learned from Six Early Adopters.” Health Affairs 33 (1): 20–29. doi:https://dx.doi.org/10.1377/hlthaff.2013.0828.
17. White, K. R., and J. S. Lindsey. 2014. Take Charge of Your Healthcare Manage- ment Career: 50 Lessons That Drive Success. Chicago: Health Administration Press. See also Kaissi, A. 2018. Intangibles: The Unexpected Traits of High-Performing Healthcare Leaders. Chicago: Health Administration Press. See also National Insti- tute of Standards and Quality. 2017. “Baldrige Performance Excellence Program.” Accessed March 1. www.nist.gov/baldrige/.
CHAPTER
63
CRITICAL ACTIONS
3 BUILDING CONTINUOUS IMPROVEMENT
1. Maintain contact with all stakeholder groups:
• Conduct surveys, listen, and hold formal meetings to ensure a complete, timely flow of information from external and internal stakeholders. Integrate collective stakeholder needs into a coherent strategy.
2. Measure and improve performance:
• Maintain a reporting system of performance measures, goals, and benchmarks. Use widespread information access to identify opportunities for improvement, support process improvement teams, and negotiate and achieve improvement goals.
3. Create and sustain a learning organization:
• Support rigorous analysis of opportunities for improvement and carefully tested improvements. Provide each associate with training, coaching, and personal development opportunities. Arrange easy access to protocols, procedures, statistics, and policies. Use the epidemiologic planning model to identify emerging needs, including service expansion, recruitment, and new facilities.
4. Support annual goal-setting negotiations:
• Establish realistic improvement goals for every team, using the transformational culture, forecasts, and improved work processes. Integrate each team’s plan into a long-term strategy that will meet trends in stakeholder needs.
5. Resolve issues in a timely manner:
• Use rounds, data, and transformational culture to identify unexpected developments and meet them with extra resources as needed.
The Wel l -Managed Healthcare Organizat ion64
Purpose
The purpose of continuous improvement in HCOs is to
identify and implement processes that will move patient care to excellence (care that is safe, effective, patient-centered, timely, efficient, and equitable)
and
support ongoing, long-term market success, measured by growth in patient and associate loyalty and satisfactory financial performance.
Continuous improvement has three core concepts: (1) that improvement is measured by market success, (2) that any work process of any team from exhibit 1.2 can be improved, and (3) that improvement requires thorough, systematic analysis. The analysis always seeks to do the following:
• Identify best practice, the work processes consistently generating benchmark results.
• Find and correct root causes, the most basic or fundamental weaknesses contributing to performance below benchmark.
• Address the concerns of every associate, implementing transformational culture.
• Ensure that change is properly and fully implemented, achieving the anticipated movement toward benchmark.
• Measure the impact of improvement on quality, patient satisfaction, worker satisfaction, and cost.
Continuous improvement—the set of activities that implements the purpose—is a large resource commitment for successful HCOs. It identifies and plans changes essential to excellence. It is objectively measured. It takes a long-term perspective. It is built into the annual calendar and associate compensation. It addresses not only patient care, but all stakeholder rela- tions, including marketing, strategy, and associate development. Continuous improvement and transformational culture are the central contribution and focus of senior leadership.
Functions
The seven functions shown in exhibit 3.1 provide the operational guidelines that support continuous improvement. Beginning with a careful review of stakeholder needs, annual completion of the functions creates carefully forecast, quantitative goals for every team. Consistent with transformational culture, the goals are negotiated annually with each team. They will incorporate improved
Chapter 3: Bui lding Continuous Improvement 65
EXHIBIT 3.1 Functions of Continuous Improvement
Function Intent Implementation Examples
Monitor stake- holder needs and identify strategic goals
Identify changes in the needs/desires of internal and external stakeholders
Establish and evalu- ate alternative HCO responses
Forecast community population and health needs
Understand stakeholder perspectives
Promote HCO opportuni- ties to appropriate stakeholders
Board members selected for commu- nity service and knowledge
Services revised to meet community needs
HCO leaders participate in community services for education, housing, etc.
Adequate numbers of associates recruited and retained
Provide evidence- based information
Fulfill every team’s infor- mation needs, includ- ing work processes, goals, and current performance
Provide data warehouse for processes and records
Report valid, reliable, timely performance measures
Access web for literature and technical reports
Monthly performance reports of unit goals and achievement, including strategic scorecard
PITs supported with history and best practice
Communications support transforma- tional culture
Provide short- and long-term forecasts
Provide current informa- tion on all external elements affecting operations
Forecast patient demand, associate and facility availability, prices, and revenue
Realistic, quantified plans for next year’s operations
Facilities appropriately sized, well planned, and responsive to stake- holder needs
Plan coordi- nated goals, logistics, and support
Negotiate annual improve- ment goals
Meet every team’s opera- tional needs
Support continuous improvement
Identify and integrate financial goals
Coordinate individual team goals
Monitor goal achievement
Invest in renewal and expansion
Every team has agreed to specific per- formance goals for the coming year
Finances are solid; capital funding is available at competitive rates
90-day plans ensure reaching agreed- upon goals
Design corporate structure
Support prompt, pro- ductive internal communication
Ensure long-term market success
Coordinate related patient care and clini- cal support teams
Evaluate scope of ser- vices and merger and partnership opportunities
Reporting structures facilitate quick, effective communication
Corporate structures, joint ventures, and strategic partnerships support population health and primary, acute, and post-acute care
Support HCO- wide process analysis
Strategic ranking, rigor- ous analysis, and successful implementa- tion of improved work processes
Select and coordinate PITs through the PIC
Analyze work processes and find and imple- ment best practice via PITs
PIC identifies most valuable OFIs and coordinates multiple PITs
PITs finish on time PIT reports are successfully imple-
mented with documented perfor- mance change
Improve continuously
Evaluate and improve the functions listed above
Annual review of opera- tional leadership, identification of OFIs, and development of improvements
Activities supporting continuous improvement are themselves reviewed for OFIs and best practices
Note: HCO = healthcare organization; PIC = performance improvement council; PIT = process
improvement team; OFI = opportunity for improvement.
The Wel l -Managed Healthcare Organizat ion66
performance in specific measures when, and only when, the improvement is supported by tested changes that make achievement a near certainty. Although many elements of the functions are assigned to specific teams, senior leadership and governance are responsible for monitoring the continuous improvement functions as a whole, moving the HCO forward to greater excellence.
Monitor Stakeholder Needs and Identify Responsive Goals Organizations succeed only because they meet stakeholder needs. If any stake- holder group lessens its support, the organization is weakened. If a group withdraws support, the organization fails. HCOs are no exception. Leaders must identify changes in stakeholder needs and adapt the HCO to them, but successful change often requires multiyear planning and complex responses. Excellence requires early detection of need and time for consensus building.
More than other service industries, the community HCO is expected to keep pace with changes in the environment rather than to be replaced by a new model. While Americans are comfortable changing from Walmart to Amazon, we expect our community hospital to remain in place but keep up-to-date. This emphasis on long-term survival is promoted by the not-for- profit corporate structure, which is more difficult to dismantle than stock corporations or partnerships, and by tax exemptions that give not-for-profit HCOs a competitive advantage. HCOs’ actual life spans reflect this. Many of America’s hospitals have histories extending a century or more, much longer than most public corporations.
Identifying and rank ordering the opportunities for improvement (OFIs) that arise from external change require an ongoing system of listen- ing to and negotiating with all stakeholders, as shown in exhibit 3.2. Senior leadership and governance devote time to hearing, understanding, and evaluating alternative possible futures. They dialogue with stakeholders and collaborate on solutions. Members of the governing board (chapter 4) are selected, in part, to understand the needs of many stakeholder constituencies. They and senior leaders are expected to keep current on state and national developments that might affect the HCO. HCO leaders are encouraged to participate in community activities beyond healthcare, broadening their understanding of stakeholder needs. Leadership meets often with commu- nity groups and leaders of other services. Marketing surveys and customer- listening activities cover a broad spectrum of current and potential customers and target specific groups with unique needs. Much time is spent exploring what stakeholders like and do not like, how serious their concerns are, and which alternatives are attractive (chapter 14). This knowledge allows pro- cess improvement teams (PITs) and planning teams to formulate proposals that meet a broader spectrum of stakeholder needs. Extensive listening and dialogue make solutions stronger because more ideas have been considered and stakeholder concerns addressed. The inputs often make the difference between a proposal being quickly acclaimed and adopted and a lengthy,
Chapter 3: Bui lding Continuous Improvement 67
contentious negotiation that leaves bruised feelings. Listening and dialogue sustain the transformational culture. They are ongoing; an overall review starts every annual planning cycle (chapter 15).
The program that helps Sharp HealthCare relate to the San Diego community is one example. Sharp, a Baldrige Award recipient, claims its “involvement in San Diego’s well-being is comprehensive”:
• When key community health issues or new health threats are identified, Sharp collaborates with appropriate public officials to achieve a safe, evidence-based, patient-centered, timely, efficient, and equitable resolution.
• Sharp’s leaders serve as board members on many community organizations.
• Sharp’s comprehensive environmental, health, and safety management program—including emergency and disaster management—ensures a safe and secure environment for customers and partners
• Staff and leaders present a strong showing of support and participation each year in community fundraisers.
• Sharp hosts many free community preventive health offerings, such as flu shots, lectures, and screenings.
Governing Board
Perspectives
Surveys and Focus Groups
Customer Feedback
Associate Feedback
Leader Participation
Insurance and Regulatory Actions
Technology and Supplier Information
Competitor Activity
External Best Practice and Reports
Analysis, Integration,
andSynthesis
Improved Proposals from PITs and planning teams Better response to customer stakeholders
Less contention, greater loyalty
C om
pr eh
en si
ve
L is
te ni
ng
A ct
iv iti
es
Associate feedback
Analysis, Integration,
andSynthesis
Improved proposals from PITs and planning teams. Better response to customer stakeholders.
Less contention, greater loyalty.
C om
pr eh
en si
ve
lis te
ni ng
ac
tiv iti
es
An al
ys is
b y
se ni
or le
ad er
s,
bo ar
d, P
IT s
B et
te r
pr op
os al
s,
gr ea
te r
sa tis
fa ct
io n
Analysis, integration,
and synthesis
Governing board
Customer feedback
Leader participation
External best practice and reports
Competitor activity
Insurance and regulatory actions
Technology and supplier information
Surveys and focus groups
EXHIBIT 3.2 Boundary-
Spanning
Activities of
Healthcare
Organizations
Note: PIT = process improvement team.
The Wel l -Managed Healthcare Organizat ion68
• Sharp offers its Weight Management Health Education program, providing health maintenance to employers and employees, and it provides free, weekly programs to the community.
• Managers are encouraged to donate a minimum of 22,000 collective hours annually to community service.1
Provide Evidence-Based Information Evidence-based management is factual and quantitative. Each team has an operational scorecard showing its current performance and improvement goals on critical measures of resources and performance. It accesses the local intranet for definitions, forecasts, policies, work process descriptions, and relevant communications, minutes of important discussions, copies of rules and decisions, and historic records. Work teams and PITs use the web to obtain evidence-based clinical guidelines as, for example, Institute for Clinical Systems Improvement (www.icsi.org), hospital-specific quality and Hospital Consumer Assessment of Healthcare Providers and System data (HCAHPS is a customer satisfaction survey system required for Medicare participation. The survey is usually implemented by national contractors, who manage sampling, calculation, statistical analysis, and benchmarking),2 Medicare participation standards,3 and other information. Web-oriented collaboratives such as the Institute for Healthcare Improvement (www.ihi.org) and Hospitals in Pursuit of Excellence (www.hpoe.org) help teams identify and apply best practice.
Most of this information is now electronic, creating a data warehouse on the HCO’s intranet or the web. Convenient, rapid access allows indi- viduals and teams to access it frequently. With cell phones and laptops, work processes can be reviewed at the point of use. Teams can analyze historic data and review earlier decisions. Many leading HCOs have documented substantial benefit, but it is likely that the best HCOs have invested more and gained more.4
Operational Scorecards Exhibit 3.3 outlines the operational scorecard, sometimes called a balanced scorecard, that guides each HCO team. The actual measures differ by unit,
but an effort is made to have multiple reliable and valid measures for each input dimension (customer demand, cost, human resources) and each output dimension (customer satisfaction, quality, and pro- ductivity). The result is usually 18 to 24 specific measures. Every team negotiates annual goals for each of its measures, seeking a realistic plan for improvement. Actual performance is reported monthly, or as soon as reliable estimates can be pre- pared. The report is easily accessed by every team
Operational scorecard (also known as balanced scorecard) A monthly quantitative report of activity and goals for a single team or work unit. Mea- sures are specific to each team’s needs. There is at least one reliable measure for each input dimension (e.g., demand, associ- ates, cost) and each output dimension (e.g., quality, customer satisfaction, productivity). Each measure has a goal.
Chapter 3: Bui lding Continuous Improvement 69
member; good team leaders celebrate achievement and point out potential difficulties.
Excellent HCOs succeed because they negotiate realistic improve- ments for selected unit scorecard dimensions. The scorecard’s multiple dimensions are essential to ensure that goals reflect a comprehensive array of stakeholder needs. The goals must be set so that progress in one dimension will not be at the expense of another. Improvement goals will usually copy best practice from elsewhere; they are carefully pretested by PITs. Not every measure will be improved; the strategy is to identify and achieve solid gains each year. Over 90 percent of the goals will be achieved. While some HCOs add more ambitious and higher-risk “stretch goals,” the benefit of stretch goals is not proven.
Every goal, whether an improvement or not, must meet four conditions:
1. Consistent with mission. Goals are not achieved at the expense of other important stakeholder needs; the goals are collectively as well as individually achievable.
2. Benchmarked or proven. The goal in question has been reached and documented in an appropriately comparable HCO.
3. Valid. Goal achievement is not impaired by factors outside the team’s control.
4. Fully supported. All team members understand their contribution to success. The necessary work processes, supplies, equipment, and facilities are available.
Output Measures Input Measures
Quality of service Clinical outcomes Procedual quality scores Structural quality
Demand Requests for service Market share Appropriateness of demand Unmet demand
Customer satisfaction Patient/customer satisfaction Internal customer satisfaction
Associate measures Associate hours worked Associate satisfaction Associate shortages; absenteeism/
lateness Training hours completed
Productivity Counts of service rendered Productivity (cost/unit of service)
Resources consumed and cost Counts of associate hours Quantities and costs of supplies Resource reliability (delays and
quality failures)
EXHIBIT 3.3 Dimensions
of Operational
Scorecards
and Common
Measures
The Wel l -Managed Healthcare Organizat ion70
Many goals are the result of PITs that have designed and tested improved work processes. Transformational management and open discus- sion are essential to the goal setting, ensuring that most potential problems are resolved and that associates believe that the goals can be both individually and collectively met. The inevitable result is that some desirable goals must be forgone. The HCO will not push one goal at the expense of another, though it may limit improvement in one dimension to ensure progress in another. The goal set is a realistic improvement, not a leap to excellence.
The operational scorecard is a critical component of excellence. The goal-setting conversations, the goals, and the performance reporting clarify and extend each associate’s contract: “I know why I’m here, what I’m sup- posed to do, and how well I am doing.” Transformational management adds three important dimensions for the associate: “I know I can rely on my team- mates, I know I can get help, and I know my efforts will be rewarded.” The combination is a powerful engine for excellence, but also for associate satis- faction, enthusiasm, and achievement. The exhibit 3.3 template is expanded with specific operational measures in each of the following chapters.
Strategic Scorecards Success for the whole is more than the sum of success of individual teams. Strategic scorecards measure the enterprise as a whole or in large compo- nents, such as service lines or joint venture corporations. As shown in exhibit
3.4, the dimensions include aggregates from opera- tional scorecards and additional measures to reflect the needs of major stakeholder groups. About 30 measures are used, grouped in major dimensions— customers, associates and suppliers, operations, and finance. The strategic scorecard documents overall HCO performance, assuring the governing board of achievement and documenting any area of short- fall. In reality, shortfall is rare; senior leadership has negotiated realistic goals and committed to achiev- ing them. The measures and goals for the strategic
scorecard are approved annually by the governing board. Critical aggregates, such as preventable mortality, overall patient satisfaction, and profitability, are permanent. Other measures focus on an identified objective or arising concern and are replaced after immediate needs are met. Most of the strategic goals are aggregates of unit goals.
Exhibit 3.5 shows a recent strategic scorecard for Saint Luke’s of Kan- sas City, an early Baldrige recipient. The color coding is important; it allows almost instant reading. Blue and green represent satisfactory performance, yellow questionable performance, and red failure. Any board member can ask senior leadership about the scorecard. The expectation is that yellow will be moved to green in the next month, and that red will never occur.
Strategic scorecard Measures of overall enterprise performance grouped in major dimensions—operations (quality and cost), customers, associates and suppliers, and finance. The strategic scorecard provides quantitative mission achievement for the governing board, senior leadership, major subsidiaries, and service lines.
Chapter 3: Bui lding Continuous Improvement 71
The operational and strategic scorecards are an essential component of excellence. They allow team members to understand goals and achieve- ments. They provide leadership at all levels with a quantitative description of the operation, focused on the mission and on tracking stakeholder needs. They give governance a clearer picture of operations, better insights into improvement, and a foundation for annual plans. They drive financial results and place them in a broader context. The Baldrige recipients have shown that these theoretical advantages translate to real ones; their strategic measures, including finance, are routinely top quartile, and often top decile.5
Ensuring Accuracy and Protecting Information Accuracy of information is critical. Modern information management uses three approaches to improve the accuracy of information (they are discussed more fully in chapter 10):
1. Screens and information input design. Well-designed screens (and paper forms if needed) discourage errors and encourage completeness. Electronic entry includes edit and audit protections that increase
Dimension Concepts Examples
Operations Service outcomes Safety Service Availability Efficiency
Service counts Mortality, complications,
readmissions Accidents to patients, visitors,
and staff Service delays Cost per unit of service
Customer and market performance
Customer satisfaction Patient experience Customer loyalty Market share
HCAHPS Returning patients, new
patients Growth in service
Associate contribution
Associate satisfaction Workforce stability Individual development plan
Associate satisfaction surveys Turnover, absenteeism Time to fill vacancies Training completion Leadership replacement plan
summary
Financial performance
Cost Revenue and profitability Funds for expansion
Total costs and costs per unit Sector profitability Cash and credit management Charitable donations
Note: HCAHPS = Hospital Consumer Assessment of Healthcare Providers and Systems.
EXHIBIT 3.4 Strategic
Scorecard
Measures
The Wel l -Managed Healthcare Organizat ion72
EXHIBIT 3.5 Saint Luke’s Hospital Strategic Scorecard
Source: Reprinted with permission from Saint Luke’s Hospital.
Chapter 3: Bui lding Continuous Improvement 73
accuracy and completeness. Procedures can follow an outline or template that helps make them complete and easier to comprehend. Retrieval of previously entered information both speeds entry and reduces errors. Tags allow cross-referencing and retrieval.
2. Standardization of performance measures. Performance measures have become increasingly complex. Ideally, users should be assured that (a) each measure reflects the process it purports to measure (valid), (b) variation from prior values, goals, or benchmarks is meaningful (reliable), and (c) the cause of the variation is reasonably under the users’ control.
High-performing HCOs rely on a measurement review committee to assist in developing and testing measures. The committee emphasizes nationally defined measures as a priority because these definitions are rigorously developed and tested and because national standardization is essential for benchmarking. When unique measures must be created or national measures adjusted for local conditions, the committee also provides expert guidance.
Measures of stakeholder satisfaction and needs are obtained by population surveys. The design and administration of surveys are technically demanding, and commercial companies provide standardized packages for various purposes. Such packages provide professional design, consistent application, automatic benchmarking, and analysis of statistical sensitivity.
3. Audits. Audits improve reliability of information both by detecting error and discouraging malfeasance (chapter 2). High-performing HCOs have extended their internal audit activity to all dimensions of the operational and strategic scorecards.
The goal of these efforts is both to ensure reliability and to promote con- fidence, so that the measures are accepted by the participants in PITs and planning sessions.
Some HCOs employ an open-access strategy, in which much infor- mation becomes public, or nearly so. However, personal information about patients and associates must be protected by law, chiefly the Health Insurance Portability and Accountability Act (HIPAA). A small set of strategic data, largely relating to work that is in process, must be protected to allow orderly decision-making.
Senior leadership is responsible for protecting against misuse of infor- mation. Protection is achieved by password control and by organizing users into groups with access limited to specific kinds of information. Protection also requires safeguarding not just the records but also the communications network (chapter 10).
The Wel l -Managed Healthcare Organizat ion74
A Best Practice in Knowledge Management Knowledge—evidence—is at the core of high-performing HCOs and the the- ory of evidence-based management. Poudre Valley Health System (PVHS), a Baldrige Award recipient, explains what is involved in knowledge management:
PVHS’ ability to meet and exceed the expectations of quality care, prompt service, and friendly staff is dependent upon the timely avail- ability of information for the workforce, suppliers, partners, collabora- tors, patients, and the community. To optimize the flow of accurate, real-time information, PVHS has established a secure, user-friendly network that is appropriately accessible to all stakeholders, regardless of geography or time of day. In this network, the central repository [has] associated content-specific functions such as:
• Clinical Information. Electronic health records, Picture Archive and Communication System (PACS), lab results, poison control, [automated pharmaceutical dispensing, and medication reconciliation].
• Physician Information Center . . . Clinical information (see above); subscription-based online resources, . . . and online medical journals.
• Decision Support. “Key Performance Indicator” reports; electronic data interchanges (automatic supply tracking, ordering, and billing with nearly 100 percent of PVHS vendors); Information Center (service utilization, patient demographics, market trends).
• Financial Information. Patient billing, payroll, accounts receivable, revenue cycle management.
• Employee Information Center. Patient census (by unit or outpatient department); bed management (number of patients by unit/facility and admission/discharge projections); time clock; due dates for mandatory annual learning test, tuberculosis testing, performance reviews, time clock entries, pay stub, and benefits; performance reviews; balanced scorecard and quality data; patient satisfaction data; Medline; policies/procedures; forms; calendars; job postings; directories.
• Patient Information Center. GetWell Network, educational materials, gift shop, newborn photo gallery, and health resources, such as a diabetes management tool and a database for identifying potential drug interactions.6
Long- and Short-Term Forecasts Many important elements of HCO activity, such as patient demand and prices, are outside the HCO’s control. Long-term forecasts identify
Chapter 3: Bui lding Continuous Improvement 75
recruitment needs for scarce personnel (see chapter 11). They are essential to planning capital needs and financial performance (chapter 13). They are used to plan five and ten years in the future for new construction, renovation, or closure (chapter 14). They are fundamental to understanding the HCO’s corporate strategy (chapter 15). Short-term forecasts begin the negotiation of next year’s goals for each team. These elements are an essential foundation for evidence-based strategic planning and annual goal negotiations.
Population-Based Long-Range Planning Model All goals and decisions about future operations require forecasts of patient demand. Each service must be the right size. If it is too small, mission achievement is incomplete; if it is too large, resources are wasted. Decisions must be made long before the care is given because it takes time to build facilities and recruit associates. Senior leadership is responsi- ble for preparing forecasts and making them avail- able. The starting point is an epidemiologic planning model that generates a reliable forecast for the number of patients who will require a specific service. Most HCOs purchase access to a sophisticated computer model that combines popula- tion forecasts and usage data from a variety of national sources to identify factors affecting the incidence and prevalence of specific conditions and to forecast demand on a community level. The computer forecasts are only part of what is required. Several elements require human judgment, as shown in exhibit 3.6.
The epidemiologic planning model draws on five major sources of data to produce forecasts of the proper size and staffing for a specific service:
1. Population. Unbiased forecasts of population counts and characteristics (e.g., age, sex, income, race) prepared by the US Census Bureau and the states must be translated to small areas, such as minor civil divisions or postal codes. Most HCOs draw patients from a dozen or more small areas but heavily from only a few. Forecasts must extend five to ten years into the future.
2. Disease risk. Large databases of hospital admissions, specific treatments, drug usage, and other indicators are used to identify the incidence and prevalence of specific medical needs. The planning model forecasts incidence of requests for care for small, homogeneous sets of population characteristics (e.g., age, sex, income, and education).
3. Market share. This is the fraction of the total demand that will seek care at a specific HCO. Patients have choices for most services, such as selecting a local competitor, traveling to a larger HCO, or not seeking care. Market share is forecast subjectively, on the basis of the HCO’s
Epidemiologic planning model A system to forecast specific health needs for the HCO’s service community, based on unbiased population forecasts, multivariate analysis of disease trends, and judgments of planning teams.
The Wel l -Managed Healthcare Organizat ion76
ability to retain or increase its attractiveness to patients. Surveys and historic usage data are used as guides.
4. Staff requirements. Requirements for licensed independent practitioners (LIPs), registered nurses, and other personnel are forecast for each service, using historical and best practice measures of individual associate capacities. Forecasts are compared against intentions of current staff to identify recruitment needs.
5. Facility requirements. Facility requirements are calculated by simulation models or by comparison to best practices. Simulation models use the numbers of patients expected and the length of time they will require service to calculate daily or hourly facility requirements. Some services, such as newborn delivery and emergency cardiac catheterization, cannot be delayed. Allowance must be made to meet the peak—rather than the average—demand, significantly increasing the physical capacity required. Other demand can be deferred, subject to patient willingness to wait, as well as to clinical need.
Question Solution Source Example
What geographic area will use the service?
Specific civil divisions likely to seek care are identified.
How many babies will be born in areas around Anytown, five and ten years from now?
What population characteristics affect inci- dence of care?
Multivariate analysis of all US civil divisions and requests for care identify predictors of incidence.
Birth rates are related to the number of women. They differ by women’s age, race, education level, and income.
How many people will be in the service population?
Detailed population fore- casts are obtained from the US Bureau of Census for each civil division.
Unbiased population fore- casts provide the number of women by age, race, educa- tion level, and income.
How many will seek care?
The multivariate analysis is integrated with the forecast.
In 2025 there will be births; by 2030, there will be .
What fraction will come to our HCO?
Historical data and local community knowledge is used to estimate market share.
Our HCO should expect percent of births, based on history.
How big should our facility be?
Facility size and staffing are determined from patient need and service availability.
Because natural labor is supe- rior to induction or surgery, the facility should be able to serve more than 95 percent of mothers without delay.
Note: HCO = healthcare organization
EXHIBIT 3.6 Elements of the
Epidemiologic
Planning Model
Chapter 3: Bui lding Continuous Improvement 77
The basic estimating equations are as follows:
Each equation requires judgments from the planning committee that address possible community and market share changes, service hours, staffing needs, and the impact of service delays. To sustain the transformational cul- ture, those judgments should be understood and accepted by the associates involved. A planning team representing all the necessary expertise will review the forecasts and make the necessary judgments, usually with alternatives addressing the potential errors.
As an example, suppose an HCO is planning a primary care facil- ity. The planning team must identify the civil divisions to be served. The epidemiologic planning model forecasts the demand by disease group. The committee must identify the disease groups that will be served. The forecast assumes the community will not suddenly change; the committee will review possibilities such as new or departing employers and estimate their impact. It must next estimate market share, considering relevant history and competi- tors. The committee must establish the number of patients each care provider team can treat. If the expected demand is 30 visits per half-day shift and each visit requires 30 minutes, and cleanup allowance means only 90 percent of capacity, or 3.6 hours per shift can be used:
If each visit requires 30 minutes per examining room, and cleanup sometimes delays room readiness, only 90 percent of capacity can be used:
Number of rooms
30 visits per shift
30 minutes per visit{ } = { } × {{ } ÷ { }
÷ { } = 0.9 allowance
240 minutes per room 4.17 rooms
The Wel l -Managed Healthcare Organizat ion78
The planning committee must decide whether to build five rooms, with idle time or room for growth, or four rooms with delays and overtime about one day a week. An OFI to reduce the cleanup allowance should be evaluated, but cutting it in half might be unrealistic. Five rooms will improve customer and care provider satisfaction but will increase project cost. Under the transformational culture, the planning team discusses the issues, as well as its decisions, with the associates who will work in the new clinic. Its decision will be reviewed and possibly revised by senior leadership and governance, so the most useful report will include a recommendation, alternatives, and a summary of issues considered.
The epidemiologic planning model is essential to virtually every ser- vice and is referenced in all the following chapters. The model generates a more reliable estimate because it systematically applies available evidence (e.g., demand-forecasting equations, best practice, customer and associate preferences) and transformational leadership (giving future users a say in the design). The demand for many support services, such as parking and human resources, is driven by the aggregates of clinical services demand forecasts. The forecasts are the starting point for an array of leadership decisions that underlie the HCO’s strategic, or long-term, plan, as well as the performance goals for each team that constitute the annual plan.
Annual Demand Forecasts The first step in negotiating any team’s annual operating goals is a demand forecast. Senior leadership assembles planning teams to review market trends, competitor behavior, and alternative ways to meet the demand. The teams review each unit’s history, together with forecasts from the planning model and possible changes. A final forecast is negotiated with each team. Team par- ticipation is essential for transformational leadership. In addition, it is known that team member insights can improve forecast reliability.
Coordinated Goals, Logistics, and Support: The Annual Planning Calendar Operational and strategic scorecards are the HCO’s foundation for excel- lence. They are not static. They are based on careful forecasts, and they are reviewed annually for realistic improvement opportunities. The annual review requires a planning system that negotiates scorecard goals. The system must identify stakeholder priorities, balance conflicting stakeholder desires, and coordinate care needs with clinical, logistic, and strategic support. The goal negotiation process has three major parts: an annual planning calendar, an internal consulting resource, and a process for conflict resolution.
Excellent HCOs maintain a calendar scheduling the key planning actions of each fiscal year. Adhering to the calendar, supplying the necessary
Chapter 3: Bui lding Continuous Improvement 79
information at each step, is the responsibility of senior leadership. Exhibit 3.7 shows the annual planning process for St. David’s HealthCare (SDH), a 2014 Baldrige recipient. “Partner” is SDH’s system owner, which is an “innovative joint venture” between the not-for-profit St. David’s Foundation and the for-profit Hospital Corporation of America (HCA). Several elements of the exhibit are important:
• Planning is essentially ongoing. The systemwide action plan (SWAP) is submitted to the governing board in November, with time for adjustments based on the board’s initial reaction. The preparation process for the next year starts in January, as the approved plan is implemented.
• The process explicitly addresses execution. The four squares to the left in exhibit 3.7 indicate ongoing implementation of the current plan, interacting with the development of next year’s plan.
• Planning is evidence based, supported by extensive fact-finding. Steps 1, 3, and 5 are evidence gathering; 2 and 4 are sharing and discussion.
• Participation is universal. Note the several standing committees and teams involved, the reference to the SDH leadership system, and the key feedback list, consulted as necessary throughout the cycle.
• The leadership hierarchy is supplemented by a standing committee, the Performance Excellence Executive Committee (PEEC). The PEEC has universal representation and calendars of due dates for specific actions. It uses fact-finding assignments and both standing and ad hoc subcommittees to review and resolve issues in preparation for discussion and decision on actions. The goal is to have each decision based on the best evidence and understood by all associates who will participate in implementation.
The relentlessly forward-looking planning process is a major source of strength. Fact-finding, participation, and consensus building seek, find, and celebrate better performance. The negotiated goals that result are real- istic. The process improvements to support them have been tested, and the unit teams have accepted them. Thus, almost all operational goals in high- performing HCOs are achieved. There is little to fix because the planning activities anticipate the problems and prevent them.
Design Corporate Structure In a transformational culture supporting service excellence, the corporate structure functions as a communication network to monitor goal achieve- ment, meet unexpected needs, negotiate future goals, and support longer- range activities such as leadership development and strategic planning.
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Creating the Leadership Hierarchy A key question is, “Where do I turn for support?”, and its answer is deter- mined by the leadership hierarchy. Under transformational culture, every
associate and every leader need realistic answers. Important requests are likely to start with “How do we . . . ?” or “Why . . . ?” The responder should be intimately familiar with the questioner’s activities and contribution.
The interprofessional care teams and clinical support teams are organized around clinical special-
ties, or service lines. The HCO’s logistic, knowledge, human resources, facili- ties, and financial teams are organized into divisions around their professional
Leadership hierarchy Reporting and communication system that links each associate and each operating unit to the governing board, usually by grouping similar centers together under coordinating leadership.
Key Feedback • Patients/
Community • Physicians • Employees • Payers and
Employers • Suppliers • External Experts • BOG and BOTs • Partners • Perf. Reviews • Phys. Gov. • Committees • Baldrige Feedback
Nov-Dec
9. Consolidate and Gain Approval of Budget and
Supporting Plan
10. Modify SWAP, as Necessary
CEO, FT, PT Partner
SDH Leadership System (Figure P.2-3)
Jan-Apr
1. Gather and Assess Stakeholder Feedback; Survey as Appropriate
Sr Leaders, PEEC, PT, CFET
Ensure System
Execution & Alignment
Ensure Facility
Execution
Establish Expectations
Establish Direction
Sept-Oct
7. Refresh Hospital and Support Service Plans
based on SWAP
8. Prioritize and Submit Budget Plans
Sr Leaders, Ft, PT
May-Aug
2. Conduct Gov. Retreat
3. Complete Env. Assessment
4. System-Level Planning Retreat
5. Eval New Strat. Opportunities
6. Approve and Deploy SWAP
Gov Retreat Attendees, Sr Leaders, PT
EXHIBIT 3.7 St. David’s
HealthCare
Annual Planning
Process
Source: St. David’s HealthCare (2014).7
Note: CFET = customer focus and engagement team; FT = financial team; PEEC = performance excellence executive committee; PT = planning team; SWAP = systemwide action plan.
Chapter 3: Bui lding Continuous Improvement 81
skills. The network that results is called a leadership hierarchy, and it replaces the transactional “organization chart” or “table of organization.” Senior leaders and governance must implement the leadership hierarchy and revise it as local conditions change. A typical HCO hierarchy is shown in exhibit 3.8.
Implementing Leadership Hierarchies Leaders at all levels are accountable for the following:
1. Listen continuously to the units, individual associates, and patients in their assigned area.
2. Resolve all issues that threaten goal achievement and achieve agreed- upon goals, either by direct action or by collaborating with other units.
Leadership Level Common Names Focus
Governance Governing board Board of trustees
Mission definition Overall achievement Customer stakeholder
relations Strategic decisions
Senior leadership
Senior leaders Corporate leaders
Strategic analysis Corporate structures Annual goal negotiation Goal achievement Process analysis and
improvement Leadership development
Intermediate leadership
Division directors Service chiefs Service line administrators
Annual goal negotiation Goal achievement Process analysis and
improvement Leadership development
Team leadership
Team leaders Nurse managers Department directors
Annual goal negotiation Goal achievement Process analysis and
improvement Leadership development
Associate Employees, LIPs, partners, volunteers
Goal achievement Process analysis and
improvement Personal development
Note: LIP = licensed independent practitioner.
EXHIBIT 3.8 Leadership
Hierarchy and
Communications
Network for
Multiteam
Healthcare
Organizations
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3. Initiate requests for assistance from other areas and respond to such requests.
4. Participate in PITs and other process analysis and improvement activities.
5. Negotiate realistic improvement goals in their assigned area, integrating the organization’s overall needs with achievable unit goals.
These obligations ensure that each team has defined membership; operating resources; and a path to communicate unmet needs and for nego- tiating, monitoring, and achieving goals. The obligations both support the individual teams and coordinate their contribution to the organization as a whole. Senior and intermediate leaders are accountable not only for large groups of services but also for the support activities that underpin the HCO’s performance.
To be successful, accountability must pass three tests:
1. Control. Operational scorecard performance should equal or exceed negotiated goals. In units large enough to have strategic scorecards, senior leaders are collectively accountable for strategic performance.
2. Best practice. The organization’s scorecard values should be better than the competition’s, and they should be acceptably close and moving closer to benchmark values.
3. Profitability. At the level of aggregation at which revenue is received, revenues should exceed costs plus an allowance for funding long- run strategic goals. (With insurance payments increasingly bundled around a care episode, only service lines and hospitals receive revenue and can assess profitability. Thus, financial performance is a dimension of the strategic scorecard, but only costs appear on operational scorecards.)
Designing HCO Systems Service lines allow HCOs to manage very different patient needs effectively, ranging from preventive care through ambulatory services of various kinds to inpatient acute care, rehabilitation, chronic inpatient care, and end-of-life care. HCO systems allow multiple models of service line operation, using different corporate structures to improve both associate and customer stake- holder service. The most common model is geographically oriented. An HCO providing several service lines to a specific community can structure its governance with a central not-for-profit corporation and either for-profit or not-for-profit subsidiaries that can include joint ownership, such as phy- sician hospital corporations, and long-term partnerships. The alternative structures allow differing mechanisms for raising capital and for sharing financial rewards. To retain not-for-profit status, the central HCO must have
Chapter 3: Bui lding Continuous Improvement 83
a majority on each subsidiary governing board and the subsidiaries must pay appropriate taxes.8
Geographically oriented HCOs frequently join larger, multicommu- nity systems. Religious orders and others have founded several large, not-for- profit multistate systems, where each community HCO operates a range of service lines appropriate to its community. These systems arose in the 1980s, seeking advantages in debt financing. They now offer opportunities for broader sharing: sophisticated central forecasting and process analysis, wide- spread benchmarking and sharing of best practice, educational and knowl- edge management resources. They add an upper row to the exhibit 3.8 hierarchy. The exact relationship varies, but central leadership typically estab- lishes a shared mission, vision, and values; long-term finance; and rules for doing business called reserved powers. The growth of healthcare systems has helped overcome the former disorganization and varying standards of a field characterized by individ- ual practitioners (see ex. 3.9), but the overall performance of the US health- care sector remains well below best practice benchmarks on quality and related indicators.9
Focusing on Population Health Many HCOs with population health missions have extended their influence through a variety of collaborative efforts, forming consortia, joint ventures, and partnerships with private, charitable, and government organizations. Few studies are available evaluating the results of these ventures.10 The prevailing models suggest various forms of collaboration, including foundations, coali- tions sponsored by local government, and coalitions sponsored by HCOs. The need to include government agencies that provide public health, hous- ing, and education makes corporate structures unlikely. The experience of Baldrige winners—particularly the Southcentral Foundation, which provides primary and continuing care to Native Americans in Alaska and was a win- ner in both 2011 and 2017—shows that transformational management and continuous improvement apply to comprehensive continuing health support just as well as they do to other patient care.
Support HCO-wide Process Analysis As chapter 1 notes, measured performance and benchmarks identify OFIs, work processes or systems performing below benchmark. The transforma- tional culture described in chapter 2 also identifies OFIs; associates are encouraged to point out potential improvements. Continuous improvement requires a systematic pro- cess to select the most promising OFIs, conduct evidence-based analyses, design and test improve- ments, and implement the new processes. Exhibit
Reserved powers Decisions in HCO systems that require ap- proval of central governance.
Process analysis and improvement A rigorous system of opportunity identifica- tion, analysis, process improvement, and implementation.
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3.10 outlines process analysis and improvement, a system that analyzes and redesigns processes to translate OFIs to real improvement.
Process improvement has widespread acceptance as a foundation for high-performing organizations in all industries and is universal among excel-
lent HCOs.11 It is largely the work of W. Edwards Deming,12 and is usually built around Lean and Six Sigma, analytic methodologies that emphasize find- ing the “root cause” weakness and correcting it. Specially trained analysts provide rigor, objectivity,
Lean and Six Sigma Formal methodologies for analyzing work, de- signing process improvements, and ensuring that new methods are appropriately tested.
EXHIBIT 3.9 Organization Structures for HCO Systems
Organization Level Trends
System Corporation A governing corporation establishing a common mission and
arranging long-term finance. It may also offer health insurance. Examples: Kaiser Permanente, Intermountain Health Care,
Ascension Health, HCA, Veterans Health Administration Focus: • Mission, vision, and values • Long-term finance • Reserved powers, such as
– Acquisition of real estate – Major construction – Approval of annual plans – Appointment of governing board members and chief executives
• Technical support for community HCOs – Review of annual audit
Large, multistate HCO systems have grown rapidly by acquiring community HCOs and aggregat- ing systems. Initial efforts were often limited to mission and long-term finance.
Many now pursue a broad scope of services, moving from historic bases as hospitals to comprehensive care, and increasing technical support.
Community HCOs Subsidiary corporations usually serving a community or specific
geographic area. Examples: local hospitals, surgical centers, nursing homes,
physicians’ offices Focus: • Strategic scorecard (exhibit 3.4) • Operational scorecards for service lines (exhibit 3.3) • On-site support to service lines and logistic services
Small and independently owned HCOs have merged around the not-for-profit community hos- pital. The merged organization provides a foundation for trans- formational management and continuous improvement.
Service Line Examples: primary care, mental health care, women’s health,
surgery, cardiovascular care, rehabilitation, transplantation, orthopedics
Focus: • Clinical protocols and effective work practices • Operational scorecard (exhibit 3.3) • Goal achievement and continuous improvement
Service lines are built around care providers with training to care for similar patients. A service line may have several teams, at several locations.
Note: HCO = healthcare organization.
Chapter 3: Bui lding Continuous Improvement 85
and thoroughness. Lean focuses on what it calls the value stream of actions that directly improve customer service, finding and eliminating unnecessary work. It empowers workers, giving them explicit control of production. It supports transformational leadership, requiring constructive responses to any stakeholder’s concerns and frequent rounds to the gemba, a Japanese word that indicates the place where work is done.13 Six Sigma is similar. Many HCOs use both.
Process improvement assumes every OFI will be considered; as many as possible will be analyzed and all successful analysis will be implemented. When one work team can resolve the OFI, the team can implement the steps described in exhibit 3.10, working as a whole or through a PIT of a few members. Many OFIs require a PIT including several work teams, coordination by central leadership, or extensive analytic assistance. These will be addressed by an organization-wide committee, the performance improvement council (PIC). The PIC will rank OFIs based on the benefit and difficulty of improved pro- cesses. All easy gains will be pursued; more difficult ones will be selected to achieve what the PIC con- cludes is the maximum practical increase in excellence.
Each PIT, large or small, has a charge, a specified membership, and a timetable. PIT meetings must be efficient, using members’ time productively. Agendas are carefully defined, information is prepared in advance, debate is appropriately moderated, and minutes are reliable. The PIT chair is trained to lead meetings and is assisted by a PIT supporter who is experienced in continuous improvement and often a Lean expert. The PIC receives and approves final reports, which include specific estimates of improvements in operational and strategic scorecards.
PIC The PIC has five responsibilities:
1. Rank the OFIs. In a large HCO, the list of OFIs can easily reach the hundreds. Many are interrelated or conflicting, and the resources available to support PITs are limited. The PIC must integrate the list and identify the most promising. Obviously, any that endanger patient care or safety should get immediate attention. Beyond that, excellent HCOs seek prompt return. They give high priority to all the OFIs that can be studied and resolved within the next annual cycle (often called the low-hanging fruit). Many OFIs will require revision or coordination. They can be refined by ad hoc committees. Some should be elevated to a more strategic level, pursued by a task force with broader scope and more resources. The PIC collaborates with senior leadership and the governing board to identify and address them. The
Performance improvement council (PIC) A selected group of leaders, always including senior leadership and representatives of all exhibit 1.2 teams, charged with reviewing and ranking OFIs, pursuing the most promising by forming and supervising PITs, providing analytic support, and identifying achievable improvement goals.
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end result is that no OFI is lost or ignored; the PIC gives every OFI careful consideration and pursues the most promising.
2. Assign PIT membership. Transformational management requires that all associates get a voice in the redesign of processes that affect them. The broad membership of the PIC gives every unit knowledge of OFIs that might affect their work. Each PIT is designed to include representatives from all teams likely to be involved. The chair is usually a highly knowledgeable operator.
Can the OFI be addressed within
the unit or activity?
NO YES
Performance improvement council prioritizes OFIs and
pursues most promising ones.
Unit or activity prioritizes OFIs and pursues most promising
ones, using internal PIT.
PIT is established with: • Charge • Membership • Timetable
PIT pursues systematic change and reports recommendation to sponsoring unit or PIC.
Improved process is implemented through involved units, revising:
• Multidimensional performance goals • Training • Supplied and equipment • Information needs
Performance improvement can be carried out at any level of the organization.
Every PIT has a charge, membership, and timetable at the outset.
Membership includes any unit affected by process, including operators, suppliers, and users.
Larger PITs can also get budgets and resources..
Systematic analysis can be expanded to formal programs such as Six Sigma or Lean..
Implementation is a separate step. New training and measures are often required.
The PIT proposes new performance goals on all dimensions affected by the new process.
.Steps toward success are celebrated with recognition, parties, and prizes.Expected improvements are achieved.
Rewards are shared by associates.
Evaluate
Test Analyze
Identify
The financial gains resulting from improved performance are shared by all associates.
EXHIBIT 3.10 Process
Analysis and
Improvement:
Translating
Opportunities
for Improvement
to Improved
Performance
Note: OFI = opportunity for improvement; PIC = process improvement council; PIT = process improvement team.
Chapter 3: Bui lding Continuous Improvement 87
3. Support fact-finding and analyses. Tasks carrying out the central “identify, analyze, test, evaluate” of exhibit 3.10 or implementing the epidemiologic planning model take substantial time. Most of the larger PITs will require supporters with Lean or Six Sigma training. Some will require specific expertise from outside consultants. The PIC ensures that each PIT has the resources it needs. It becomes a central point for hiring outside consultants and can establish policies to maximize their contribution.
4. Monitor PIT progress. The PIC monitors progress against the timetable and identifies difficulty. Its direct connection to senior leadership and governance gives it quick access across the leadership hierarchy, which helps to resolve roadblocks.
5. Participate in the ongoing improvement of continuous improvement. As described in the following, the system of continuous improvement is subject to continuous improvement. The PIC and senior leadership collaborate to maintain efficient processes.
Building Success in Process Analysis and Improvement Several aspects of exhibit 3.10 and its implementation through the PIC and PITs are departures from tradition:
• Work teams are expected to identify OFIs and to study and improve processes within their control.
• The PIC searches for the opportunities that create the best gains in the strategic scorecard. Solvable problems (the low-hanging fruit) get implemented quickly, rather than being held hostage to more complex issues.
• Resources for analysis are available as needed, with trained analysts who will identify, document, and benchmark new methods.
• Timetables for study and implementation are established and monitored by the PIC. Extra resources are committed when timetables are not met.
• The PIC and PIT team structures serve a dual role. They allow no surprises; every involved associate can be confident that she has a voice. They test every improvement, making sure that it is practical in the real workplace.
Senior leaders participate in the PIC, acting both collectively and individually to support its results. Individual leaders often have roles on important PITs. In addition, the leaders must assist in resolving conflicts. Change frequently requires substantial relearning by individual associates (and occasionally painful personal adjustment). Defensiveness, denial, and arguments are an expected part of process improvement. A focus on evidence
The Wel l -Managed Healthcare Organizat ion88
is the first solution, supported by deliberate airing of conflicting positions. Many issues require private sessions where emotions as well as facts can be explored, alternatives investigated, and accommodations made. Senior lead- ers are often participants.
The annual planning calendar is also essential for results because it establishes a deadline for resolution. Many serious conflicts will test that deadline, and it is senior leadership’s job to hold to this date judiciously. That action rules out foot dragging, red herrings, and obfuscation as strategies to protect limited interests. It does not rule out legitimate concerns expressed by any associate. The culture reinforces leadership’s action. Listening has occurred, facts have been gathered and tested, and the opinion of colleagues has been established. Evidence has prevailed over histrionics and power. The case is won or lost, and continued objection is fruitless.
Improve Continuously In excellent HCOs, every element is subject to systematic review and improvement. The processes supporting continuous improvement are no exception. The senior leadership team must collect and evaluate both quan- titative and qualitative evidence about the PIC, the process analysis pro- gram, and the overall results. Quantitative measures begin with the strategic scorecard (see exhibit 3.4). The improvement system is an immediate OFI when strategic objectives are not being met. There are also both qualitative and quantitative indicators. Examples of qualitative indicators are shown in exhibit 3.11. Many arise from various listening activities and unexpected events. These are the “ear to the ground” activities that identify social trends, competitor plans, and similar matters of great interest. They are an important part of boundary spanning and the annual strategic review.
Systematic listening, suggested several times in exhibit 3.11, includes generating written reports of noteworthy findings. Unexpected event reports, communication and response, and service recovery identify OFIs (see chapter 2). Reports must be aggregated, summarized, and critically reviewed. Aggre- gation and summary can be part of the annual review planning (see chapter 14). Members of the PIC can individually identify and rank OFIs for manag- ing the PIC and PITs. Their reports can be aggregated and consensus can be reached using nominal group technique.14 Using group technique provides senior leadership with a more objective and thorough evaluation.
Many of the questions that arise in evaluating the infrastructure of the HCO revolve around “How do we fall short on our values and vision?” Those questions are challenging to answer. Inherent biases cause disabling blindness. Cultural competency is an important example—it is not uncom- mon to overlook some population sectors different from one’s own. The first step toward overcoming these weaknesses is for the senior leadership team to reflect on the question. The second is to form review teams who are broadly representative and sensitive to the issues. These teams can pursue
Chapter 3: Bui lding Continuous Improvement 89
multiple possibilities to identify OFIs, such as conferring with leaders of cul- tural groups, comparing the HCO’s boundary spanning with best practices in other communities, and reports in the literature.
People
Continuous improvement requires two different sets of leadership competen- cies beyond the core commitment to empowerment. First, managers must make interactions with associates effective and efficient. The PIC, the PITs, and rounds must be self-evidently productive—associates must leave think- ing, “That was useful,” not “Another time-waster!” Because it supports both candor and respect, the transformational culture provides an important foun- dation for constructive dialogue. Leadership rounding reinforces the founda- tion; it gives every associate an easy route to appeal. In addition, leaders are
Continuous Improvement Function Qualitative Indicators Sources
Monitor customer needs
Unexpected event analysis Expressed customer desires Competitor activities Best practices in other HCOs Changes in healthcare financing
and technology Changes in community income,
employment, and civic commitments
Systematic listening in the local community
Published reports from trade associations and research
Consultants Government activity
Monitor associate needs
Case analysis of turnover, absenteeism, and worker safety
Unexpected event analysis
Systematic listening Unionization efforts Terminal interviews
Arrange corporate communica- tions hierarchy
Review expressed concerns of customers and associates
Unexpected event analysis Review implementation of PIT
recommendations
Systematic listening of customers and associates
Past PITs
Effectiveness of process improvement
Review of PIC and PIT performance
Comparison to Baldrige recipient applications
Case studies and published literature
Concluding interviews of PITs
Study of implemen- tation failures or delays
Note: HCO = healthcare organization; PIC = performance improvement council; PIT = process
improvement team.
EXHIBIT 3.11 Qualitative
Indicators of
Opportunities
for Improvement
for Maintaining
Continuous
Improvement
The Wel l -Managed Healthcare Organizat ion90
trained in running meetings, dealing with emotional reactions, and using process analysis to understand and improve sophisticated processes.
Second, leaders must make appropriate technical skills available, so that process analysis accurately identifies root causes. Implementing exhibit 3.10’s “evaluate, identify, analyze, and test” cycle requires professional-level analysts, including statisticians, accountants, engineers, programmers, and lawyers, as well as knowledgeable care providers. Many PITs will need sub- stantial help. Part of the PIT supporters’ obligation is early detection and arranging technical support needs. HCO systems can provide technical sup- port from central office staff. They can also network with their member units, identifying and promoting best practice. Even the largest HCOs will turn to outside consultants for some problems; smaller ones may need ongoing contracts to support their limited staff.
Measures
Strategic and operational scorecards implement objective measurement as the best source for all judgments and evaluations. The approach does not translate easily to the infrastructure of transformational and operational lead- ership. The infrastructure does not create a tangible product, and much of the resource used to maintain it is blended into other activities. It is still pos- sible to measure some elements and identify OFIs, as shown in exhibit 3.12.
The exhibit 3.12 measures are difficult to benchmark and complicated to interpret. For example, “ad hoc surveys of other stakeholders,” “board self-evaluation,” and “movement to benchmark” cannot reasonably be com- pared across different communities. Population health measures can be com- pared and benchmarked, but the HCO is only one of many factors that affect the statistics. The full array of measures plus qualitative judgments must be carefully explored to identify the right goals for the HCO.
The issues involved in evaluating local market information provide an illustration. Much about the local market can be measured but not bench- marked, such as the percentage of patients leaving the community and their reasons, the market shares of local competitors and their trends, and the number and size of competitors. While the per capita cost of care can be benchmarked, an HCO in a community with high unemployment and low levels of secondary education should not be directly compared with an HCO in a suburban community filled with professional families. Both HCOs can lower the per capita cost in their communities, but they cannot overcome the social and economic differences.
The process for evaluating OFIs and establishing goals for improving continuous improvement should give primacy to objective measures, but it should never ignore qualitative information. The three key questions for evaluation are the following:
Chapter 3: Bui lding Continuous Improvement 91
1. Is the HCO moving in the correct long-term direction, at a rate sufficient to maintain its competitive advantage?
2. Is progress uniformly demonstrated across the HCO? 3. What are the most important OFIs and achievable improvement
goals?
Because of the complexity and importance of the task, the evaluation is usually carried out by both the governing board and senior leadership. They meet at a retreat to allow time for thorough discussion of carefully analyzed quantitative and qualitative data. The consensus reached establishes the pri- orities for strategic OFIs and shapes the future position of the HCO.
Function Infrastructure Concept Measures
Monitor stake- holder needs
Maximize stakeholder satisfaction and loyalty
Patient outcomes Ad hoc stakeholder surveys Unexpected events Financial performance Population health Board self-evaluation
Provide evidence- based support
Every associate has needed skills and access to knowledge
Patient outcomes Worker surveys Training results Unexpected events
Reliable forecasts
No surprises Variation of actual result from forecast in unit scorecards
Annual planning and coordinated goals
Comprehensive, on-time goal-setting
Continuous movement toward benchmark
Percentage of goals achieved Percentage of goals set on
time Goals presenting difficult
negotiations
Corporate structure
Prompt communication and dispute resolution
PITs completing on schedule Leadership satisfaction
Process analysis
Identify promising OFIs Improve work processes Implement with improved
unit and strategic scorecards
PITs completing on schedule Leadership satisfaction Movement to benchmark
Improve continuously
Remove roadblocks to improvement
Move rapidly toward benchmark
Success record of PITs Movement to benchmark
Note: OFI = opportunity for improvement; PIT = process improvement team.
EXHIBIT 3.12 Performance
Measures for
Infrastructure
Functions
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Managerial Leadership
Several parts of the continuous improvement functions are standard practice, found in all or nearly all US HCOs. Stakeholder monitoring, forecasts, a cor- porate structure focused on expertise, and systematic study of work processes have multidecade histories. Charleston Area Medical Center (Charleston, West Virginia), other Baldrige recipients, and other excellent HCOs have designed and added several elements building on transformational culture:
• Negotiating goals, rather than imposing them • Copying best practice, rather than fixing the weakest practice • Using copious rewards • Extensive training, which builds confidence as well as competence • Improving improvement
These additions all increase costs. Rounding, negotiating, and thinking about improvement consume hours of leaders’ expensive time. Training and rewards are particularly costly. They are investments in excellence, but many stakeholders will want to know, “How do we pay for them?” The short answer is that these activities increase the skill and commitment of associates; their increased skill reduces errors and speeds recovery so that patient care is cheaper. Strong evidence shows that the package works, and HCOs have provided no reports of its failure, but differential proofs are lacking—that is, one cannot say, “We have evidence that rewards will work without rounding, or that goal negotiation is superior to imposing goals.” Thus, the package must be defended as a whole.
Making the Case for Continuous Improvement Leaders must often explain how continuous improvement works. They use the following three arguments to support continued investment.
1. It is paying off for patients. The data generated for the strategic scorecard show the following: .a Care is safer. Our preventable deaths, patient falls, drug errors, and
other accidents are dropping. .b Care is more effective. The work processes that we have improved
translate to shorter stays and fewer readmissions. .c Patients like it. Our HCAHPS scores are up.
2. It is paying off for our associates. The strategic scorecard shows the following results: .a Our care providers and other associates report that they are more
satisfied.
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.b Our absenteeism and associate injuries are down.
.c Our turnover is down, reducing the costs of finding, hiring, and cultivating a corps of loyal, effective associates.
3. It is paying off for our HCO in these ways: .a Our financials are stronger. .b Our patients are more loyal. .c Our market share is growing.15
Clearly, success feeds on itself. When the numbers on the strategic scorecard back up the claims, doubters are silenced.
Victories are important; failure should be avoided. Excellent HCOs avoid failure with three major strategies:
1. Commitments are realistic. Continuous improvement has several built-in protections. New processes are based on documented best practice that is carefully studied and tailored to local needs. Potential difficulties are identified and resolved before commitment. Goals that are particularly challenging are classified as stretch goals, going beyond the commitments and gaining extra rewards if achieved.
2. Negotiations are transformational. No voice is shut out. Not only does this identify preventable risks; it also builds collective support and team spirit. Associates are committed to the goals.
3. There are emergency supports. Progress toward the goal is continuously assessed, and action plans are modified as necessary. Leadership will commit extra resources to seeing that they are achieved.16
Enhancing Transformational Culture and Continuous Improvement The documented implementations of the transformational culture and con- tinuous improvement model for HCO management have gone well, though there is much room for improvement. These five leadership actions are widely accepted as best practice habits that young leaders should copy:
1. Build good frontline physician and nurse support. Physicians, other LIPs, and nurses are the people who actually deliver care and relate most closely to patients and families. Any successful HCO requires their active support, but care provider satisfaction and engagement is an OFI in many HCOs.17 High-performing HCOs have responded, building extra listening mechanisms, investing in expanded training to build skills of first-line leaders, and celebrating gains. Care provider relations build critical support, and preventing burnout and moral distress, as well as addressing emotional and physical demands throughout the LIP’s career, are crucial actions. Support of the frontline provider helps initial efforts succeed and builds momentum for more complicated
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problems. “A great place to give care” becomes a foundation as the transition matures.
2. Promote evidence-based conversation and solutions. To preserve a culture of trust and respect, the negotiations between stakeholders must be perceived as fair. An effort by some stakeholder groups to exploit others is likely to destabilize the model and potentially destroy it. The commitment to evidence is a solid foundation for fairness. Fact-based rules are the same for all. Challenging speculative and unfounded statements by asking for facts raises the quality and value of the conversation; it also provides a foundation for challenging self-serving behavior.
3. Strengthen critical logistic and strategic capability. Leaders must make effective response to the HCO’s strategic needs and opportunities. A responsive attitude is important to sustaining the culture; a responsive organization is important to sustaining operations. Consequently, certain logistic and strategic components must grow in size and effectiveness. Training, counseling, and mentoring must grow. Information processing, technical consultation, and auditing must meet all needs.
Measuring and benchmarking these services are challenging. It is easy to undersize them because the effects are deferred and widely dispersed. The successful approach is to use demand and customer satisfaction measures as a guide in order to find the appropriate size. The customers are all internal, and they deserve prompt, effective service. Delays can be measured. The quality of service can be assessed by auditing the work product. Cost and productivity can be benchmarked against programs in high-performing HCOs. Large HCO systems have some advantages. They can centralize some services, standardize others, and analyze details of comparable programs.
4. Capitalize on value-based incentive payments. High-performing HCOs will thrive under the emerging value-based payment schemes because they are better equipped to respond to changes in reimbursement. The core of financial success is the actual improvement in care. The recent moves to value-based payment—elimination of readmission payments, incentives for higher quality—and proposed changes to global episodes of care reward HCOs providing care that is safe, effective, timely, and efficient. The revised reward structure supports a mission of excellence in care and a mission of population health.
5. Ensure sincere commitment. A transformational culture succeeds because it gains greater support and loyalty from stakeholders than competing approaches. The gravest danger is losing that support, and the greatest threat is stakeholders who gain unfair advantage. Free
Chapter 3: Bui lding Continuous Improvement 95
riders destroy the dynamic of working together for rewards and replace it with self-serving agendas and hypocrisy.
The governing board has a critical role in implementing both continu- ous improvement and transformational culture. It can fail in several ways. It can set unrealistic goals at the outset of the annual budgeting process. It can offer substandard wages or benefits, creating shortages of critical personnel. It can accept excessive demands from a specific stakeholder group, leading to imbalances and destroying trust. The least visible of these risks may be to diminish auditing efforts (see chapter 2), allowing suspicion to rise about hon- esty. The suspicion that others are getting the advantage destroys the trans- formational culture. Board discussions must include all stakeholders and strive for fairness and transparency. Board actions should strengthen the model, but secrecy is likely to destroy it. No high-performing HCOs brag about their auditing systems, but the systems are present and recognized by all associates.
Evidence-based continuous improvement has led a growing number of HCOs to success, but pursuing excellence in this way is not simple. The approach is strongly supported by a transformational culture. Together, they demand ongoing effort from a large number of well-trained people. The overview of the model presented in this chapter and chapter 2 sets the stage for the specific actions discussed in the following chapters.
Practice Applications
These questions are about applying the chapter content. It’s often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. Think about what a new first-line leader (e.g., a nurse manager or food service supervisor) needs to understand about the elements of continuous improvement (summarized below from exhibit 3.1) and how the HCO implements them. There is a lot to learn, more than a class or a memo, but we can start with the purpose or contribution of each element—basically, “Why is it there?” Could you answer that question in a few sentences for each element? .a Stakeholder needs and desires .b Quantitative, evidence-based information .c Long- and short-term forecasts .d Coordinated goals, logistics, and support .e Supportive corporate structure .f HCO-wide process improvement .g Improving “continuous improvement” continuously
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2. As the new first-line leader grasps the concept of continuous improvement, she is likely to be concerned about how the elements discussed in question 1 play out for her unit. How would you reassure her that she can succeed in her new role?
3. The PIC has approved a PIT to address hospital noise—an issue that has led to one of the HCO’s lowest HCAHPS scores. The charge is to “identify removable causes of noise and propose plans to reduce noise on inpatient units.” The nursing supervisor for internal medicine and the director of plant services will cochair. You will be the PIT supporter. What data should the PIT review at its initial meeting? What sort of additional information should it collect? What questions should the chairs propose at the initial meeting?
4. Your HCO must decide which service lines it will offer and how big they will be, selecting from a spectrum of comprehensive personal health services—primary, acute, rehabilitation, continuing, and palliative. How should the HCO determine that it should offer, or not offer, a given service line? What are the critical questions to be asked and answered?
5. Base your answers to this question on exhibit 3.7. At its August meeting, the governing board approved senior leadership’s proposal for the SWAP but suggested that cost per admission is important. Comparative data suggest that the community is well above the median for similar communities; board members are concerned with the impact health insurance costs will have on local employment. The CEO asks you to draft a statement for all the HCO’s leaders to initiate steps 7 and 8. What are the takeaway points that should go in the memo?
Additional Resources
Charleston Area Medical Center Health System. 2015. “2015 Malcolm Baldrige National Quality Award Application.” Accessed August 23, 2018. www.nist.gov/ sites/default/files/documents/2017/10/11/CAMC%20Health%20System%20 Application %20Summary.pdf. Note: Baldrige Applications describe work processes and results following a rigorous outline in the Baldrige Excellence Framework (www .nist.gov/baldrige). They constitute a comprehensive review of how winners achieve excellence.
Kovner, A., and T. D’Aunno. 2016. Evidence-Based Management in Healthcare, 2nd ed. Chicago: Health Administration Press.
McAlearney, A. S., and A. Kovner. 2018. Health Services Management, 11th ed. Chicago: Health Administration Press.
Chapter 3: Bui lding Continuous Improvement 97
Notes
1. Sharp HealthCare. 2007. “Sharp HealthCare: The Best Place to Work, Practice Med- icine, and Receive Care.” https://www.nist.gov/sites/default/files/documents /2017/10/11/2007_Sharp_Application_Summary.pdf. Accessed January 3, 2018. P. 6.
2. Centers for Medicare & Medicaid Services. 2016. “Hospital Compare.” Modi- fied October 19. www.cms.gov/medicare/quality-initiatives-patient-assessment - instruments/hospitalqualityinits/hospitalcompare.html.
3. Centers for Medicare & Medicaid Services. 2015. “Hospitals.” Modified Janu- ary 21. www.cms.gov/Regulations-and-Guidance/Legislation/CFCsAndCoPs /Hospitals.html.
4. Sahni, N. R., R. S. Huckman, A. Chigurupati, and D. M. Cutler. 2017. “The IT Transformation Health Care Needs.” Harvard Business Review. Accessed Novem- ber. https://hbr.org/2017/11/the-it-transformation-health-care-needs.
5. Griffith, J. R. 2017. “An Organizational Model for Excellence in Healthcare Deliv- ery: Evidence from Winners of the Baldrige Quality Award.” Journal of Healthcare Management 62 (4): 328–42.
6. Poudre Valley Health System. 2008. “2008 Malcolm Baldrige National Qual- ity Award Application: Poudre Valley Health System.” Accessed August 23, 2018. www.nist.gov/sites/default/files/documents/2017/10/11/2008_Poudre_ Valley_Application_Summary.pdf.
7. St. David’s HealthCare. 2014. “St. David’s HealthCare 2014: Malcolm Bald- rige National Quality Award Application.” Accessed August 23, 2018. www.nist .gov/sites/default/files/documents/2017/10/11/2014_St_Davids_HealthCare_ Award_Application_Summary.pdf.
8. US Internal Revenue Service. 2018. Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, Instructions for Form 1023. Accessed February 3. www.irs.gov/pub/irs-pdf/i1023.pdf.
9. Rosenberg, B. L., J. A. Kellar, A. Labno, D. H. M. Matheson, M. Ringel, et al. 2016. “Quantifying Geographic Variation in Health Care Outcomes in the United States Before and After Risk Adjustment.” PLoS ONE. Published December 14. doi:101371/journal.pone0166762.
10. Perez, B., M. K. Szekendi, K. Taylor-Clark, J. Vaughn, and K. Susman. 2016. “Advancing a Culture of Health: Population Health Programs in Place at Essential Hospitals and Academic Medical Centers (2012–2014).” Journal of Healthcare Qual- ity 38 (2): 66–75. doi:https://dx.doi.org/10.1097/JHQ.0000000000000032. See also Baehr, A., T. Holland, K. Biala, G. S. Margolis, D. J. Wiebe, and B. G. Carr. 2016. “Describing Total Population Health: A Review and Critique of Exist- ing Units.” Population Health Management 19 (5): 306–14. doi:https://dx.doi .org/10.1089/pop.2015.0105.
11. Griffith 2017. 12. Deming, W. E. 1986. Out of the Crisis. Cambridge, MA: MIT Press. 13. Toussaint, J. S., and L. L. Berry. 2013. “Leadership Lessons from Lean.” Trustee
66 (10): 21. https://createvalue.org/wp-content/uploads/2013/11/Trustee - Magazine .Leadership-Lessons-from-Lean.2013.pdf.
14. Harvey, N., and C. A. Holmes. 2012. “Nominal Group Technique: An Effective Method for Obtaining Group Consensus.” International Journal of Nursing Prac- tice 18 (2): 188.
15. Griffith 2017.
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16. Charleston Area Medical Center Health System. 2015. “2015 Malcolm Baldrige National Quality Award Application.” Accessed August 23, 2018. www.nist.gov/ sites/default/files/documents/2017/10/11/CAMC%20Health%20System%20 Application%20Summary.pdf.
17. Shanafelt, T. D., G. Gorringe, R. Menaker, K. A. Storz, D. Reeves, S. J. Buskirk, J. A. Sloan, and S. J. Swensen. 2015. “Impact of Organizational Leadership on Phy- sician Burnout and Satisfaction.” Mayo Clinic Proceedings 90 (4): 432–40. doi:10 .1016/j.mayocp.2015.01.012.
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CRITICAL ACTIONS
4 ESTABLISHING STRATEGIC GOVERNANCE
1. Establish a culture of respect, honesty, and service:
• Maintain honest and service-oriented governance processes.
• Work with senior leadership and the clinical staff to ensure that these values are upheld.
• Listen to stakeholder voices and fairly balance stakeholder needs.
2. Use realistic forecasts to create a plan for mission achievement:
• Use population-based, long-range forecasts and financial planning.
• Monitor and respond to changes in community population and economic activity.
3. Work with interprofessional care teams to improve quality and efficiency of care:
• Monitor a strategic scorecard of organizational performance.
• Maintain the clinical staff organization as a partnership that provides mutual benefit.
• Support a satisfying work environment.
4. Keep the board as an effective forum for meeting stakeholder needs:
• Maintain the board’s knowledge of stakeholder needs.
• Monitor and improve the board’s own performance.
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Purpose
The purpose of the governing board of a well-managed HCO is to
create and maintain a foundation for relationships among the stakeholders that identifies and implements their healthcare goals as effectively as possible.
This purpose is challenging because it requires the board to resolve conflict- ing stakeholder needs and require new levels of accountability. The board’s central purpose is to resolve the conflicts in a way that maximizes the total benefit. That entails attracting balanced stakeholder support—patients and providers must be satisfied at the prices acceptable to insurers.
Customer stakeholders demand improvements in patient safety, more rigorous cost control, greater scrutiny of community benefit, and the trans- parency of managerial practices. Provider stakeholders expect strong support and a congenial culture. Stakeholders’ decisions to participate are based on their perceptions of the HCO’s ability to be a great place to get care, a great place to work, or a cost-effective addition to their insurance plan. Associates and other stakeholders expand and implement the strategic foundation, but the board is by definition the ultimate authority.
This purpose, called the corporate or managerial perspective of gover- nance, is not universally understood.1 It is perverted by failures in the board’s agency relationship with stakeholders—for example, when the board becomes captive to the CEO, or when board members gain as individuals at the expense of the stakeholders. It is a contrast to and often confused with two alternate perspectives that have been proposed for not-for-profit governance.
The resource distribution perspective views the organization as a source of largesse and the governing board as a body to distribute resources. Such a purpose is sometimes called “political” because the role of legislative bodies and politics, in general, is to distribute resources.2 The HCO’s expenditures are income to various stakeholders and an important economic resource. The HCO is usually one of the community’s largest employers, and a large share of its income comes from outside the community (see chapter 1). Under this perspective, physicians, suppliers, and employees gain importance, compared to patients and families. Distributional equity—who gets the money—is a matter of constant concern. The managerial perspective emphasizes how to get the money—that is, through quality and efficiency of service, combined with fair compensation and rewards for successful effort.
The resource contribution perspective is no longer common but still occurs. It views board members as contributors of resources to the orga- nization. The approach emphasizes the funds or services board members may donate or the influence they can bring to bear on critical external rela- tions. Naming to the board a member of the richest family in town or the mayor’s partner to the HCO board are examples. In contrast, the managerial
Chapter 4: Establ ishing Strategic Governance 101
perspective emphasizes active participation, preparation, and wisdom; board membership is not honorific and does not require wealth.
The role of the owners complicates the board’s purpose. In the for-profit tradition, the focus is on maximizing profit. Stock holders—the owners—dominate the governing board. Board members—usually called directors—are compensated for their efforts and are given strong incentives to achieve financial goals.
In the not-for-profit tradition, there are no stockholders. The owners are the members of the community served. Compensating any individual or other corporation beyond the fair market value of their services constitutes inurement and jeopardizes tax-exempt status. The community ownership concept arises from legislation and the courts. The original concept of a charitable organization was to make no profit and disburse assets, but in recent decades non- profit boards have accepted the need to ensure contin- ued, and even expanding, mission achievement.
The Well-Managed Healthcare Organization focuses on nonprofit governing boards. Members are commonly called trustees, rather than directors, reflecting their willingness to manage the HCO in trust for the community. They are rarely compen- sated financially, except for out-of-pocket expenses.
By tradition and reinforced by tax law, trust- ees’ decisions should be based on what will best fulfill community needs. The HCO has tax exemp- tion because if it did not exist, a government-run HCO would be required. The Internal Revenue Service (IRS) requires nonprofit boards to review community needs and submit evidence of “community benefit” such as charitable care for the uninsured, education of communities, and losses on government-supported insurance. The report they must submit, IRS Form 990 Schedule H, also requires reporting of senior leader and other high individual compensation.
The managerial perspective leads organizations to excellence. Evi- dence shows that nonprofit HCOs that have adopted the managerial perspec- tive have better organizational performance.3
Functions
Managerial approaches to governance generate a set of functions or tasks that the board must perform effectively to support the organization. The decisions that HCO boards must make to achieve excellence are described in exhibit 4.1. These functions describe the governance needs of almost
Inurement Distribution of nonprofit assets to an indi- vidual or corporation. Although individuals and corporations can be compensated for their services, compensation that exceeds fair market constitutes inurement. Inurement jeopardizes tax exemption (see IRS.gov).
Trustees Members of the governing board of not-for- profit HCOs who volunteer their time to the organization (typically, without remuneration). The title reflects their acceptance of the obligation to manage the HCO assets in trust for the community. They may also be called directors.
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any HCO, from a small home care company or doctor’s office to a large integrated system. Small organizations may not have a formally designated board, but their leaders must still accomplish these functions.
EXHIBIT 4.1 Functions of the Governing Board
Function Intent Implementation Examples
Maintain leadership capability
Establish the capability to provide the board with timely, thorough, relevant, and accu- rate information and to implement the board’s decisions
Recruit a CEO and review her contribution to the HCO
Establish policies for recruit- ing, developing, and com- pensating other leaders
Maintain a plan for leader- ship succession
Select a CEO Evaluate executive
performance Establish senior leader-
ship compensation Review compensation
and bonus program for all managers
Establish the mission, vision, and values
Agree on common goals and core values of the organization
Articulate the goals as a guiding concept
Undertake a visioning exercise
Maintain ongoing commu- nication with stakeholder representatives
Conduct an annual review
Revise the mission, vision, and values
Meet with clinical staff leadership
Hold a retreat for annual environmental assessment
Ensure quality of clinical care
Maintain a central com- mitment to quality medical care
Attract and retain the most competent physicians, nurses, and other healthcare professionals
Approve the strategic goals for quality improvement
Approve the privileges of attending physicians and other LIPs
Approve compensation pro- grams for care providers
Encourage PITs to address important quality-of-care issues and OFIs
Approve clinical staff bylaws
Approve quality-related incentives
Approve corporate strategy and annual implemen- tation
Establish the scope and organization of services and set strategic annual improvement goals
Balance the vision against current realities
Establish plans for expan- sion and renewal
Maintain competitive physi- cal plant and equipment
Approve plans for implementation
Set the annual strategic goals
Approve the capital and new programs budget
Monitor per- formance against plans and goals
Ensure implementation of annual goals
Review reports of strategic performance
Monitor progress of long- term projects
Question leadership on correction of yellow and red zone responses
Review progress reports of search activities and construction
Improve con- tinuously
Ensure that the governance function remains competitive
Annually review individual and collective performance
Conduct confidential survey of member concerns
Note: HCO = healthcare organization; LIP = licensed independent practitioner; OFI = opportunity for improvement; PIT =
process improvement team.
Chapter 4: Establ ishing Strategic Governance 103
Maintain Leadership Capability Typical trustees have full-time occupations. They volunteer their services and have only limited time for the HCO. They serve for only a few years. Board decisions are made by committee, whereas implementation requires an indi- vidual. All of these factors—the competing obligations, the lack of continuity, and the need to implement the decisions—limit what a board can accomplish on its own. Thus, the first function of governance is to assemble an executive team. Typically, this step is done by hiring a CEO, establishing a rewarding relationship with that individual, and assisting that individual in building and supporting an effective team.
CEO Selection and Support The office of the CEO is the central coordinating point for all managerial activities. The CEO selects and ensures accountability of all other employees of the organization, coordinates the annual planning cycle, implements the plans, and represents the board and the owners internally and externally. She acts for the board in all emergencies and in rounding and listening activities, where she must interpret and sometimes infer the board’s desires. The CEO controls the facts brought to the board’s attention and is critical to ongoing board education and improvement. She creates the transformational culture, promotes timely sharing of relevant and accurate information, and imple- ments continuous improvement.
The CEO and the senior leadership team are often the only people in the community who are professionally trained in healthcare delivery. That training covers technical questions of need, demand, finance, qual- ity, efficiency, law, and government regulation that are not included in the training of doctors, lawyers, or businesspersons. With the training comes a professional obligation to excellent care. The obligation is similar to that of physicians and nurses, but it includes “all patients,” not just “my patients.”
Many say that selecting the CEO is the most important decision a board will make. It is also exceptionally difficult. It involves judging the future skills of individuals, always a hazardous undertaking. It is made with- out the assistance of a CEO, whereas other decisions have the benefit of the CEO’s counsel. It is made infrequently, and the people who make it may never have selected a CEO before.
How does a board make such a difficult decision? The best way is to follow, with extra thoroughness and care, the rules that improve all high-level personnel decisions. A succession plan identifies a temporary replacement, who may also be a candidate for permanent appointment. The board, or consultant the board appoints and supervises, must develop and prioritize selection criteria identifying the desired skills and attributes and specify a plan to assess each applicant’s qualifications. A national search for candidates is usually appropriate. For most US organizations, the law requires not only equal opportunity on the basis of race, age, gender, and disability but also
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affirmative action in seeking candidates who are disadvantaged on those grounds. The backgrounds of qualified individuals must be carefully veri- fied. Executive search firms provide assistance with each of these steps; they contribute by having broad relevant experience and by developing a pool of potential candidates.
The selection process is only the beginning of a relationship. Sustain- ing the CEO–board relationship over time allows both the organization and the executive to grow. Four major elements are the focus of ongoing review, with a formal annual cycle:
1. Develop a mutual understanding of the employment contract. Written contracts are now the standard, but much of the relationship depends on an underlying relationship of trust and communication. The contract specifies the duties of the CEO, the mechanisms for review of performance, and the approach to compensation.4 It also states the procedures for terminating the relationship, including appropriate protection for both the organization and the CEO. Properly performed, the CEO’s job is now and always has been high risk. Thus, agreements should include appropriate protection if the CEO must leave the institution.
2. Agree on short-term (usually one-year) goals. All managers and leaders in well-run organizations have explicit personal goals as well as commitments to the organizational goals reflected on their teams’ scorecards. The CEO’s personal goals are established by discussion with the governing board and are related to the goals of the institution as a whole.
3. Establish the base compensation. Compensation includes salary, employment benefits offered to all employees, unique benefits offered to the CEO, terms for bonuses and merit increases, an agreement on the disposition of any incidental income the CEO might earn as a result of related professional activity, and an agreement on both voluntary and involuntary termination compensation. The compensation should comply with IRS regulations. Review by legal counsel is essential.
The only enduring guideline for designing a compensation package is the marketplace—that is, what the individual could earn in a similar employment elsewhere. The marketplace is the national market for people trained and experienced in healthcare leadership. While not-for-profit compensation generally does not equal the levels given in similarly sized, for-profit organizations, senior managers earn about ten times the median personal income, and CEOs receive substantially more. The IRS monitors executive salaries and questions those that appear to exceed the market.5
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4. Establish incentives for goal achievement. Incentive compensation is increasingly common. The incentive should be based on the overall achievement of the strategic scorecard goals and is based on criteria established in advance. Incentive payments can be quite large—as much as 50 percent of total compensation. Incentive-based compensation using the strategic scorecard clarifies goals and documents that community needs are being met, and it may be more palatable to the general public than a high CEO salary.
Leadership Development and Succession Planning The board is responsible for a leadership succession plan and a program to develop managers and leaders.6 The plan and the program are designed by the CEO and senior leadership and approved by the board with at least an annual review. The plan identifies specific internal candidates to replace key executives, including the CEO. The development program includes a review of compensation and incentives, evaluation of the competencies of all senior leaders, identification of individual improvement opportunities and plans for enhancing skills, and an assessment of preparation for promotion. Leading HCOs pay particular attention to issues of diversity and inclusion, seek- ing not only equal opportunity for women and members of disadvantaged groups but also seeking to build a staff that collectively mirrors the charac- teristics of the population served and the employee workforce.7
Establish the Mission, Vision, and Values The governing board establishes the mission, vision, and values. It manages the extensive stakeholder discussions that support both the statements and their acceptance throughout the organization. The board’s role is to monitor the reality and effectiveness of the mission in light of evolving stakeholder needs. It implements this function through its annual environmental assess- ment and goal-setting activities. It periodically revisits the mission, vision, and values with a “visioning exercise” (chapter 2), not so much to change these core commitments as to refresh stakeholder understanding.
Ensure Quality of Clinical Care The third essential function of the governing board is unique to HCOs. The governing board is legally responsible for ensuring the quality of medical care.8 The board is responsible for exercising the duty of care on behalf of the patients and the community and on behalf of physicians and other LIPs who desire to participate, and the organization as a whole is liable for dam- ages should they fail.
In addition to these legal requirements, The Joint Commission has specified many of the structures by which the board and the hospital clinical staff discharge this duty. The growth of quality measurement, service lines, and evidence-based protocols has simplified the issues involved. The Joint
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Commission requires the measurement and improvement of outcomes of care as specified in their core measures.9 The Centers for Medicare & Med- icaid Services is now compensating hospitals directly for achieving quality goals,10 and there is clear evidence that the HCOs with ongoing board review maintain a higher quality of care.11
In addition to approving and monitoring explicit annual quality goals, the board has the following five obligations:
1. Approve the clinical staff bylaws and ensure their uniform application. The bylaws establish the contracts between the HCO and its LIPs. They address the requirements for individual membership, the procedures for ongoing review of performance, and the obligations of practitioners to participate in quality improvement. The bylaws apply to both LIPs employed by the HCO and those in private practice (i.e., employed directly by patients).
2. Approve appointments and reappointments of individual LIPs. The bylaws specify that each LIP be given privileges to provide specific
care to patients. The privilege contract requires that the LIP maintain his professional competency by meeting the standards of his professional organization or licensure, by successfully completing continuing education, and by achieving clinical results comparable to similarly prepared colleagues. Each LIP is reviewed annually by his peers to ensure his compliance with these terms. The governing board role is to ensure that the peer review was adequate, appropriate, and unbiased. The board may hire an external consultant to improve the peer review process. In rare cases, it may overrule a recommendation to terminate or limit privileges.
3. Appoint clinical staff leadership at all levels. The board should ensure that clinical leaders are diligent and unbiased in pursuing the service excellence model. It acts on recommendations of senior leadership.
4. Approve a plan for clinical staff recruitment and development. An HCO’s complement of LIPs is a critical resource, and many specialties are in demand. The HCO must seek the necessary replacements.
5. Approve financial contracts with physicians and physician organizations. Financial contracts are deliberately separated from the privilege contract, allowing some LIPs to maintain private practice.
Some basic facts heighten the importance of the board’s quality-of- care activities. First, the HCO is an expensive capital resource made available to the physicians and other LIPs by the owners in return for either excess
Clinical staff bylaws A formal document establishing the contract between the HCO and its licensed indepen- dent practitioners, including the requirements for accepting individual practitioners, the procedures for review of performance and discipline, and the obligations of practitioners to participate in quality improvement.
Privileges The contract between the HCO and each LIP, authorizing the LIP to provide specific kinds of care to patients.
Chapter 4: Establ ishing Strategic Governance 107
revenue to invest back into the nonprofit organization or for community benefit, as defined by the IRS. The board has an obligation to see that the owners receive fair value for the use of the resource. The courts have inter- preted that obligation to include limiting privileges to the competence and proficiency of each physician or other affiliate of the clinical staff (i.e., allied health professionals not employed by the HCO requesting privileges).12 Sec- ond, physicians are a uniquely expensive and critical resource for the com- munity. A shortage of physicians in a community is a serious threat to the quality of care and indirectly limits growth of the workforce. A surplus may encourage marginally necessary treatment that is both costly and dangerous. If community demand is low relative to the supply, unit costs will mount drastically, and lack of practice may impair quality. Third, many physician specialties would find their income severely reduced without participation in an HCO. Physicians and other LIPs deserve fair treatment and equitable opportunities to participate. The process of peer review can be subverted for the personal gain of some members;13 the board’s responsibility is to see that this does not occur. In short, the issues involve a sensitive balance of com- munity and professional needs on both quality and economic dimensions.
Most of the activity is carried out by management and the clinical staff. The details of the processes involved are addressed in chapter 6. The core concept is one of peer review—the care of all patients is subject to review by a group of similarly trained LIPs. Peer LIPs work within the bylaws, and the clinical staff organization and the senior manage- ment team provide appeal and mediation opportuni- ties that keep the review process fair. The board’s role is usually limited to oversight and final approval. The board also serves as a final arbiter in case of disputes, but these should be rare.
Approve the Corporate Strategy and Annual Implementation As the board and the HCO progress through the annual calendar (see chapter 3, exhibit 3.7), the board makes the final decisions in shaping both short- and long-term performance. These are resource allocation decisions, distinguished from the mission and vision by the commitment to expend resources in certain directions. Resource allocation decisions progress from corporate strategies to long-term plans, financial plans, and annual goals. In all cases, management proposes the action and its justification. The board reviews the proposal for consistency with stakeholder needs, mission, and prior actions, and in most cases the board approves the management proposal.
Setting Corporate Strategies The initiative for strategic opportunities comes from the environmental assessment (see chapters 3, 14, 15). A successful assessment generates
Clinical staff organization The organization of an HCO’s LIPs that imple- ments evidence-based medicine, establishes expectations for quality of individual LIP performance, conducts peer review, and facilitates communication from LIPs to the governing body.
The Wel l -Managed Healthcare Organizat ion108
dozens, even hundreds, of new business opportunities and ways of meeting old goals. The most realistic of these should be developed and evaluated through scenarios. Scenarios often begin with sketches of various outcomes for the community; several of the common topics for these scenarios are shown in exhibit 4.2. The initial scenarios can be quite abstract and ambigu- ous. A typical scenario establishes criteria and forecasts scorecard results for each alternative. Business plans often involve quantum shifts in facilities, service capabilities, or market share. They can include mergers, acquisitions, joint ventures, and large-scale capital investments. Strategic opportunities are sometimes triggered by external events and require rapid decisions. The governing board of the well-run HCO quietly but thoroughly evaluates the more probable strategic scenarios in advance and is therefore prepared for prompt action when required.
Long-Term Planning Once the strategies and priorities are established, management develops spe- cific plans for facilities, personnel, marketing, and operations (see chapters 14 and 15). These are often multiyear plans with specific implications for the annual plans. The board reenters the decision process when a final set of plans has been developed and documented. It ratifies or selects among the final proposals. The board’s initial role—establishing the strategic direction and outlining the specific goals to be met—is far more important than the final ratification. As the plan is implemented, the board reviews progress as part of its monitoring function.
Long-Range Financial Plans A crucial test of the strategic and long-range planning activities comes when the financial impact is assessed. This assessment involves realistic assumptions
about future market share, prices, and costs that are used to build a long-range financial plan (LRFP), which shows earnings, debt, and capitalization for at least the next seven years. The plan is actually a sophisticated financial model that can quickly calcu- late the implications of major decisions.
The LRFP integrates the strategic business plans and tests their real- ity. It accepts estimates of the demand, revenue, and cost for various strategic opportunities and shows the impact on profit and debt structure under varying market and price assumptions. The alternatives that generate the most favor- able combination of customers served and capital structure can be identified. All the elements are interrelated. A new service affects market share, prices, cost, and profits. It may be redesigned several times to fit the LRFP. The pro- cess—generally undertaken by management and reported to the board when a successful fit has been reached—is a critical step in ensuring productive plans.
Long-range financial plan (LRFP) An ongoing projection of financial position showing earnings, debt, and capitalization for at least the next seven years.
Chapter 4: Establ ishing Strategic Governance 109
The LRFP is also used to identify immediate financial needs. The survival of any enterprise, for-profit or not-for-profit, requires ongoing cash flow. Long-term obligations such as construction contracts or bond debts must be met along with current price needs. Equipment and facilities must be replaced, but most HCOs operate in an environment where most prices are fixed. Medicare and other government programs establish revenue; the HCO has little chance to negotiate the amounts.
The LRFP generates a cash need for each year. Forecasts of costs come from the internal goal-setting process described in chapter 3 (the section titled Coordinated Goals, Logistics, and Support: The Annual Planning Cal- endar). Revenue and need must be resolved. The governing board initiates this process by setting financial goals from analysis of the LRFP, the “Janu- ary” circle of exhibit 3.7.
Issue Strategic Opportunity Implications
Expansion/ closure
Expand existing services
Add new services Close or reduce
services
Demand trends Financing Cost and quality of service Ability to support high-tech
specialties Impact on other services
Local affiliations
Specific affiliation opportunities
Expansion or closure Existing affiliations Size and strength of competitors Antitrust considerations Regional affiliation opportunities
Regional affiliations
Specific affiliation opportunities
Expansion or closure Impact on local market share Costs and benefits foreseen Local political issues
Relation to insurers
Contract acceptance Cash flow reduction Joint venture
Market response Profit and cash flow implications Variety of plans available to local
buyers
Relation to physicians
Contracts Joint ventures
Primary care physician preferences Specialist preferences Existing physician organization
Relation to employees
Shortages Surpluses Workforce skills
Projected supply and demand for workers by specialty
Programs for associate development Programs for associate satisfaction
and commitment
EXHIBIT 4.2 Strategic
Scenario
Implications
for Healthcare
Organizations
The Wel l -Managed Healthcare Organizat ion110
Annual Goals Boards of high-performing HCOs set goals for all multidimensional strategic measures of performance.14 The annual planning process (exhibit 3.7) begins with extensive data collection by senior leadership (step 1 of exhibit 3.7). The process will identify a number of improvement opportunities and strategic opportunities that are reported to the board, usually at a one- or two-day retreat. The board’s role will reflect on the relative value of these opportu- nities to stakeholders to frame a strategic plan with ranked priorities (steps 2–6). Senior leadership then negotiates specific goals with all work teams, creating the systemwide action plan, or SWAP (steps 7–10). The extensive list of stakeholder inputs (“Key Feedback”) ensures that the process is far from simple. Conflicting opportunities are inevitable. Board members bring prior experience and knowledge of the community to bear on the issues. They work thoughtfully to identify realistic and valuable improvements for the coming year. As noted, the goals are almost always achieved.
The specific measures used in the strategic goals and reported in exhibit 3.5 can be changed as part of the goal-setting process. Some, such as the financial performance summaries, tend to be permanent. Others are current targets. They are spotlighted in the report for a year or two and then replaced, often because benchmark has been achieved. The measures dropped from the report usually remain in the individual unit reports but are no longer the focus of board review.
The board participates in goal setting at three critical points—iden- tifying stakeholder priorities, setting guidelines for the negotiations, and approving the final budget proposal. In addition to targets for the dimen- sions shown in the strategic scorecard, exhibit 3.5, the board establishes a target for programmatic capital expenditures each year. The amount sets the stage for competitive review of capital and new program requests. The review process, which involves many parts of the HCO, is described in several of the following chapters.
The board mandates that, wherever possible, four points of reference are used to evaluate current performance and the opportunity to improve. (Some referents may be unavailable for specific measures.) The board’s emphasis on these referents is an important reinforcement for evidence-based management.
1. Trends. Last year’s value, or a time series of several years, provides an initial baseline and allows judgment on the direction of the measure.
2. Competitor and sector comparisons. What similar organizations are achieving provides crude guidelines, even if the available information is not strictly from competitors.
3. Benchmarks. The benchmark value may be from an organization that is outside of healthcare—for example, the standards for financial ratios
Chapter 4: Establ ishing Strategic Governance 111
that are driven by the total bond market, not simply healthcare bonds, or the healthcare cost levels of a country with a different system.
4. Values. The benchmark for some measures (e.g., worker injuries, patient safety violations, infant deaths) is not good enough. The proper goal for these measures is zero. Focusing on the zero goal is often a powerful motivator, producing major gains and falling benchmarks.
Goal setting is a detailed, complicated construction that involves almost the entire organization and requires several months to complete. (Goal setting is discussed in many chapters in this book; chapter 10 expands the measurement concepts, and the contributions of management support services are described in chapters 11 through 15.) The final set of goals is a book-length document for larger HCOs, containing the expectations for each work group. The financial expectations—the traditional budget—are major works in themselves, with several parts (see chapter 13). The final capital budget lists the approved projects in priority order and is supported with detailed descriptions and timetables for each project. In general, the final review is a fine-tuning exercise within the original guidelines. Final approval should be anticlimactic; a well-managed goal-setting process uses the referents, conforms to the guidelines, and settles most questions before it is submitted for approval.
Monitor Performance Against Plans and Budgets The hallmarks of successful organizations are to be future oriented, set achievable goals, achieve those goals, and celebrate success. Well-managed organizations work on a no-surprises assumption that carefully developed agreements will meet legal and ethical standards and will generally come to pass. Monitoring is not policing; it is an activity to prevent problems and to find insights for the next round of goal setting. Recent law and social action in the United States have emphasized the duty of governance to control compliance with ethical and legal standards, including such issues as accurate information, protection of assets, protection of confidentiality and other indi- vidual rights, and conformance to laws governing contracts. While much of the legal obligation to control is established only for publicly listed for-profit corporations, the trend has widespread support both in society at large and among healthcare influentials. Excellent organizations use board review that is future-oriented and preventive. They build a culture where noncompliance is never a reasonable path to follow.
The board performs three monitoring functions that promote both excellence and compliance: routine surveillance of performance data; accep- tance of reports from auditors, accreditors, and other external agencies; and approval of major contracts and transactions.
The Wel l -Managed Healthcare Organizat ion112
Routine Surveillance of Performance Data The strategic measures established in the goal-setting process are monitored by the board monthly or quarterly. The concept and the reality are that most values reported on the Saint Luke’s template (see exhibit 3.5) will be in the green or blue zones, exceeding the minimum goal and moving toward benchmark. Reports in the yellow zone are a signal to management rather than the board. Reports in the red zone—below the minimum goal—are rare but serious. When they occur, management is expected to be prepared with a 90-day plan for recovery. Board intervention should be extremely rare. Inter- vention draws the board into details of management that it is not equipped to handle. Worse, intervention draws the board away from the strategy-oriented functions it alone can do.
Acceptance of Reports from Auditors, Accreditors, and Other External Agencies Best practice now requires that the audit activities needed for strategic pro- tection report directly to the governing board so that the auditors are insu- lated from threats and conflicting interests. The result of the expansion of audits is not only greater protection against fraud but also greater accuracy in reporting and greater trust in the numbers throughout the organization.
Several outside agencies monitor performance from a public perspec- tive and report directly to the board, usually through an audit committee. The no-surprises assumption applies: Clean reports are expected, and excep- tions, though rare, get immediate and unpleasant readjustment.
The board selects an external auditor and receives its reports. The audit attests that the accounting practices followed by the organization are sound and that the financial reports fairly represent the state of the business. A management letter points out real or potential problems that might impair either of these two state- ments in the future. The management letter is, in
effect, an audit of the internal auditor and the board’s ultimate protection against misrepresentation, fraud, or misappropriation of funds.
The board also selects an accreditation organization and receives its report. Almost all acute care hospitals are accredited. Excellent hospitals gen- erally meet or exceed accreditation standards; serious or repeated difficulty meeting them suggests major weaknesses in the organization.
Various laws now govern specific activities such as patient record con- fidentiality, rights of patients and families, employees and physicians, manage- ment of environmental hazards, compliance with accounting regulations, and other state- and federally mandated requirements. Compliance programs are procedures designed to ensure compliance with specific regulations, such as those focusing on civil rights and Medicare fraud and abuse or the Health Insurance Portability and Accountability Act. They are the responsibility of
Management letter Comments of external auditors to the gov- erning board that accompany the audited financial report.
Compliance programs Programs designed to meet statutory and regulatory requirements; may be based on legislation or voluntary efforts such as accreditation.
Chapter 4: Establ ishing Strategic Governance 113
the executive office, but governing board oversight is required. Bond-rating agencies investigate all out- standing judicial or regulatory issues; their reports are a useful summary for the board. In 2002, Con- gress passed the Sarbanes-Oxley Act to impose numerous requirements on corporations regarding their governance and internal control arrangements.15 Although Sarbanes-Oxley does not apply to not-for-profit corporations, the legislation has been widely accepted by leading HCOs.16 If a committee of the board receives and acts on a thorough annual report of compliance, and any interim reports of serious difficulties, the organization is protected from the more severe penalties of these laws.17
Approval of Major Contracts and Transactions In addition to its approval of physician and LIP contracts, the governing board routinely approves real estate transactions, acquisitions, mergers, joint ventures, and contracts involving large sums of money. The review includes compliance with legal requirements, and the existence of the review protects stakeholders against unexpected major changes in direction. In well-managed HCOs, these transactions arise from strategic opportunities that the board has previously discussed.
Improve Continuously An effective board must be thorough in its environmental assessment, imagi- native in its search for solutions, and deliberate in its eventual actions. It must also be timely (responding to issues promptly) and efficient (not wasting the time of its members and other participants in the decision process). Well- managed organizations meet these criteria by a triple strategy of disciplined operation that emphasizes scheduling, preparation, focus, and delegation; deliberate educational programs for board members; and the use of system- atic board performance review.18
The board, like all units of excellent HCOs, is expected to monitor and improve its own performance. It does this through an annual self-assess- ment that is usually led by a committee of the most senior members, a group that often also serves as the nominations committee. The members are often surveyed to determine their independent opinions of how well the board has completed the five functions and what opportunities for improvement (OFIs) should be pursued. They are often asked to assess their own contribu- tion, an approach that helps identify new leadership and to encourage more passive members to reevaluate their own contributions. The committee com- piles these comments and its own observations and leads a discussion of how board processes can be improved. Surveys of boards in other sectors confirm that boards that assess their members and themselves tend to be more effec- tive than those that do not.19
Routine Surveillance of Performance Data The strategic measures established in the goal-setting process are monitored by the board monthly or quarterly. The concept and the reality are that most values reported on the Saint Luke’s template (see exhibit 3.5) will be in the green or blue zones, exceeding the minimum goal and moving toward benchmark. Reports in the yellow zone are a signal to management rather than the board. Reports in the red zone—below the minimum goal—are rare but serious. When they occur, management is expected to be prepared with a 90-day plan for recovery. Board intervention should be extremely rare. Inter- vention draws the board into details of management that it is not equipped to handle. Worse, intervention draws the board away from the strategy-oriented functions it alone can do.
Acceptance of Reports from Auditors, Accreditors, and Other External Agencies Best practice now requires that the audit activities needed for strategic pro- tection report directly to the governing board so that the auditors are insu- lated from threats and conflicting interests. The result of the expansion of audits is not only greater protection against fraud but also greater accuracy in reporting and greater trust in the numbers throughout the organization.
Several outside agencies monitor performance from a public perspec- tive and report directly to the board, usually through an audit committee. The no-surprises assumption applies: Clean reports are expected, and excep- tions, though rare, get immediate and unpleasant readjustment.
The board selects an external auditor and receives its reports. The audit attests that the accounting practices followed by the organization are sound and that the financial reports fairly represent the state of the business. A management letter points out real or potential problems that might impair either of these two state- ments in the future. The management letter is, in
effect, an audit of the internal auditor and the board’s ultimate protection against misrepresentation, fraud, or misappropriation of funds.
The board also selects an accreditation organization and receives its report. Almost all acute care hospitals are accredited. Excellent hospitals gen- erally meet or exceed accreditation standards; serious or repeated difficulty meeting them suggests major weaknesses in the organization.
Various laws now govern specific activities such as patient record con- fidentiality, rights of patients and families, employees and physicians, manage- ment of environmental hazards, compliance with accounting regulations, and other state- and federally mandated requirements. Compliance programs are procedures designed to ensure compliance with specific regulations, such as those focusing on civil rights and Medicare fraud and abuse or the Health Insurance Portability and Accountability Act. They are the responsibility of
Management letter Comments of external auditors to the gov- erning board that accompany the audited financial report.
Compliance programs Programs designed to meet statutory and regulatory requirements; may be based on legislation or voluntary efforts such as accreditation.
The Wel l -Managed Healthcare Organizat ion114
Assessing Performance The essential question in assessing the board’s performance is whether stake- holder wants have been satisfied as well as realistic alternatives would permit. The board’s performance is the corporation’s performance, as reflected in the balanced scorecard and as compared to competitors and benchmarks.
In addition to the balanced scorecard measures, boards can use check- lists of recommended practices to assess their performance. The measures shown in exhibit 4.3 help the board carry out its trust obligations. They complement, but do not replace, the balanced scorecard. A successful board should comply with all ten measures, but it should also have a near-bench- mark scorecard.
Executive Sessions A wave of governance failures in the for-profit world around 2002 led to rethinking and strengthening of board practices and authority. One element that has gained popularity is the use of regular executive sessions, in which only non-management board members remain. The purpose of the session is to allow outside members complete freedom to discuss the performance of the CEO or other issues in the early stages when they can most effectively be addressed. An executive session can be part of each regularly scheduled board meeting.
People
Board Membership Society has established, through law and tradition, two minimum criteria for the actions of governing boards. The first is that the yardstick of action is prudence and reasonableness, rather than the looser one of well-intentioned or the stronger one of success. Board members should be careful, thoughtful, and judicious in decision-making; they need not always be right. The second is that the board members hold a position of trust for the owners. They must not take unfair advantage of their membership and must, to the best of their ability, direct their actions to the benefit of the whole ownership. Board members must avoid situations that give some owners special advantage, particularly an advantage to themselves. In not-for-profit corporations, the board members must attempt to reflect the needs of all individuals in the community who depend on the institution for care.
Excellent boards seek members who are committed to the criteria of prudence and trust. They select their members through a continuing search, and they support their members with ongoing programs to help them make the biggest possible contribution. This section discusses board selection
Chapter 4: Establ ishing Strategic Governance 115
1. Meeting legal requirements
Bond-rating agencies include a due diligence review of the organization’s compliance with all outstanding legal obliga- tions. The board, at a minimum, should always require that one of its committees have access to all such due diligence reports and any responses from senior management.
2. Compliance orientation
Corporate compliance is a process of honest self-scrutiny, often involving objective third-party evaluators. When done properly, it produces an attorney–client privileged report that the board of directors or an appropriate board committee can study in depth and monitor steps taken in response. Boards should insist that senior management develop a corporate compliance mentality, in which legal shortcomings are routinely defined, identified, analyzed, and corrected. A formal compliance program reduces legal risks and constitutes another best practice of good governance.
3. Continuing gov- ernance educa- tion (CGE)
The board chair, the CEO, and the governance committee chair should together take the lead in ensuring meaningful CGE for the entire board and not just its new members. Every board should have its formal and informal CGE calendar for each year, supplemented by having individual board members lead the discussions after their attendance at CGE events.
4. Use of dashboards
Dashboards (e.g., exhibit 3.5) help boards realize that policy decisions should result in performance improvements. Appropriate and regular use of dashboards will build gover- nance confidence and will easily distinguish those boards from the ones not using such governance best practices.
5. Agenda practice
Some form of board self-evaluation and executive sessions should occur at each board meeting. Good practice encour- ages questions, seeks balanced presentations, and makes a deliberate effort not to disparage any good-faith question.
6. Conflicts of interest*
Conflicts of interest should be announced at every meeting. “If board members will just remember three simple rules about conflicts of interest, they will generally want to do the right things. a. Undisclosed conflicts are, by definition, not ‘in good
faith,’ which has the legal effect of nullifying all the direc- tors’ statutory immunities.
b. Undisclosed conflicts can, since 1996, produce substan- tial federal excise taxes on affected individuals who are corporate insiders and who obtain excess benefits from their organizations.
c. An apparent, but not real, conflict can cause almost as much trouble as a real one in terms of public embarrass- ment for individuals and [not-for-profit] boards.”
EXHIBIT 4.3 Ten Measures
of Board
Effectiveness
(continued)
The Wel l -Managed Healthcare Organizat ion116
7. Corporate governance committee
The committee should meet regularly throughout the year; seek and nominate appropriate new members; review all outside reports and board effectiveness mate- rials, plans, and continuing education; propose new mea- sures, procedures, and bylaws as indicated; and investi- gate violations of confidentiality and conflict-of-interest policies.
8. Voluntary Sarbanes-Oxley compliance
The landmark Sarbanes-Oxley Act does not apply to not-for- profit organizations except to provide whistleblower protec- tion. But its rationales do apply. Governance committees should study the act and recommend such easily identifi- able steps as CEO and CFO certification of financial state- ments and clarification of who should and should not serve on the board and various committees.
9. CEO evaluation CEO evaluation is best coordinated through a board committee, but all members of the board should be invited expressly to participate. The evaluation should relate to board-established objectives and include an opportunity for open-ended comments as well as ones responsive to specific questions. The evaluation should directly affect a year-end bonus or the next year’s base compensation. The board chair should share the evaluation with the CEO in a personal meeting. The process should include both the CEO’s self-evaluation and the CEO’s reaction to the board’s evaluation.
10. Board planning and evaluation
Each of the foregoing nine areas of conduct includes some form of planning for the institution, but no single one of them “asks whether the full board is invested in helping to plan the overall future of the organization. Board self-analysis should include what all directors/ trustees think about: a. their collective tackling of the foregoing nine measurable
elements in the last year, b. the organization’s prospects for the future, and c. their individual contributions and/or misgivings about
what each has done or not done for the organization.”
Source: Used with permission from Bryant and Jacobson (2005).20
*Conflicts of interest are real or potential personal financial benefit that may accrue from a given
board decision.
EXHIBIT 4.3 Ten Measures
of Board
Effectiveness
(continued)
criteria, processes, compensation, education, and support. It also addresses two special issues of membership: conflicts of interest for board members and roles for physicians and CEOs on boards.
Chapter 4: Establ ishing Strategic Governance 117
Membership Qualifications
Skill and Character Criteria Board members should be able to make the challenging and sophisticated decisions required in the five managerial functions. Members should bring to each meeting good judgment based on an acute sense of the best interest of the owners as a whole. For not-for-profit HCOs, board members must recog- nize the community as owner. What characteristics predict these critical skills?
• Familiarity with the community. The raison d’être of community boards is their ability to relate healthcare decisions to local conditions. This ability means insight into how much money the community should pay for care, how to recruit professionals to the community, how to attract volunteers and donations, how to make community members feel comfortable as patients and associates, and how to influence local opinion and leadership. Different groups in the community will have different views on these questions. The board should have members who represent the diversity of the community but whose understanding transcends their own sex, race, and social group.
• Familiarity with business decisions. Most board decisions are multimillion-dollar commitments. They are measured and described in the languages of accounting, business law, finance, and marketing. The HCO boardroom, like other boardrooms, is a place where technical language is frequently used to communicate complex concepts. There is also an emotional component to multimillion-dollar decisions. Although citizens at large can make excellent board members, moving from hundred-dollar decisions to million-dollar decisions takes some practice. Previous experience at decision-making is important to gain the necessary familiarity with the language and as psychological preparation.
• Available time. Board service on even a medium-sized community hospital requires a substantial time commitment—one day per month at a minimum, but more for officers and committee chairs. People who do not have the time to master the information and participate actively in debate are unlikely to guide the organization effectively.
• A record of success. The best predictor of successful board service, more important than general experience or formal education, is how well the person has done on similar assignments. This indicator is important after the person has joined the board as well. Effective members should be promoted to higher board offices. Reliance on achievement is a way of overcoming biases in selecting board officers. Objective criteria open opportunities for members of disadvantaged groups.
The Wel l -Managed Healthcare Organizat ion118
• Reputation. The general reputation or character of an individual is important in two senses. First, like the record of success, it is an indication of what the individual will do in the future. Second, it serves to enhance the credibility of the individual. Persons with reputations for probity frequently gain influence because of that reputation. What they say is received more positively. Boards have a legal obligation for prudence. The appointment of people whose reputation is suspect could be construed as imprudent.
Representation Criteria Representation criteria are related to the resource-distribution functions of the board. Many people support the political argument that only a member of a certain constituency can understand truly how the organization treats that group. They believe a good board should have representation from women, the poor, ethnic groups, labor, and so forth. The concept of repre- sentation can be extended to include employees, physicians, nurses, religious bodies involved in ownership, and other groups. Stakeholder constituencies are usually pleased by recognition at the board level.
Several caveats must be attached to representation criteria. First, and most important, representatives who lack the necessary skills and character are unlikely to help either their constituency or the community at large. Second, excellent boards act by consensus for the community as a whole. The concept of resource distribution tends to foster adversarial positions, compromise instead of consensus, and division instead of enhancement of resources. Third is the problem of tokenism. A seat on a board, particularly a single seat, does not necessarily mean influence in the decisions. Finally, the appointment itself changes the individual. The lessons of the boardroom are not available to their constituents, and over time, the board members are co- opted from the view for which they were selected. Tokenism and co-optation can be deliberate adversarial strategies to diminish a group’s influence.
Affirmative action to ensure that competent individuals are not excluded from board membership is encouraged under the law and seems likely to make organizations more successful. A balance can be best struck if two points are kept in mind:
1. Board members are appointed as individuals, not as representatives. They should be competent to serve in their own right, regardless of their position in the community.
2. Board members act on behalf of the community as a whole. This fact does not rule out special considerations of groups with unusual needs, but it places those considerations in a context—they are appropriate to the extent that they improve the community as a whole.
Chapter 4: Establ ishing Strategic Governance 119
Board Selection Selecting board members involves issues of eligibility, terms, offices, com- mittees, and the size of the board, as well as the actual choice of individuals. Officers and committee chairs have more power than individual members, so their selection is especially important.
Appointment to Membership and Office Most HCOs have self-perpetuating boards—the board itself selects new members and successors. Other methods include election by stockholders— the prescribed procedure in stock corporations—and election by members of the corporation who sometimes are simply interested members of the community. Boards of government institutions are frequently appointed by supporting jurisdictions or, rarely, through popular votes. In multicor- porate systems, the parent corporation appoints subsidiary boards, usually from local nominations. Boards generally elect their own officers. In addi- tion to the officers, a number of committee members and chairs must be appointed, a job usually left to the chair but appropriately subject to discus- sion or approval.
Role of the Nominating Committee The nominating committee nominates both members and officers. As exhibit 4.3 notes, the committee also manages the board’s self-evaluation and resolves issues of conflict of interest. It is usually a standing committee with membership determined by the bylaws. It is common to put former officers on the nominating committee; such a strategy emphasizes continuation of the status quo in the organization. Thus, organizations wishing for fresh ideas broaden nominating committee membership and charge the committee with searching more widely for nominees. It is typically in the confidential discussions of the nominating committee that individuals are suggested or overlooked, compared against criteria, and accepted or rejected. This process makes the nominating committee one of the most powerful groups in an organization. Sophisticated leaders generally seek membership, or at least a voice, on this committee.
Nominees are usually asked beforehand if they will serve, and the best candidates frequently must be convinced. On most boards and similar social structures, truly contested elections and overt campaigning are rare. Many organizations nominate only one slate for boards and board offices. Formal provisions for write-in candidates and nominations from the floor are a safeguard that is rarely used. In the normal course of events, selection occurs in the nominating committee. The committee often proposes not only board members but also corporate and board officers and chairs of standing committees.
The Wel l -Managed Healthcare Organizat ion120
Size, Eligibility, and Length of Terms The number of nominations to be made each year is a function of the number of board members and the length of their terms. Board sizes range from a handful to a hundred, although between 10 and 20 members are most common, with a preference for smaller. Larger boards tend to be honorific, delegating the actual governance functions to an executive committee.
Terms are generally three or four years, and the number of terms that can be served successively is usually limited. Lengthy terms or unlimited renewal of terms can lead to stagnation; it is difficult for the nominating committee to pass over a faithful member who wants to serve another term unless the rules forbid it. Too-short terms reduce the experience of officers as well as members. (It is possible to allow officers to extend their service beyond the normal limits.) Inexperienced officers rely more heavily on the CEO, thereby increasing the CEO’s power at the expense of broader insight.
The size, terms, and limits are related. If there are 15 members, three- year terms, and a two-term limit, there will be five nominations each year, but only two or three new people will be added in most years. The median experience of board members will be about three years. Similarly, 16 mem- bers, four-year terms, and a two-term limit will add two new people yearly, and the median experience will be nearly four years.
In addition to length of service, many organizations have eligibility clauses related to the owning corporation. For-profit boards can require stock ownership. Church-sponsored organizations, even when they are oper- ated as secular community institutions, can require that board members be from the religious group. Some government and voluntary not-for-profit institutions require residence in the political jurisdiction for board member- ship. Other eligibility clauses include phrases such as “good moral character,” although so much judgment is implied that they are more selection than eligibility criteria.
Compensation The rewards for serving are complex. They include the satisfaction of being a good Samaritan, pride in professional achievement, public recognition, association with community leaders, and sometimes commercial opportuni- ties that relate indirectly to recognition and association. They do not include significant direct financial reward. Monetary compensation is rare in not-for- profit HCOs; fewer than 10 percent of hospitals report compensation.21 The Volunteer Protection Act of 1997 affords greater protection against personal liability for trustees who are not compensated.22
CEO Membership The CEO is always an active participant in board deliberations. Because their principal livelihood is from employment at the organization, CEOs have fundamental conflicts of interest in serving on the board. The conflict
Chapter 4: Establ ishing Strategic Governance 121
is particularly apparent when possibilities for consolidation or conversion are considered. It also occurs when other employees or doctors present griev- ances against the CEO. Although less obvious, CEOs can influence the board by controlling the information it receives (including the minutes) and by their role in suggesting the agenda.
Most hospital boards make the CEO an ex officio member, although there has been a steady decrease in CEOs with voting privileges in not-for- profit HCOs, suggesting a growing separation of management and gov- ernance.23 CEOs hold offices, such as chair of the executive committee or president of the corporation. The justification lies in the same rule governing other conflicts—that the community’s potential benefit exceeds its potential loss. It appears to be correct; evidence shows that organizations that deeply involve the CEO in strategic decisions have better financial performance.24
Physician Membership Physicians who practice at the HCO also have clear conflicts of interest. The national consensus on their participation, however, is even clearer for physicians than for CEO board membership; in fact, The Joint Commission recommends physician representation. Empirical evidence indicates that hos- pitals that have physicians in board roles have better mortality and morbidity performance—that is, their scores on important measures of quality of care are superior and their financial performance improves.25 However, the results are not automatic and depend on specific implementation. Physician repre- sentation improves overall success: The board needs to hear the viewpoint of doctors, and doctors need to know their views are being expressed. Many HCOs set aside seats for doctors and solicit nominations from the clinical staff. It is not uncommon for the clinical staff to elect its representatives to a minority of the board. Physician representation can approach 50 percent, but large fractions in not-for-profit corporations raise questions of inurement, tax exemption, and antitrust. The IRS relies on explicit rules to avoid inurement and to retain tax exemption.26 Antitrust considerations forbid physicians (or other vendors) from collusion in restraint of trade.
Appointment of a few physicians is not a panacea, however. They are added to the board as community members, not representatives. Conflict- of-interest rules can silence a physician when her viewpoint is most critical. HCOs use a variety of other mechanisms to emphasize each physician’s participation in the decisions most immediate to his practice (see chapter 6).
Board Organization
Committees Board committees weigh the importance of various issues, evaluate differ- ing political perspectives, identify interrelationships and opportunities to combine or separate issues, and resolve issues that do not require full board
The Wel l -Managed Healthcare Organizat ion122
attention. They analyze facts and educate members. They develop expertise in a given area, such as finance. They often expand representation, including others beside board members. Finally, they can take on especially sensitive issues, such as compensation, nomination, auditing, and clinical staff mem- bership, in a more discreet setting.
Well-managed boards delegate routinely to standing committees—per- manent units of the board, established in the bylaws of the corporation. As shown in exhibit 4.4, finance, compensation, audit, and nominating commit- tees are almost universal. Most governing boards have a quality committee to review processes of care, mortality, dashboard indicators for clinical quality, patient safety, and patient satisfaction. Some boards have combined nominat- ing with the oversight and evaluation function of the board’s performance into a governance committee.
Each standing committee should have a clear, recurring agenda that cannot be handled well by other structures. The use of an executive com- mittee appears to be diminishing among small boards, where routine use is unnecessary. The overall tendency is toward a small, active board, with a few important standing committees. The countertrend in healthcare systems is toward a large network of such boards, but with a central board that has final authority over reserved powers—those specifically not delegated to subordi- nate boards.
Beyond the few standing committees, well-managed boards of all sizes use ad hoc committees, formed as appropriate to the issue at hand for a speci- fied period. An organization often has several ad hoc committees working simultaneously and reporting to the board or its standing committees. Large numbers of people can be involved. Effective use of ad hoc committees delib- erately expands representation and participation, using clear goals, acceptable solution parameters, and timetables to guide and empower larger groups. The committee knows it must produce a solution within the parameters if possible and report back for further instructions if it cannot. The boundaries of an acceptable decision are established in advance, and decisions within the boundaries are usually accepted by the board with limited debate. Schedul- ing, preparation, focus, and delegation allow diverse opinions to be heard, evaluated, debated, and revised. Ad hoc committees bring the most knowl- edgeable members into each decision. They open opportunities for conflict resolution and promote understanding and consensus. Even if a minority is opposed to the final outcome, the members understand the logic that deter- mined it and are convinced that the process was appropriate.
The rules for operation of the board are recorded in governance bylaws. These specify quo- rums, requirements for passage of specific items, duties of committees and officers, and procedures for the conduct of business. Matters such as the use of
Governance bylaws The set of procedural rules adopted by the board and followed in discussions and ac- tions. The rules establish procedures that protect individual members from liability.
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a consent agenda or the board’s calendar are usually covered in procedural memoranda that supplement the bylaws.
Multicorporate Governance Structures The original concept of a governing board was of the ultimate authority for an independent corporate unit. The managerial functions identified earlier derive from that concept. They are the set of activities that must be referred
Committee Function Membership
Executive Act on behalf of full board in emergencies
Less commonly, assume governance functions, making the full board advisory or honorific
Officers (chair, vice chair, secretary, treasurer), standing committee chairs, CEO and CFO
Quality Develop strategic goals for quality improvement and safety
Set the quality agenda Receive and recommend approval of
quality and safety reports Review physician appointment and
reappointment and results of focused quality studies
Board chair, COO, CMO, CNO, chair of the quality improvement council, clinical and nonclinical members
Finance Establish long-range financial plan, debt structure, and initial budget guidelines
Monitor budget performance
Treasurer, CFO, potential future chairs
Compensa- tion
Review executive performance Award increases and bonuses Link senior executives’ compensa-
tion to quality and patient safety indicators
Ensure compliance with IRS, GAO, and Sarbanes-Oxley (if applicable)
Officers, former officers, legal counsel
Audit Review financial audit and reports from The Joint Commission
Officers, former officers
Nominating Nominate new board members and board officers
Review board performance and indi- vidual contribution
Annually evaluate individual conflicts of interest
Suggest improved processes
Senior board officers
Note: CEO = chief executive officer; CFO = chief financial officer; COO = chief operating officer;
CMO = chief medical officer; CNO = chief nursing officer; GAO = Government Accounting Office;
IRS = Internal Revenue Service.
EXHIBIT 4.4 Typical Standing
Committees of
the Governing
Board
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to the most central decision maker to be properly coordinated. The nature of hierarchical organizations is such that one can affiliate several corporate units and establish governance functions for the affiliates, setting up boards that report to boards. For example, an HCO that operates two hospitals, a medi- cal group practice, a home care agency, and a hospice as subsidiaries needs at least one board, but it might have as many as five—one for each entity. (Technically, any separately incorporated unit must have a board, but the requirement can be met by a small group of employed officers. The discus- sion here is of boards that include other stakeholder representation.)
Subsidiary boards make four contributions that have have resulted in their popularity among larger HCOs:
1. They expand representation, allowing local leaders to retain a sense of influence over their institution; local preferences can be reflected in operating decisions. This specificity is particularly important when the subsidiaries operate in different markets; as a result, most multistate systems have local subsidiary boards.
2. They allow board specialization. The home care and hospice board would allow input from stakeholders with expertise and interest in these services, for example.
3. They permit joint ventures with other corporations and partnerships with the clinical staff. Various service lines can be separately incorporated with different groups of physicians who serve on the boards.
4. They allow identification of taxable endeavors and protect the exemption of activities that qualify under the Internal Revenue Code.
Subsidiary boards operate under the concepts of reserved powers. Reserved powers are held permanently by the corporate board. Their purpose is to make sure the subsidiary continues to follow the central mission and vision and to resolve conflicts between subsidiaries. (A similar concept, called supermajority, requires the support of certain stakeholders in votes dealing with certain issues.) Reserved powers usually include the rights to buy or sell other corporations and real estate; issue stock or debt; approve long-range plans, LRFPs, and annual goals; appoint or approve board members and the CEO; and approve bylaws. Within the limits imposed by reserved powers, subsidiary boards tend to work as corporate boards do. They carry out the managerial and resource-related functions for their organization, making recommendations to the parent board on the reserved matters.
Exhibit 4.5 shows the board structure of Henry Ford Health Sys- tem, an HCO with $3.4 billion per year in gross earnings that serves about 20 percent of the metropolitan Detroit market of 4.5 million people. The
Chapter 4: Establ ishing Strategic Governance 125 EX
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The Wel l -Managed Healthcare Organizat ion126
system has 12 subsidiary boards that involve 150 members and report to a system board of 44 members. The 12 boards allow almost 200 people to participate in the activity of the corporation. It is sufficiently flexible to allow the system to run a successful insurance company, participate in a variety of partnership activities with several other large healthcare providers and insur- ers in the area, and operate HCOs oriented to specific local communities and reflecting their histories and preferences. About a dozen other corporate entities exist but are managed by internal directors. With the exception of the 1,000-member Henry Ford Medical Group, which is accountable to the system board through the regional units, these entities are mainly special- purpose organizations that handle insurance and real estate activities.
Joint Venture Boards Much acute care is now delivered in service lines that focus on a specific clini- cal area such as women’s health. It is common to establish the service line as an explicit collaboration between the HCO and a group of its physicians. It is often desirable to incorporate the service line separately and to share its governance with the participating physicians. The arrangements can either be contractual or by established as jointly owned corporate subsidiaries, com- monly called joint ventures.
Joint ventures normally have boards that represent the participat- ing groups. They can be either for-profit or not-for-profit. They are often designed to require approval of parent corporate boards or supermajorities on matters such as major expansion, change in direction, or dissolution. The joint venture structure is flexible and convenient to allow physician owner- ship and shared financial rewards. The actual models in place are not auto- matically effective, however. A review of literature concludes, “The evidence base for the impact of many models of economic integration is either weak or nonexistent, with only a few models of economic integration having robust effects.”27
Joint ventures need not be limited to service lines. Understanding the competition, even in hotly contested local markets, is a form of cooperation. For healthcare, competition is regulated by federal and state law, which gen- erally encourages rivalry to win customers under specified conditions such as licensure, fair advertising, and avoidance of collusion or discrimination. The law permits various kinds of collaboration. HCOs are learning to exploit both aspects of regulated markets. Thus, they can and do compete and collaborate with each other simultaneously. In Kansas City, Saint Luke’s Health System and the local unit of HCA, a national for-profit hospital system, collaborate to run a cancer center.28 In Iowa, two Catholic systems work together to provide referral care and telemedicine to a larger rural area.29 Arrangements such as these are formed because they offer routes to market advantages that are more practical than other available alternatives.
Chapter 4: Establ ishing Strategic Governance 127
Education and Information Support for Board Members New members need education in several unique aspects of healthcare man- agement, particularly the board roles in monitoring quality.30 There are also issues unique to the particular institution. While new members should bring fresh perspectives, they should not operate in ignorance of history. New-member orientation programs include tours, introductions to key personnel, conveyance of written documents and texts, and planned conver- sations and presentations. A typical list of subjects is shown in exhibit 4.6. Catholic Health Initiatives, a successful HCO system operating in 20 states, mandates a three-day off-site training program for each new trustee in their member HCOs.31
Ongoing board education sets meeting time aside to explore new ideas and best practices—often using consultants. To be effective, formal programs for board members should follow certain rules. Brevity is essential. Small segments should be scheduled for each specific topic. Most important, members should be active participants. Questions should be encouraged, the style should be conversational, and the discussion should be extended over several sessions. Both orientation and ongoing board education should be evaluated.
Mission, Role, and History of HCOs
What healthcare organizations give to the community
Difference between for-profit, not-for-profit, and government ownership
HCO–Physician Relations Nature of contract between doctors and
healthcare organizations Concept of peer review Trustee responsibilities for the clinical
staff
How HCOs Are Financed Operating funds Private insurance Government insurance Uninsured patients Sources and uses of capital
funds
Functions of the Governing Board Maintain management capability Establish the mission, vision, and values Approve the corporate strategy and annual
implementation Ensure quality and appropriate medical
care Monitor organizational performance Continuously improve board performance
How HCOs Strive for Excellence Quality and safety agenda Service lines Empowerment and transforma-
tional management culture Performance measurement Continuous improvement
Duties of Trustees Duty of trust Duty of prudence Conflict of interest Fiduciary and compliance duties Trustee liability
EXHIBIT 4.6 Board Member
Orientation
Subjects
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After orientation, most board members’ learning is informal and on the job. Well-organized boards make committee appointments carefully, allowing new members to become acquainted with the organization in less demanding assignments. The board fills chairs with experienced members; they use chairs and organization executives to help members learn as they serve. The four critical committees—executive, quality, finance, and nomi- nating—should be composed of the more seasoned board members, and their chairs should be members nearing the end of service. The nominating committee is frequently the last service of former officers.
In addition to on-the-job learning, high-performing HCOs now include educational programs for the board in their agenda. These serve to clarify specific situations, keep the board current with national and regional trends, and provide background on complex issues. Many disagreements between stakeholders stem from avoidable misunderstandings and ambigui- ties of positions. Thus, the “backgrounding” helps the board make clearer, less controversial decisions.
Measures
Board performance is measured primarily by the strategic scorecard. Values on the scorecard should be improving and approaching benchmark. If they are stagnant or declining, the board must negotiate more aggressive goals and explore with management or outside consultants how to achieve them. Specific OFIs for the board arise from the measures proposed by authors Bryant and Jacobson (see exhibit 4.3). Many OFIs arise from qualitative comments; the board’s nominating committee identifies and prioritizes them in its review processes.
Managerial Leadership
The board’s continuous improvement function, structure, and educational program described in this chapter are all designed to increase board effective- ness. They have all been used effectively by high-performing HCOs—that is, those that are near benchmark on strategic performance measures. They help many boards overcome the pitfalls of governance: incomplete information, inability to reach decisions, and unbalanced response to stakeholder needs. Even with them, boards and senior management must be vigilant to help the board make the best decisions.
Operating Discipline Board and senior leadership keep the board on schedule by careful prepara- tion, design of the agenda, subcommittees, and personal negotiation. Most
Chapter 4: Establ ishing Strategic Governance 129
board actions are by consensus—unanimous agreement—rather than by a majority vote. This policy gives minority positions substantial power. A com- mitted minority can successfully stall a position valuable to the whole. In the worst case, when several stakeholder groups use this possibility, the board becomes a deliberate weapon to avoid change. Leadership works carefully to build consensus, using individual negotiation, subcommittees, and com- mittees to build consensus. As a result, most issues are clearly understood, and specific stakeholder concerns have been addressed when final actions are taken. It is rarely necessary to present a controversial issue.
Preparation Senior leadership is responsible for preparing appropriate factual docu- mentation for every agenda item. These leaders have the responsibility for conducting environmental surveillance, identifying issues, analyzing and developing proposals, and understanding the needs of the community. Staff is used extensively to gather and disseminate facts and to identify potential conflicts. Establishing the fact base is a major justification for the strategic support activities described in chapters 10 through 15. Not only does it provide the due diligence that foresees and avoids implementation problems, but it also identifies potential conflicts and opens alternatives for negotiated solutions.
The other aspect to preparation is general rather than specific to the issues at hand. Most issues take meaning from context; the better the environment and the decision-making processes are understood, the bet- ter the specific decision is likely to be. Thus, board selection and education are important preparation. Well-managed boards begin major issues with backgrounding. They balance the importance of the issue with the team managing it. They frequently pair inexperienced and experienced members to facilitate on-the-job learning.
Focused Agendas The actual agenda management falls heavily on the board chair, the commit- tee chairs, and the CEO. A discussion may have any of several outcomes in view: general education and backgrounding, exploration of controversial or complex topics, a plan to develop a proposal through committees, or action on specific proposals. Both the outcome and time allotment are made clear to the board at the start of the discussion. A major issue may come before the board for each of these outcomes as it evolves, is understood, and is finally resolved.
Successful boards tend to focus on major issues one at a time, attempt- ing to comprehend all aspects of the single issue and reach a consensus under- standing of it. Meetings feature a few issues or a single issue in depth, rather than a superficial review of several topics. Ongoing information not related to the priority issues is often consolidated into a consent agenda—a group of
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reports passed without discussion. Members may request to remove a matter from the consent agenda if they have a specific concern. Such requests are rare and are usually granted by the chair or by motion of the board.
Retreats are effective as devices to focus board attention. They can be held in comfortable off-site settings, emphasizing the departure from usual practice. Longer sessions allow fuller presentation of issues and background. Additional representatives of clinical staff and management can be invited, facilitating understanding, acceptance, and implementation of the final deci- sion. Consultants and guests from the community can be used to expand knowledge of factual and political issues.
Use of Committees and Subcommittees The purpose of the focused agenda is not to suppress debate or force inad- equately prepared decisions but to ensure that no aspect of the board’s functions is neglected at the expense of discussion that can be completed in a less central environment. Thus, issues that arise from board discussion are referred to standing or ad hoc committees—and within these committees, to subcommittees or to less formal discussion. Moving the issue away from the boardroom allows more voices to be heard, more alternatives to be explored, and more candid expressions of viewpoints.
Senior leadership plays a critical role in this process. It identifies stakeholders with interests and brings them to the committees. It seeks best practices that demonstrate the ways others have solved the issues. It painstak- ingly explores positions, developing the understanding that is the first stage of negotiating solutions.
Negotiation Progress usually involves designing proposals that meet most or all stake- holder needs and do not impair the special needs of any one group. Propos- als that might generate powerful resistance are avoided. Compromise is the rule; radical reform is rare. Although this realism slows progress, it is inherent in the culture of respect. The fact that HCOs that use this model succeed shows that there are avenues where material progress can be made. Extensive negotiation is often necessary to find them. Negotiation takes place at all levels, from individual meetings to major committees, but rarely in the board meeting itself. Senior managers often negotiate directly to shape proposals that will gain consensus. Their skill at shaping consensus proposals and then implementing them “as advertised” is a major factor in maintaining stake- holder loyalty.
Legal and Ethical Issues of Board Membership Three areas of legal and ethical concern are known to create governance difficulties:
Chapter 4: Establ ishing Strategic Governance 131
1. Conflict or duality of interest, where a board member has a personal financial gain or risk in the decision at hand.
The duty of trust holds that members of governing boards should not serve when their personal financial interests conflict with those of the owners. Conceptually, this is clear enough. In practice, it is hard to find people who meet the criteria for board membership but who have not also become involved in activities that eventually will conflict. Conflict of interest is inherent in any democratic structure, and it cannot be permanently resolved. Each member annually declares in writing her major activities and holdings. Individuals are expected to disqualify themselves from discussion and voting on an issue whenever appropriate, but they may be asked to do so by the chair or another member. Good practice calls for an announcement of conflicts at each board meeting, with attention to the specific agenda. It is generally agreed that the external auditor and the legal counsel should not serve as board members.
2. Inurement, where a board member improperly receives financial gain from the assets of a corporation.
Inurement rules apply to not-for-profit corporations. Actions by trustees that lead to their personal financial gain can be inurement. Inurement often means compensation in excess of the market value provided. The IRS monitors executive and other high-level salaries and can deny tax-exempt status to an organization that allows inurement.
3. Conversions, where the assets of a not-for-profit corporation are transferred to a for-profit corporation at less than their true value.
Conversion (when not-for-profit assets are converted to for- profit ownership) and consolidation (when one corporation merges with another, regardless of tax structure) raise important questions of fairness to the owners. Because of this, they place trustees and directors at unusual risk. Boards usually hire special legal counsel skilled in these transactions.32 Large-scale conversions and consolidations often require regulatory or judicial review.
Lawsuits over these matters serve to reinforce the ethical duties. Board members can be sued as individuals, although such suits are rare. Lawsuits must demonstrate a trustee’s failure in one or more of the three duties of prudence, trust, and control, such as failing to take due care, deliberate self- serving, or unnecessarily risky behavior. The board’s legal counsel should guard against individual liability as well as guide the board as a whole. Direc- tors’ and officers’ liability insurance provides legal and financial assistance against suits that might be placed.
Carrying out the management and leadership activities delegated by the board is a demanding professional career (and is the subject of the
The Wel l -Managed Healthcare Organizat ion132
remaining 11 chapters). The resources that HCOs use to carry them out cost as much as or more than many clinical activities but are arguably more important. Delivering babies is important, but only if the mothers and babies receive safe, effective, patient-centered, timely, efficient, and equitable care. Those goals are met through the processes that the board starts and that management carries out.
Practice Applications
These questions are about applying the chapter content. It’s often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. Should every community have its own HCO with its own mission, or should HCOs be like Walmart stores, where the mission is universal? If there is a virtue to an individual mission, what is it and how should a local govern- ing board establish a mission?
2. A prominent business leader who is being considered for trustee says, “This mission/vision/value stuff is really just window dressing. The HCO’s mission is obvious. Stakeholders’ lives won’t change if you don’t have vision and values statements. You probably don’t pay much attention to them any- way.” Should the CEO reply? If so, how?
3. Consider board decisions like the mission, scope of service, corporate structure, and annual plan. What does senior leadership contribute to these discussions? How does the board evaluate that contribution? What makes the relationship between the board and leaders effective, and what erodes the relationship?
4. How does the CEO respond to a board member who says, “We can’t have better quality without spending more money”? What about one who says, “I think we should leap to benchmark on [a dimension the member thinks is important]”? What should the CEO do if some board members feel that certain negotiated goals at step 6 of exhibit 3.7 are insufficient?
5. Why should the governing board evaluate its own performance? How does a board build in self-evaluation so that it is not overlooked? Should a board use both the strategic scorecard and the ten measures in exhibit 4.4 to evaluate its work?
Additional Resources
American Hospital Association. 2018. “Welcome to AHA Trustee Services!” Accessed August 28. http://trustees.aha.org.
Chapter 4: Establ ishing Strategic Governance 133
. 2015. “Leadership Toolkit for Redefining the H: Engaging Trustees and Com- munities.” Accessed August 28, 2018. https://www.aha.org/system/files/2018 -01/redefining-h-with-appendix.pdf.
Bjork, D. A. 2012. Healthcare Executive Compensation: A Guide for Leaders and Trustees. Chicago: Health Administration Press.
Hinton, J. 2015. “Governance Resilience: The Presbyterian Journey.” Frontiers of Health Services Management 31 (4): 18–28.
LeBlanc, R., and J. Fraser (eds.). 2016. The Handbook of Board Governance: A Compre- hensive Guide for Public, Private, and Not-for-Profit Board Members. Hoboken, NJ: John Wiley & Sons.
Prybil, L., F. K. Ackerman Jr., D. A. Hastings, and J. G. King. 2013. The Evolving Accountability of Nonprofit Health System Boards. Chicago: American Hospital Association Center for Healthcare Governance.
Notes
1. Kane, N. M., J. R. Clark, and H. L. Rivenson. 2009. “The Internal Processes and Behavioral Dynamics of Hospital Boards: An Exploration of Differences Between High- and Low-Performing Hospitals.” Health Care Management Review 34 (1): 80–91.
2. Alexander, J. A. 1990. “Governance for Whom? The Dilemmas of Change and Effectiveness in Hospital Boards.” Frontiers of Health Services Management 6 (3): 39.
3. Alexander, J. A., and S.-Y. D. Lee. 2006. “Does Governance Matter? Board Con- figuration and Performance in Not-for-Profit Hospitals.” Milbank Quarterly 84 (4): 733–58. See also Alexander, J. A., Y. Ye, S.-Y. D. Lee, and B. J. Weiner. 2006. “The Effects of Governing Board Configuration on Profound Organizational Change in Hospitals.” Journal of Health and Social Behavior 47: 291–308.
4. Bjork, D. A. 2012. Healthcare Executive Compensation: A Guide for Leaders and Trustees. Chicago: Health Administration Press.
5. Bader, B. S., and E. Zablocki. 2018. Best Practices for Board Oversight of Executive Compensation. American Hospital Association. Accessed August 23. http://trustees .aha.org/execperformance/archive/oversight_exec_compensation.pdf.
6. Sibbald, S., C. Wathen, and A. Kothari. 2017. “Managing Knowledge in Transi- tions: Experiences of Health Care Leaders in Succession Planning.” Health Care Management Review 36 (3): 231–37. doi:10.1097/HCM.0000000000000167.
7. Dreachslin, J., R. Weech-Maldonado, J. Gail, J. Epane, and J. Wainio. 2017. “Blue- print for Sustainable Change in Diversity Management and Cultural Competence: Lessons from the National Center for Healthcare Leadership Diversity Demonstra- tion Project.” Journal of Healthcare Management 62 (3): 171–83. doi:10.1097/ JHM-D-15-00029.
8. Alexander, J. A., S-Y. D. Lee, V. Wang, and F. S. Margolin. 2009. “Changes in the Monitoring and Oversight Practices of Not-for-Profit Hospital Governing Boards 1989–2005: Evidence from Three National Surveys.” Medical Care Research and Review 66 (2): 181–96. doi:https://dx.doi.org/10.1177/1077558708326527.
9. For more information, see The Joint Commission’s website at www.jcrinc.com. 10. Centers for Medicare & Medicaid Services. 2017. “Hospital Inpatient Qual-
ity Reporting Program.” Modified September 19. www.cms.gov/Medicare/
The Wel l -Managed Healthcare Organizat ion134
Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Hospital RHQDAPU.html.
11. Tsai, T. C., A. K. Jha, A. A. Gawande, R. S. Huckman, N. Bloom, and R. Sadun. 2015. “Hospital Board and Management Practices Are Strongly Related to Hos- pital Performance on Clinical Quality Metrics.” Health Affairs 34 (8): 1304–11. doi:10.1377/hlthaff.2014.1282.
12. Marren, J. P., G. L. Feazell, and M. W. Paddock. 2003. “The Hospital Board at Risk and the Need to Restructure the Relationship with the Clinical Staff: Bylaws, Peer Review and Related Solutions.” Annals of Health Law 12 (2): 179–234.
13. Patrick v. Burget et al. 1988. 486 U.S. 94, No. 86-1145, Supreme Court of the United States.
14. Griffith, J. R. 2017. “An Organizational Model for Excellence in Healthcare Deliv- ery: Evidence from Winners of the Baldrige Quality Award.” Journal of Healthcare Management 62 (4): 328–42.
15. Public Company Accounting Reform and Investor Protection Act, Pub.L. 107–204, 116 Stat. 745; 2002.
16. Alexander, J. A., G. J. Young, B. J. Weiner, and L. R. Hearld. 2008. “Governance and Community Benefit: Are Nonprofit Hospitals Good Candidates for Sarbanes- Oxley Type Reforms?” Journal of Health, Politics, Policy, and Law 33 (2): 199–224. doi:https://dx.doi.org/10.1215/03616878-2007-053.
17. Evashwick, C. J., and K. Gautam. 2008. “Governance and Management of Com- munity Benefit.” Health Progress 89 (5): 10–15.
18. Jiang, H. J., C. Lockee, and I. Fraser. 2012. “Enhancing Board Oversight on Qual- ity of Hospital Care: An Agency Theory Perspective.” 2012. Health Care Manage- ment Review 37 (2): 144–53. doi:https://dx.doi.org/10.1097/HMR .0b013e 3182224237.
19. Millar, R., R. Mannion, T. Freeman, and H. T. O. Davies. 2013. “Hospital Board Oversight of Quality and Patient Safety: A Narrative Review and Synthesis of Recent Empirical Research.” Milbank Quarterly 91 (4): 738–70. doi:https://dx.doi .org/10.1111/1468-0009.12032.
20. Bryant, L. E., Jr., and P. D. Jacobson. 2005. “Measuring Nonprofit Health Care Governance Effectiveness: How Do You Know a Good Thing When You See It? Ten Easy Measures of Nonprofit Board Conduct.” Modern Healthcare supplement, December.
21. Lockee, C. 2008. “Board Structures and Practices: Insights from the 2007 Biennial Survey of Hospitals and Healthcare Systems.” Healthcare Executive 23 (2): 62–64.
22. Volunteer Protection Act of 1997 (P. L. 105-119). 23. Collum, T., N. Menachemi, M. Kilgore, and R. Weech-Maldonado. 2014. “Man-
agement Involvement on the Board of Directors and Hospital Financial Perfor- mance.” Journal of Healthcare Management 59 (6): 429–45.
24. Bai, G., and R. Krishnan. 2015. “Do Hospitals Without Physicians on the Board Deliver Lower Quality of Care?” American Journal of Medical Quality 30 (1): 58–65. doi:https://dx.doi.org/10.1177/1062860613516668.
25. Whitehead, R. J., and B. Humphrey. 1997. “IRS Eases Rules for Physician Repre- sentation on Governing Boards.” Healthcare Financial Management 51 (3): 36–39.
26. Jiang, J., C. Lockee, K. Bass, and I. Fraser. 2009. “Board Oversight of Quality: Any Differences in Process of Care and Mortality?” Journal of Healthcare Management 54 (1): 15–29.
27. Burns, L. R., and R. W. Muller. 2008. “Hospital–Physician Collaboration: Land- scape of Economic Integration and Impact on Clinical Integration.” Milbank Quar- terly 86 (3): 375–434. doi:10.1111/j.1468-0009.2008.00527.x.
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28. Saint Luke’s Hospital. 2003. “Saint Luke’s Hospital of Kansas City.” National Insti- tute of Standards and Technolgy. Accessed September 12, 2018. www.nist.gov/ sites/default/files/documents/2017/10/11/Saint_Lukes_Application_ Summary .pdf.
29. Griffith, J. R., and K. R. White. 2003. Thinking Forward: Six Strategies for Highly Successful Organizations. Chicago: Health Administration Press.
30. Evashwick and Gautam 2008. 31. Griffith and White 2003. 32. Bryant, L. E., Jr. 1998. “Responsibilities of Directors of Not-For-Profit Corpora-
tions Faced with Sharing Control with Other Nonprofit Organizations in Health Industry Affiliations: A Commentary on Legal and Practical Realities.” Annals of Health Law 7: 139–58.
SECTION
II CLINICAL EXCELLENCE
CHAPTER
139
CRITICAL ACTIONS
5 FOUNDATIONS OF CLINICAL EXCELLENCE
1. Support evidence-based patient management guidelines to deliver patient care:
• Assist care providers in establishing a complete, accurate diagnosis for each patient.
• Maintain a library of electronically accessible evidence-based patient management guidelines.
• Promote interdisciplinary plans of care and case management for individualized, patient-centered care.
2. Use functional protocols to ensure safe, effective, patient-centered, timely, efficient, and equitable care:
• Standardize evidence-based care processes.
• Educate care providers to achieve uniform care and high-reliability results using standard work.
• Integrate care processes across professional boundaries.
3. Continuously improve clinical care:
• Support an individualized plan of care for each patient.
• Measure and benchmark outcomes and effective care processes.
• Assist empowered care providers to identify opportunities and coordinate changes in care.
• Provide measures of clinical performance to identify opportunities for improvement.
4. Support an empowered culture of evidence-based medicine and evidence-based management:
• Organize interprofessional care teams in clinical service lines.
• Maintain a transformational culture for discussion, adaptation, and conflict resolution.
• Set clinical excellence goals, support improvement teams, and reward improvement.
The Wel l -Managed Healthcare Organizat ion140
5. Strengthen population health:
• Expand and coordinate comprehensive ambulatory care.
• Develop coalitions to promote population health.
• Measure and improve the HCO’s contribution to population health.
Purpose
The first purpose of any HCO is excellence in healthcare. Specifically, the vision that should guide every interprofessional care team is to
identify and meet each patient’s healthcare needs, and to
provide safe, effective, patient-centered, timely, efficient, and equitable care.
Excellent HCO leadership supports care teams to make the vision reality, helping each care provider perform effectively, building teams that collabo- rate, providing the information and communication, integrating the efforts of the multiple teams that most patients will need, and maintaining the envi- ronment of care. As of 2015, few HCOs had come close to the vision.1 As Mark R. Chassin, MD, president of The Joint Commission, puts it, “Quality and safety problems in healthcare continue to routinely result in harm to patients. Desired progress will not be achieved unless substantial changes are made to the way in which quality improvement is conducted.”2
The “substantial changes” to achieve the vision are well documented. Excellence requires
• skilled physicians and independent practitioners who can diagnose disease from symptoms and complaints,
• trained interprofessional care teams who can identify and respond to patients’ needs,
• complete and timely health records, • evidence-based patient care guidelines as foundations for integrated
care plans, • functional guidelines and standard work that ensures uniform delivery
of care, • ongoing efforts to listen to patients and team empowerment to meet
each patient’s unique needs, and • effective collaboration in and across teams.3
Any one of these can fail, and any failure will prevent excellence. Perhaps the biggest challenge is creating an overall culture of high reliability, where each
Chapter 5: Foundations of Cl in ical Excel lence 141
of the seven elements not only happens routinely but is integrated with the other six.4
Many excellent HCOs extend their mission to a second, broader pur- pose: to improve population health—that is,
to identify and meet the community’s healthcare needs.
Implementing the population health purpose requires excellence in care. It goes beyond to minimize unnecessary use of health services through col- laborative efforts to promote health, prevent disease, and curtail unnecessary treatment.
The HCOs that are models for The Well-Managed Healthcare Orga- nization have a solid record of top-quartile results.5 Their approach, trans- formational culture (chapter 2) and continuous improvement (chapter 3), is the only documented path to high reliability. Building on their experiences, chapter 5 explains the evidence-based model of twenty-first-century care. Chapter 6 discusses the arrangements between the HCO and its care leaders— physicians, nurse practitioners, physician assistants, and other care providers licensed to manage patient care and lead care teams. Chapter 7 describes the role of nursing; chapter 8 the contribution of clinical support services, such as imaging and pharmacy; and chapter 9 the extension of excellence in care to population health. The following chapters, on knowledge management, human resources, and environment of care, are also essential to high reliability.
Functions
Exhibit 5.1 describes five functions of an HCO’s clinical organization that support excellence in care and also provide a foundation for population health. The following sections explore these functions in greater depth: ensuring accurate diagnosis; providing excellent treatment that is safe, effec- tive, patient centered, timely, efficient, and equitable; individualizing patient care planning and treatment; improving population health; and improving clinical performance.
Ensure Accurate Diagnosis Diagnosis, the process of determining the nature of disease, drives all of evidence-based medicine. The codification of disease initiated by physician Thomas Sydenham in the seventeenth century and now implemented by the International Classification of Diseases, version 10, provides the founda- tion for all treatment.6 Identifying a correct and complete diagnosis is not simple. Doing so integrates information from the patient’s reason for seeking healthcare, his history, a physical examination, and the results of diagnostic
The Wel l -Managed Healthcare Organizat ion142
Function Description What the HCO Does
Ensure accurate diagnosis
Ongoing heuristic pro- cess driven by observa- tion and interaction with the patient; establishes initial treatment plan and identifies each patient’s needs
Selects effective LIPs as care provider leaders
Monitors care provider leader effectiveness
Provides training to maintain and improve clinical skills
Supports responsive listening to patients’ needs
Provides diagnostic clinical support services
Provide excellent care
Individual care activities performed according to guidelines and func- tional protocols so that care needs are uniformly fulfilled in a way that is safe, effective, patient centered, timely, effi- cient, and equitable
Maintains access to current, evidence-based guidelines
Trains care provider in the use of guidelines
Promotes patient safety and minimizes risks
Protects patient privacy and establishes informed consent
Maintains logistic support and current patient records
Provides nursing care Integrates care from multiple
service lines
Individualize patient care planning and treatment
With ongoing t reatment, patient variability addressed by continued monitoring, individual- ized and interprofes- sional plans of care, and case management
Provides specialist consultation Integrates medical and nursing care Supports communication between
care providers, patient, family, and subsequent care providers
Improve population health
Community-wide approaches promote healthy behavior, prevent injury and disease, and promote cost-effective use of services; HCO collaborates with other community organizations
Identifies community health needs with measures and benchmarks
Catalyzes community interest Collaborates with other
organizations Promotes effectiveness Discourages unnecessary care
Improve clinical performance
HCO measures and benchmarks to iden- tify OFIs that are then addressed by PITs; training improves performance; success is rewarded
Supports measurement and benchmarking
Supports PITs Uses guidelines, training, and
incentives to implement improved methods
Note: HCO = healthcare organization; LIP = licensed independent practitioner; OFI = opportunity
for improvement; PIT = process improvement team.
EXHIBIT 5.1 Functions of
the Clinical
Organization
Chapter 5: Foundations of Cl in ical Excel lence 143
testing. It is ongoing and heuristic—that is, it systematically employs a trial- and-error mechanism that recognizes uncertainty and proceeds cyclically as more information is gathered. Exhibit 5.2 shows the major steps in the diagnostic process.
Although exhibit 5.2 is a useful conceptual model, most real care is substantially more complicated. Several additional considerations are critical to understanding the realities of modern patient care.
Differential diagnosis: List possible diseases ranked from most to
least likely.
Diagnostic testing: (laboratory, imaging, diagnostic study, or
specialist consultation) Con�rm or correct
differential diagnosis.
Treatment is begun on con�rmed diagnoses by initial caregiver or specialist referral.
Progress monitored by observation, listening, or
diagnostic testing.
Review complaint, history, and physical.
Patient arrives with complaint.
Initial heuristics try various possible diagnoses
against observation of the patient and diagnostic
testing.
Subsequent heuristics monitor patient’s progress
by observation and continued testing.
Discharge: No further options are available to improve patient’s condition.
D iff
er en
tia l d
ia gn
os is
r ev
is ed
b as
ed o
n pa
tie nt
p ro
gr es
s.
D iff
er en
tia l d
ia gn
os is
r ev
is ed
ba se
d on
t es
t re
su lts
. EXHIBIT 5.2 Simplified
Diagnostic
Process
The Wel l -Managed Healthcare Organizat ion144
• Diagnosis is subject to improvement and refinement as more diagnostic information is obtained. Although the diagnosis becomes surer as the patient progresses, revision to the plan of care remains possible. Actual care is much more dynamically heuristic than the figure suggests. The primary care provider begins constructing the diagnosis when the patient walks in, and then she adds or rules out possibilities almost continuously as examination and care progress. Many patients have multiple problems and multiple diagnoses. The list of diagnoses is more often “evolving” than “final.”
• The differential diagnosis, introduced around the start of the twentieth century, lists the several possible diagnoses consistent with the patient’s complaint and symptoms, with the most likely first. Further examination and testing rule out the less likely candidates. Those that remain identify the appropriate plan of care.7
• Nursing provides additional diagnoses that are often important in reaching full recovery (chapter 7). Nursing diagnosis follows a different logic and structure from medical diagnosis. It often addresses social, emotional, and attitudinal problems that complicate care and that must be solved to achieve excellence.
• Clinical support services provide diagnostic testing to confirm or rule out each of the listed diagnoses. Specialists perform and interpret these tests. They and treatment specialists are available as consultants to the primary care team.
• Definitive treatment for serious disease often involves referral to a treatment specialist such as a surgeon. The treatment specialist typically manages a specific diagnosis and returns care to the primary team when that treatment is complete. Ongoing care of chronic illness is typically managed by the primary care team, often coordinating several specialists.
For many patients the diagnostic process is a team effort. Consul- tants, support services, and nurses collaborate to identify and address all the patient’s care needs.
The process meets the National Academy of Medicine (previously, IOM) goals when the following milestones are achieved:
• No treatable diagnosis is overlooked. • No diagnosis is treated that should have been ruled out. • The nursing diagnosis addresses additional needs critical to recovery. • The patient or patient’s advocate is fully informed about the diagnoses
and allowed to exercise control over treatment selection. • All decisions are reached in a timely manner. • All diagnostic tests are safe, effective, and efficient.
Chapter 5: Foundations of Cl in ical Excel lence 145
All failures in diagnosis are costly. Some are very costly, and a few shorten life. High-performing HCOs use their clinical, logistic, and strategic support systems to reduce failures.8 Excellent HCOs reach high performance by relying on the following four steps:
1. Empowerment for all care providers, establishing a blame-free culture and ensuring that issues impairing each care provider’s best effort are promptly corrected
2. Credentialing, training, and quality review (chapter 6) to verify and increase care leaders’ qualifications and improve performance
3. Success as “a great place to give care” to recruit and retain well- qualified care providers; steps 1 to 3 create a culture where care providers do their best
4. Ongoing learning and continuous improvement to improve skills; process improvement teams (PITs) become team efforts to reach benchmark by careful analysis and improvement of processes
Provide Excellent Care Three major functions—using evidence-based guidelines for care planning, using functional protocols to standardize clinical and other work practices, and providing appropriate and continuous training and education of care providers—are fundamental to safe, effective, patient-centered, timely, effi- cient, and equitable care.
Patient Management Guidelines Clinical activities are specific responses to patient stimuli. Hypothetical iden- tical patients should receive the same diagnoses and the same care, with every care activity delivered identically. Uniformity is achieved through patient management guidelines and functional protocols, though it does not pre- clude adjustments for patient differences. In fact, there never have been, nor will be, two identical patients, but the uniform guidelines and protocols provide foundations for the individualization of care.
Patient management guidelines (also called pathways, or simply guidelines) are now the standard of care for most diseases. Guidelines present several advantages. First, they apply the professional consensus of best practice for treating a specific diagnosis. The consensus makes cooperation possible and is essential to sophisticated teamwork. Second, they provide the basis for monitoring processes. Many guideline steps are recorded and can be tallied. Specific completion failures can be identified as opportunities for improve- ment. Third, guidelines are a convenient statement of contracts with patients
Patient management guidelines Formally established expectations that define the normal steps or processes in the care of a clinically related group of patients, includ- ing “recommendations intended to optimize patient care that are informed by a systematic review of evidence and an assessment of the benefits and harms of alternative care options.”9
The Wel l -Managed Healthcare Organizat ion146
and insurers. The courts and the marketplace have reinforced the right of consumers to have their care conform to clinical standards developed by professionals. The use of guidelines has supported shorter inpatient stays and improved survival rates; less expensive sites for care, such as rehabilitation hospitals, same-day surgery programs, and palliative care options; and alter- natives to expensive and high-risk treatments.
Patient management guidelines are classified by diagnosis, but also by symptom or condition, such as chest pain or pregnancy. They are organized around episodes of patient care, such as preventive, inpatient, or continuing care. They specify the components of care, expected outcomes, and proce- dural quality measures. Guidelines are usually developed by multidisciplinary teams and written to be easily communicated among the interprofessional care team.
Patient management guidelines improve individual care provider per- formance in five ways:
1. The guideline is supported by training and becomes habitual as a starting point for similar patients.
2. Several professions can use it to anticipate and coordinate care events. 3. Care providers can use it as shorthand or an outline to guide their
decisions and their communications to others. 4. The guideline forms the foundation for the interdisciplinary plan of
care (IPOC) developed for each patient; team members modify the guideline to meet individual patients’ needs. The IPOC improves communication by highlighting the patient’s exceptions to the guideline.
5. The guideline defines process measures of performance and incorporates information collection that can be used for its evaluation and improvement. The individualized plans also contribute information for guideline revision.
Several hundred conditions now have nationally promulgated guide- lines that serve as a basis for local review and implementation. Many condi- tions have several published guidelines. Well-managed inpatient HCOs have guidelines in place for several dozen of their most common conditions. The National Guideline Clearinghouse (NGC) provides a web-based library of guidelines contributed by a medical specialty association; relevant profes- sional society; public or private organization; government agency at the federal, state, or local level; or healthcare organization or plan. Listed guide- lines must be based on a systematic review of evidence as demonstrated by documentation of specific requirements and an assessment of benefits and harms of treatment and alternative options, and they must be in English.10 However, due to budget cuts during the Trump administration, the future of the NGC is unclear. The Institute for Clinical Systems Improvement has
Chapter 5: Foundations of Cl in ical Excel lence 147
also developed and published guidelines since 1993. One of their guidelines is shown in exhibit 5.3.
No guideline should ever be implemented without careful review of the implications of using it in a specific HCO. The review should be under- taken by a PIT representing all potential users. Guidelines following stepwise therapy (i.e., try alternative A; if it is not successful, use B) should meet ethi- cal standards to protect the patient.11 The PIT should explore all the ramifi- cations of the guideline, including local trials as necessary. The development process encourages learning, promotes discussion of the debatable issues, and builds consensus. It pilot tests the proposed guideline against current practice and identifies supply, equipment, and training needs.
Guidelines must be reviewed regularly to identify changes in the evidence for specific practices. The local PIT is reassembled periodically to consider these changes.
Functional Protocols Functional protocols, also called standard work, are step-by-step procedures for specific components of care—ranging from the simplest, like handwash- ing, to complex and dangerous treatments, like surgery and cancer therapy. Exhibit 5.4 is an example of a functional protocol.
Excellent HCOs maintain large numbers of functional protocols, supporting web access for easy reference. Functional protocols are major contributors to patient safety. Many patient care failures—from falls to infec- tions to wrong-site surgery to drug errors—can be traced back to absent, incomplete, inaccurate, or overlooked steps in the work process. These fail- ures cause tens of thousands of undesirable outcomes each year.12 Functional protocols prevent these failures through several different mechanisms:
• Eliminating unnecessary or redundant steps • Preventing omissions and promoting safety (alerting for tasks that
might be overlooked or omitted) • Improving patients’ reactions by identifying signs or symptoms of
unsuccessful response • Standardizing supplies, with savings through lower prices, inventory,
and training costs • Scheduling or sequencing to reduce errors or delays • Substituting lower-cost personnel for specific activities • Reengineering the care process (a revised protocol may combine and
revise several earlier versions, requiring substantial investment but improving care overall)
• Eliminating unnecessary procedures by making the indications or authorizations more restrictive (e.g., protocols for expensive drugs and diagnostic tests can require failure of less costly alternatives, prior approval, or a formal second opinion)
The Wel l -Managed Healthcare Organizat ion148
Psychotherapy strategies
Complementary and integrative
medicine
Physical rehabilitation modalities
Interventional treatment
Pharmacologic treatment
7 Develop pain
treatment plan
Return to patient engagement to re-establish
treatment goals
Return to pain assessment
• Reassess treatment plan • Consider multidisciplinary team
referral, and/or a pain medicine specialist
Goals met? • Function • Comfort • Barriers
Coordination of Care and Follow-Up
• Proactive management of condition and col- laborative care referrals
• Team-based patient care • Follow-up and communication plan • Periodic reassessment of goals and function
Ongoing pain management as
needed
ICSI Institute for Clinical
Systems Improvement
Pain Treatment Plan Algorithm
8 9 10 11 12
Is care plan implemented as planned?
Is diagnosis correct?
Shared decision-making
Shared decision-making
14
Opioid management (see Acute Opioid
Treatment Algorithm
13
no no
yes
yes
yes
no
Consider opioids if: • Other treatments
are not sufficient • Emergent pain
relief is indicated
Shared decision-making
EXHIBIT 5.3 Pain:
Assessment,
Nonopioid
Treatment
Approaches,
and Opioid
Management
Source: Copyright 2017 by ICSI.13
Chapter 5: Foundations of Cl in ical Excel lence 149
Physician collaborates with healthcare team on best use
of medication.
Physician writes medication order.
Pharmacy receives order.
Clari�cation with physician
Order correctedLabel is generated and sent to IV room for preparation.
Medication and label are checked by pharmacist for accuracy.
Medication is delivered to nursing unit.
Nursing reviews order and administers a medication.
Patient responds to medication.
Patient improves and is discharged.
NO
YES
Nursing documents the administration.
Medication is prepared by trained
technical staff.
Is order appropriate?
Quality Factors Pharmacist continuing education Protocols, algorithms, and standards
Pharmacist reviews order for appropriate use, dose, potential for adverse events, cost-effectiveness.
RN is alerted to new order.
Staff Quality Factors Certi�cation of training
Internally developed training program Recerti�cation of technicians
Support Quality Factors
Certi�cation of laminar hoods IV room particulate
counts Sterile preparation area procedures
Product selection
Routine IV room cleaning
Patient response is positive?
EXHIBIT 5.4 Functional
Protocol for
Medication Order
and Fulfillment
Note: IV = intravenous; RN = registered nurse.
The Wel l -Managed Healthcare Organizat ion150
Computerized order entry and medication reconciliation systems are examples of procedure improvements in drug administration. The new sys- tems have better alerts to guard against prescribing the wrong drug, admin- istering the wrong dose, or recording the dose incorrectly. The result is both lower cost and higher quality.14
Good functional protocols have the following seven components:
1. Authorization—statement of who may order the procedure 2. Indication—statement clarifying clinical conditions that are appropriate
use of the protocol 3. Contraindications—conditions where the procedure must be modified,
replaced, or avoided 4. Required supplies, equipment, and conditions—all special requirements
and how they will be met 5. Actions—clear, step-by-step statements of what must be done 6. Recording—instructions for recording the procedure and observation
of the patient’s reaction 7. Follow-up—subsequent actions, including checks on the patient’s
response, measures of effectiveness, indications for repeating the procedure, and disposal or cleanup of supplies
The profession most directly involved usually establishes the func- tional protocol, based on best and most recent evidence. Modification may be necessary to accommodate the equipment and facilities or the patient population of a specific HCO. In many cases, the profession involved can apply the protocol without assistance. A PIT may be required to resolve interactions with other care providers and care support teams.
Sets of interrelated functional protocols have become more common- place. Surgical care provides several examples. Preoperative care uses proto- cols to obtain informed consent, instruct the patient, obtain final diagnostic values from lab and imaging studies, complete the preanesthesia examination, and administer preoperative medications. To perform surgery without delay, each activity must be orchestrated to occur at the earliest possible time and in the proper order. The preoperative care process requires advance agreement on the tasks and their order among several clinical support and medical pro- fessions. Many of these agreements are independent of the patient’s specific disease. They become components of patient management guidelines for several hundred surgical procedures.
The flow process design of exhibit 5.4 is popular in guidelines and protocols because it shows the sequencing and conditional relationships of each step. The protocols are web based and accessible. Reference to the flow process is superior to memory. Refinements—detailing activity by the calen- dar or day of stay, for example—are also used.
Chapter 5: Foundations of Cl in ical Excel lence 151
Checklists Checklists are functional protocols focused on patients rather than proce- dures. A checklist is used in the surgical time-out to verify several critical elements, such as the identity of the patient, nature of the surgery, and any relevant additional conditions. A checklist for hospitalized general medical patients, directing the team’s attention to pneumococcal immunization, pres- sure ulcers (bedsores), catheter-associated urinary tract infections, and deep venous thrombosis was associated with “significantly increased documenta- tion and adherence to care processes” for these conditions.15
Care Provider Selection and Training The HCO must have a credentialing process to ensure care provider com- petence (knowledge and skill obtained by formal education and experience), as well as a proficiency-monitoring process (evidence that the clinician applies the knowledge and skills appropriately). Credentialing validates the profes- sional’s training and previous experience. It includes a check for criminal behavior and seeks evidence of success in earlier professional work.
Credentialing must be repeated to ensure continued competence and proficiency. Guidelines change as new treatment modalities and new technology are developed. For beginning professional care providers and nonprofessional clinical work- ers, substantial in-house training programs may be required with a phase-in approach to delivering care independently. Care team professionals must receive refresher courses and updated education on new and established guidelines. For many care providers, this is accomplished with an in-house continuing education program. Specialists are usually required to maintain certification, which usually requires continuing education from designated programs.
Electronic Access to Guidelines, Protocols, and Patient Data Excellence requires that all care providers have two kinds of knowledge: understanding of patients’ current needs and understanding of the clini- cally indicated responses. The first is now supported by the electronic health record. The record provides a history for evaluating the patient’s current condition and instantaneous communication to all team members. The sec- ond is now supported by electronic access to guidelines and protocols.
Electronic access supports telemedicine, a capability that is increas- ingly important in small HCOs and multisite HCO systems. Excellent care requires an array of specialist consultation. Telemedicine and referral linkages are making remote consultation more practical, extending services in rural areas. Audio, video, and access to diagnostic tests and imaging enhance the interchange with remote specialists. Improved patient outcomes have been
Credentialing The process of validating a professional care provider’s eligibility for clinical staff member- ship and for privileges to be granted based on academic preparation, licensing, training, certifications, and performance.
The Wel l -Managed Healthcare Organizat ion152
documented.16 Formal affiliations with larger centers are superior to indi- vidual patient referrals. They establish sharing of expensive resources like magnetic resonance imaging, support for measured performance and annual goal setting, and educational services and advice on guidelines.
Learning from Unexpected Events Chapter 2 noted the importance of a reporting system for unexpected events, including clinical errors and misadventures, accidents, near accidents, property losses, and any other situations in which reality fell short of the expectations of patients, guests, or associates. The reports generate a substantial file that is an important resource for continuous improvement. Each incident must be evaluated. Often additional information must be collected. The reports cre- ate a valuable statistical record, revealing when, where, and how unfortunate results occur and providing OFIs to reduce the incidence. For serious events, a team must establish the HCO’s appropriate response to the individuals involved. Many event reports summarize service recovery (chapters 11 and 15), a technique in which the response is begun at the time of the event.
Clinical unexpected events are pursued further:
1. Reporting near misses of serious events is encouraged. These are more frequent than actual events and provide insight into preventive opportunities.
2. Individual events are evaluated to establish the patient harm and HCO’s appropriate liability.
3. Individual events causing serious or potentially serious clinical consequences are studied to improve guidelines and prevent recurrence.
4. Frequently occurring similar events are pursued as OFIs, using PITs to improve guidelines.
5. When appropriate, communication and resolution (chapter 2) procedures are followed, identifying contributing causes as OFIs and providing appropriate compensation to the patient.
6. The HCO is prepared to vigorously defend its position in the event the injured party chooses legal action.17
These six steps, now common in many leading HCOs, have essentially eliminated the “malpractice crisis” for HCOs that implement them. They have also reduced patient injuries and provided a faster, less expensive path to resolving those that still occur. Patients do not lose their right to trial, but most injured parties accept an immediate settlement that approximates what they would receive in court, after deduction of attorneys’ fees. The HCO saves attorneys’ fees and court costs.18
Chapter 5: Foundations of Cl in ical Excel lence 153
To encourage the reporting and analysis of unexpected events and medical errors, the Patient Safety and Quality Improvement Act of 2005 (PSQIA) established a voluntary reporting system to enhance the data avail- able to assess and resolve patient safety and healthcare quality issues. PSQIA provides federal privilege and confidentiality protections for patient safety information, imposes civil money penalties for violations of patient safety confidentiality, and also authorizes the Agency for Healthcare Research and Quality to list patient safety organizations (PSOs). PSOs are the external experts that collect and review patient safety information.19
Individualize Patient Care Planning and Treatment Individualized planning and treatment are basic functions that support excel- lence in care and may involve tailoring a standardized plan of care to support patient needs. Care providers are obligated to monitor the patient’s progress and to modify the guideline to fit the patient’s needs, as exhibit 5.2 shows.
When the evidence behind a guideline step is not conclusive, patient- centered care and the ethical principle of patient autonomy on which it is based become critical. For example, for the diagnosis of localized, low-risk prostate cancer, there is an array of treatment options and a lack of evidence that any of the treatment choices is superior. However, the costs are widely variable, as shown in exhibit 5.5.20 The patient will choose. Providing him with comprehensive and accurate advice is clearly critical to achieving both patient-centered care and efficiency. Over time, comparative effectiveness research will improve our understanding of prostate cancer care.21 There will always be a frontier of scientific knowledge, where patient counseling will make important differences in both patient satisfaction and the total cost of care for a community.
Treatment Explanation Lifetime Cost
Watchful waiting Observation without monitoring; pallia- tive treatment when symptomatic
$24,520
Active surveillance Close follow-up with exams and test- ing; treatment with curative intent for disease progression
$39,884
Radical prostatectomy
Complete removal of prostate gland $38,180
Brachytherapy Implantation of radioactive seeds $35,374
Intensity-modulation radiation therapy
Advanced radiation beam therapy targeted at tumor
$48,699
Source: Data from Hayes et al. (2013).22
EXHIBIT 5.5 Average Lifetime
Costs for
Treatment of
Localized,
Low-Risk
Prostate Cancer
in Men Aged 65
or Older
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The IPOC is a process that includes the patient, family, and all clini- cal disciplines relevant to the diagnoses. It should begin at entry and extend through the entire care episode to the next level of care.23 The IPOC identi- fies every patient’s individual needs to make sure the care will meet them. A nursing diagnosis (chapter 7) is often critical; it addresses the interaction of the patient’s living environment with her disease. The IPOC is a foundation for case management in cases of exceptional complexity.
An IPOC is generally initiated by a nurse, beginning with the relevant guidelines and developed in collaboration with other members of the care team. It includes input from the patient and family. The care team devel- ops goals for the episode of care and across the trajectory of the illness or condition. The IPOC addresses psychosocial and spiritual support, educa- tional needs, cultural and linguistic needs, home environment, community resources, and postdischarge planning.
The IPOC forms the basis for coordinating multiple therapeutic ser- vices, such as surgical or other invasive interventions, intensive care, pharma- ceuticals, and rehabilitation therapies (e.g., physical, occupational, speech). A good IPOC addresses all of the following elements:
1. Assessment—comprehensive review of the patient’s diagnosis, disabilities, and needs and identification of any unique risks
2. Treatment goals—statement of clinical goals, such as “elimination of congestive heart failure,” and functional goals, such as “restore ability to dress and feed self”
3. Component activities—a list, often selected from relevant care guidelines and functional protocols, of procedures desired for the patient
4. Recording—a formal routine for recording what was done and reporting it to others caring for the patient
5. Measures of progress and a time schedule for improvement—measures of improvement for as many goals as possible
6. Danger signals and contraindications—specific events indicating a need to reconsider the plan
The IPOC supports both the patient management guidelines and the case management approach to improvement. Three critical aspects are patient listening, being vigilant to subtle changes in the patient’s condition, and communicating about the patient’s progress with the attending physician and other care providers.
Case Management Some patients will have exceptionally complex care needs that will require formalizing a comprehensive clinical strategy. Case management uses
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expanded IPOCs for complex problems such as multiple concurrent con- ditions and expensive chronic diseases such as end-stage heart failure and multiple sclerosis. Care for these patients is usually long term and often goes beyond medical assistance. Emotional support is often an issue. Family and community contributions are important, and special equipment and facili- ties are often necessary. In the most complex cases, the care plan may be a written consensus of professional viewpoints, closely monitored to gain the best possible results while minimizing costs.24 Although case management is routine for very complex long-term conditions, it is not routinely neces- sary. The evidence does not show that case management reduces overall care costs.25
Improve Community Health An overall population health strategy must address not only excellence in personal care but also disease prevention and health promotion. The issue is central to the control of costs of healthcare.26 Pre- vention is generally considered to be direct interven- tions to avoid or reduce disease or disability. Many preventive activities are focused on individuals, such as immunization and encouragement of healthy life- styles, but much prevention involves community-wide activities such as ensuring pure water, limiting crime, and enacting legislation on firearms and dangerous substances. Population health includes all activities to change patient or customer behavior. It is undertaken by care providers and by civic agencies such as public health departments, education systems, and voluntary associations. It has become an important topic for employers.
HCOs provide prevention and population health for four reasons:
1. The moral commitment of all care professions is to health, clearly including prevention.
2. Prevention opportunities arise from the same scientific knowledge as treatment opportunities. The NGC includes more than 850 guidelines referencing prevention.
3. Healthcare professionals are respected authority figures, and their advice is given at times when the patient is receptive.
4. Prevention helps communities that own HCOs. Each episode of illness prevented translates eventually to reductions in cost of care. A healthier community has more workers and lower health insurance costs, making it a better place to build or expand business. (Ironically, disease prevention reduces hospital and physician revenues. Well-managed institutions do it anyway; it is probably essential to avoid bankrupting the major healthcare financing programs.)
Prevention A direct intervention to avoid or reduce dis- ease or disability.
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Prevention can be categorized as primary, secondary, or tertiary, and health promotion tools can be used to change behavior on all three levels. Primary prevention activities are those that take place before the disease arises to eliminate or reduce its occurrence. Immunizations, use of seat belts
and condoms, sewage treatment, and restrictions on alcohol sales are examples. Secondary prevention reduces the consequences of disease, often by early detection and treatment. Self-examinations for can- cer; routine dental inspections; mammography screenings; colonoscopies; and management of chronic diseases such as diabetes, hypertension, and asthma are examples. Tertiary prevention is the avoidance of complications or sequelae. Early physi- cal therapy for strokes, retraining in activities of daily living after injury, and respite services to help family caregivers are examples. Secondary and tertiary pre- vention are done mainly by caregivers and the patients themselves.
Patient management guidelines and functional protocols should incor- porate prevention and health promotion. For example, functional protocols for injections, surgical interventions, and other treatments prevent both hospital-acquired infections and injury to care providers. Home care visit protocols include inspection for hazards and discussion of patient needs and symptoms with family members. Diabetic and cardiovascular care guidelines include selection of the optimal pharmacological treatment and guidance to the patient in lifestyle and nutrition. Prenatal, postnatal, and childcare guide- lines include immunizations; checks for potential developmental disabilities; and education for the mother on child development, nutrition, home safety, and domestic violence.
HCOs with a community health mission extend their efforts to broader initiatives to minimize disease and its impact. The Affordable Care Act stimulated transition to community health missions. Chapter 9 addresses the distinction and its implications as well as strategies for improving popula- tion health.
Improve Clinical Performance Improvement is a vital element of excellence in care. To monitor progress, each service line has specific performance measures, benchmarks, negotiated goals, and OFIs for team performance, with detail distributed to each of its operating units. It uses PITs to pursue the OFIs and keep the guidelines updated. Transformational culture (chapter 2) supports a working environ- ment where the following become true and are believed by most associates:
Primary prevention Activities that take place before the disease occurs to eliminate or reduce its occurrence.
Secondary prevention Activities that reduce the consequences of existing disease, often by early detection and treatment.
Tertiary prevention Activities that reduce or avoid complications or sequelae (aftereffects) in existing disease or disability.
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• Recruitment emphasizes the mission of the organization so that it attracts care providers and employees who are committed to excellence.
• Transformational culture encourages individual judgment to identify unique patient needs and unusual circumstances. It rewards informal consultation and collaboration to provide individualized care.
• All workers and managers understand the importance of respect for each individual’s contribution, open exchange of information, cooperation, and prompt response to questions. Compliance with cultural expectations (e.g., scheduling, documentation, timeliness, courtesy) is accepted as essential.
• Interprofessional participation in the development of clinical goals is widespread.
• The climate is blame free. It encourages change while reassuring associates of their personal security while it provides consistent procedures and processes; well-understood avenues for comment with prompt, sensitive response; and recognition of the importance of dissent.
• Warnings and measured sanctions are promptly applied. For example, the penalty for incomplete medical records (usually a temporary loss of privileges) is automated and routine. Because of the warnings, it is rarely applied.
• Stronger sanctions are used reluctantly but predictably in the case of repeated unjustifiable practice.
Fulfilling this list creates a culture of high reliability or of “continu- ously learning healthcare.”27 As discussed in chapter 2, senior leaders estab- lish an organizational culture of quality and safety and focus priorities on clinical performance and quality outcomes. Clinical leaders integrate quality and safety principles into the workplace, modeling quality principles in their interactions with staff, patients, and guests and by rounding regularly.
Clinical improvement is ongoing in this environment. Guidelines change as research provides improved clinical solutions. PITs continuously review functional protocols, updating them to incorporate guideline changes. Broad participation and incorporation into web resources ensure that all associates stay current. Training programs are modified for newcomers.
People
Building an Engaged Workforce In the daily care of patients, interprofessional care teams tend to be small and transient. They change as the attending physician, hospitalist, nurses,
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and pharmacy and therapy professionals change. These teams “huddle” fre- quently to resolve questions and coordinate care. They are drawn from larger and more permanent accountability units that participate in continuous improvement, goal setting, performance measurement, and reward activities. Widespread acceptance of the transformational culture is essential to suc- cess. It systematically builds a cadre of like-minded, engaged care providers who help one another achieve excellence, in which team expectations help individuals and the pursuit of excellence becomes a routine and rewarding part of life.
Clinical unit leaders play a critical role in supporting the culture of clinical excellence. They must be trained in transformational leadership, in understanding their performance measures, and in the continuous improve- ment process. Much of this training is ongoing, but several hours of classes and a formal system of assistance, mentoring, and review are important for newcomers.28
Organizing Clinical Units Clinical units are organized by grouping patients with similar needs. Service lines, the largest clinical units, generally parallel major clinical specialties. Smaller units are also built around clinical similarity, creating work teams that become skilled in specialized care.
The complexities of excellent care are such that many HCOs use specialized internal consulting activities to support their work teams and clinically oriented PITs. Internal specialists in quality management have addi- tional education in quality monitoring and statistical issues, and often con- tinuous improvement systems such as Lean. Healthcare quality management professionals may complete special training and pass an examination spon- sored by the National Association for Healthcare Quality to be designated a certified professional in healthcare quality.29 Infection preventionists are generally nurses or other clinicians with advanced education in epidemiology and microbiology. They may be certified by the Association for Professionals in Infection Control and Epidemiology and earn a certification in infection prevention and control.30 Physicians are certified by the Infectious Diseases Society of America through the American Board of Internal Medicine. Simi- larly, risk management professionals may earn certification sponsored by the American Society for Healthcare Risk Management.31 The specialists and their staffs are truly consultants. They do not have authority over account- ability units. Such authority is known to erode the empowerment of the clinical teams.32
Exhibit 5.6 shows a possible organization of service lines supported by several centralized functional services and an internal consulting unit. Reality is far more dynamic than the exhibit depicts. The exhibit’s framework pro- vides a mechanism for setting improvement goals, achieving the collabora- tion those goals require, and resolving issues arising in the implementation.
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Interprofessional Conflicts Clinical professionals are recognized in a formal process of certification, licensure, or registration. Several hundred professional certifications exist in healthcare—more than 100 in medicine alone. The process typically requires both classroom and experiential education, as well as continuing education to maintain competencies. Care teams often include several professionals with different certifications. Disputes over professional rights are common, especially when types of care providers compete over the same pool of fees. Professional standards are justified as protecting the consumer by establishing knowledge and skill requirements. It is important to understand that it also creates economic monopolies that increase the profession’s income and the customer’s cost of care.33 Thus the question of professional domain—what requirements are necessary for a given task—is one in which customer stake- holders have a profound interest.
One role of the HCO leadership is to exercise that interest wisely. Using guidelines, protocols, and IPOCs creates many opportunities to sub- stitute less expensive nonprofessionals for professionals. Most applicable law makes this acceptable so long as professional supervision is available. Part of
Risk management Quality improvement Patient safety
Utilization management
Clinical Service Lines
Primary care Cardiovascular Women’s health Neurology/stroke Oncology Orthopedics Hospitalists Pulmonary care General surgery Emergency care
Mental health/ substance abuse Palliative care Home care Continuing care
Operating rooms Nursing procedures Staf�ng and scheduling Education Credentialing
Pathology and medical laboratory Imaging Rehabilitation Anesthesia
Pharmacy
Social service
Quality Management
Chief Nursing Of�cer
Chief Executive
Of�cer
Chief Operating
Of�cer
Nursing Support
Chief Medical Of�cer
Clinical Support
EXHIBIT 5.6 Organization of
Clinical Services
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the design of guidelines and protocols should establish the clinically neces- sary level of training for each task. The evidence-based rules of medicine and management are the correct drivers; tasks should be completed by the low- est level of skill required to do them safely. When a higher skill is necessary, the HCO should supply it. That need can arise collectively from published concern or individually from a care provider’s assessment of a patient’s need.
These substitutions often create potential income losses for more highly paid professionals. Well-managed organizations must be sensitive to income concerns, but they must also press forward with sound solutions. The criterion must be evidence of safety and effectiveness. The disputants must leave the debate thinking that they were fairly treated. Situations in which one group of stakeholders uses its economic power to stymie progress for all must be avoided.
Measures
Scorecards for Clinical Services Exhibit 5.7 shows an operational scorecard template for any service line. The operational scorecard can be applied to units in service lines, such as specific primary care offices or inpatient care units for acute care services, often with specific outcome and process measures. Electronic interfaces with the medical record allow for real-time, daily monitoring of quality and safety indicators and trends to enable quick improvement of the situation. Other information in the data warehouse may be accessed on a regular basis in order to assess patient satisfaction and market response, associate engagement, and cost. When the service line is separately incorporated, financial performance should also be reported.
Demand and Output Output—the use of services—is captured in accounting systems, which gen- erate detailed data on the kind of service (or occasionally product, such as a drug). Demand for care is often inferred from output, but it can be measured directly from inpatient scheduling and intake systems. Direct measurement permits identification of scheduling delays and lost cases, valuable quality and marketing indicators.
The epidemiologic planning model constructs demand forecasts from available community information. Forecast demand provides an average for market share. It can support detailed analysis of community sectors that may choose the HCO for specific services. It is also useful in evaluating effective- ness—the model can construct expectations for major clinical events. These can be compared to actual demand to identify overuse or underuse.
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Dimensions Examples
Input Measures
Demand
Requests for care
Market share Appropriateness of
service Logistics of service
Patient arrivals, appointment requests, consultation and referral requests; often specified by patient age, service, and location
Percent of total demand from community Percent of expected or benchmark demand from epide-
miologic planning model Hours of availability
Cost/resources
Total costs Resource condition
Labor, supplies, plant, indirect costs for service line Occupancy and percentage of capacity rates, age of
equipment, failure rates of equipment
Human resources
Supply Training Associate satisfaction
Staffing levels, staffing shortfalls, vacancy rates, turnover Average hours of training per associate Associate loyalty, retention or termination, absenteeism,
work loss days from accident or injury
Output Measures
Output/productivity
Patients treated Cost per case Cost per treatment
Discharge counts by specified group Total costs/discharges by specified group Costs for specific activity, such as surgical operations
or patient examinations
Quality
Clinical outcomes
Procedural quality
Structural quality
Mortality, patient safety events, readmissions, patient condition at discharge
Procedural measures assessing completion of specific tasks or events
Structural measures assessing availability and adequacy of service, particularly staffing and facility safety
Customer satisfaction
Patient satisfaction
Referring physician satisfaction
Other customer satisfaction
Access
Postdischarge surveys, counts of “Caught in the Act,” complaints, service recovery, and unexpected incidents
Survey, rounding, complaints
Community surveys, boundary-spanning activities
Delays for service, unfilled demand
EXHIBIT 5.7 Profile of Service
Line Operational
Scorecard
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Quality Assessment Both outcome measures and process quality measures have expanded sub- stantially in recent years. The new measures often contain sophisticated adjustments to remove factors beyond the service’s control. They have become practical as electronic record keeping has expanded.
Outcomes quality measures are aggregated from groups of patients with similar diseases. Examining specific disease groups is often a key to improving patient management guidelines, but finer specification creates smaller counts. In general, specific measures should be available for the small- est groups that are statistically meaningful, and statistical adjustment should standardize the population for aggregated data.
The Joint Commission’s National Patient Safety Goals promote spe- cific improvements in patient safety. Updated each year since 2003, the 2018 goals seek improvement for the following outcomes and process measures:
• Accuracy of patient identification • Communication among care providers • Medication safety • Harm associated with clinical alarm systems • Healthcare-associated infections • Patient falls • Healthcare-associated pressure ulcers • The Universal Protocol for invasive diagnosis or treatment (conducting
a preprocedure verification process, marking the procedure site, and performing a time-out)
In addition, The Joint Commission looks for evidence that the HCO encourages patients’ active involvement in their own care as a safety strategy and explicitly identifies and addresses safety risks.34
Increasingly, quality rates and scores are publicly reported. The Leap- frog Group, for example, publishes a hospital safety grade.35 The National Quality Forum publishes its Field Guide, cataloguing several hundred outcomes and process measures, with information on users and sources of benchmarks.36 WhyNotTheBest.org publishes a wide range of hospital- specific values, drawn mainly from the Centers for Medicare & Medicaid Services (CMS) Medicare data.37 CMS itself publishes hospital quality rank- ings.38 These measures usually incorporate several service lines, more like the governing board’s strategic scorecard than the scorecard of a unit or service line. They are useful in benchmarking and goal setting.
Quality statistics must be carefully analyzed. Extensive specification and adjustment are necessary to make “apples to apples” comparisons, adjusting for factors in the patient population that are beyond the unit’s
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control. Size and sensitivity can be a problem. A small emergency depart- ment with 250 heart attack admissions per year might have only three deaths per month. Adjustment of survival rates for risk factors such as comorbid conditions, obesity, or smoking would be appropriate, but with such small numbers, each case could be reviewed to identify OFIs.
Process measures are useful supplements to outcome statistics. They cover completion of steps such as administration of aspirin and oxygen, percentages of patients meeting timelines, delays for patients failing to meet timelines, and other process failures. The expectations would be that compliance approached 100 percent and that individual failures could be investigated for correctable causes. The process measures will be sensitive where the outcomes are not, but it is important to select processes that are important and scientifically justified. Structural measures of quality—basi- cally, counts of availability of appropriate resources—are now rarely useful for quality assessment.
Patient Satisfaction and Associate Engagement Satisfaction data are now collected by contract with companies specializing in patient discharge surveys. Reliable information requires careful monitoring of the sample, rigorous and standardized question design, deliberate efforts to improve response rates, statistical analysis, and benchmarking. Patient satisfac- tion data now include Hospital Consumer Assessment of Healthcare Provid- ers and Systems (HCAHPS) measures of patient perception of quality of care as a condition of Medicare participation, with specific questions to address the larger functional services, such as nursing and rehabilitation therapies. The HCAHPS questions (available at www.hcahpsonline.org) identify several specific elements of the patient experience that are controlled by the organi- zation, such as pain management and explanation of pharmaceuticals. The questions must be incorporated in commercial patient satisfaction surveys, and public reporting is required and posted on the government (US Depart- ment of Health and Human Services) and other websites. Respondents are identified by disease group, allowing easy tallying for accountable teams.
Clinical associates are also formally surveyed. Their engagement, mea- sured directly by survey and indirectly by turnover and absenteeism, is closely linked to high outcomes performance, retention, and the return on train- ing investments. Physicians are generally associated with service lines; their response is an important source of marketing and quality insight. It is com- mon to supplement surveys with focus groups and rounding to identify OFIs.
Value-Based Purchasing The Hospital Value-Based Purchasing (VBP) Program is a CMS initiative that rewards acute care hospitals with incentive payments for quality care provided to Medicare beneficiaries. Section 1886(o) of the Social Security
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Act established the Hospital VBP Program, affecting payment for inpatient stays in more than 3,000 hospitals across the United States. This program is part of CMS’s larger quality strategy to reform how healthcare is delivered and financed.39 CMS bases hospital performance on an approved set of mea- sures and dimensions grouped into specific quality domains: safety, clinical care, efficiency and cost reduction, and patient satisfaction (elements that are captured in HCAHPS). Domains are assigned weights (percentages), which are then used to score each domain. Hospitals will receive either financial rewards or penalties, depending on the score of the outcomes in each domain.
According to articles that examine financial incentives intended to improve the provision of value-based healthcare, there were no differences between the United States and other countries, between schemes that tar- geted hospitals or primary care, or between schemes combining pay for performance with rewards for reducing costs and schemes using pay for performance alone. Paying for performance improvement is less likely to be effective. Allowing payments to be used for specific purposes, such as qual- ity improvement, had a higher likelihood of a positive effect, compared with using funding for physician income. The size of incentive payments relative to revenue was not associated with the proportion of positive outcomes.40 Despite this discouraging start, it is likely that insurer and buyer pressure for quality improvement will continue.
Managerial Leadership
The issues that trap hospitals in mediocrity are failures in their transfor- mational and evidence-based management processes. Over recent decades, evidence-based management has made substantial gains. Systems based on guidelines, protocols, performance measurement, and continuous improve- ment have become the standard of practice.41 When the measures reveal OFIs, leadership must focus on three issues: use of IPOCs, guidelines, and protocols; sustaining a culture of teamwork and respect; and supporting the system of continuous improvement.
Sustaining the Platform of IPOCs, Guidelines, and Protocols Serious illness requires not just teams, but teams of teams. Many of the care providers serving the same patient never meet one another; they are in differ- ent locations or on different shifts. Coordination within and between teams becomes critical. Breakdowns are most common not in the activities of a single care provider but in the handoff from one care provider to another or one team to another. Lost information causes a task to be done incorrectly, delayed, or left undone. Communication is key.
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Systems such as guidelines, protocols, and electronic records facilitate effective communication. Guidelines, however, are not simple; they are not transferred mechanically to the IPOC. Rather, the care team considers how each step is appropriate to the specific patient. Protocols are similarly com- plex. Easy reference to an electronic copy becomes a powerful support to ensure that every step is correctly completed. The electronic record clearly and succinctly summarizes needs, accomplishments, and next steps. It pro- vides the data for many performance measures. As clinical teams realize these assets, their expectations for instantaneous web-based service grows. These systems build confidence that encourages communication among teammates.
Leadership actions to sustain the platform of the IPOC include the following:
1. Ensuring round-the-clock staff access to every IPOC, guideline, and protocol. This responsibility becomes a core assignment for information technology (chapter 10), though it is no longer a technical challenge. Leaders should make sure that the assignment is clear, understood by IT staff, and measured on IT scorecards. Often, visual management boards are used to display progress.
2. Comprehensive training, so that every care provider is effective and comfortable in carrying out the activities of his assignment.
3. Answering care providers’ questions and responding to OFIs about the layout, indexing, and validity of the IPOC and guidelines. Leadership makes sure that all questions are answered, seeking knowledgeable experts as needed. It supports the OFIs as part of the continuous improvement process (chapter 3). Questions about the guidelines can be referred to the appropriate clinical service line. For frequent diagnoses, the HCO can form a PIT and develop a consensus version.
Sustaining a Culture of Teamwork and Respect As they pursue excellence by addressing OFIs, leaders must foster the culture of teamwork and respect necessary for the fulfillment of the HCO’s mission, vision, and values. Training, as well as communication between leadership and associates, will be substantially more effective in a successful transfor- mational culture. Leaders should support that culture by effective response to associate concerns. That begins with ongoing training for first-line team leaders and managers. In addition, rounding allows associates to pursue questions with higher-ranking leaders, which allows the leaders to moni- tor first-line effectiveness. All associates are assured that the HCO’s values are upheld, providing them with a safe and comfortable work environment. Any evidence of violation is pursued promptly, as outlined in the section of chapter 2 titled “Correction.” The following are three common concerns
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about direct care providers and clinical support teams, with the appropriate leadership responses:
1. “I am concerned about an element of this guideline . . .” Leaders should describe the origins and development of the guideline or protocol, making clear that the guideline or protocol has been studied by qualified professionals and represents a consensus on best practice. Leaders should cite any available evidence about the protocol’s overall outcomes, such as changes in measures of quality or patient satisfaction. They may ask a qualified specialist to explain clinical details. They may accept the associate’s concerns as an OFI, leading to a PIT and revision.
2. “But this duty is my professional right!” Associates in one profession may claim the rights to certain treatments or activities (e.g., nurse anesthetists working during a specific surgical procedure, rather than anesthesiologists; midwives using forceps to speed vaginal delivery; licensed practical nurses administering only certain classes of medication). These disputes are resolved by identifying the standard of practice. If evidence exists in the published literature or in a documented site visit to a comparable HCO, the profession can complete the activity. A PIT comprising representatives from all professions involved, plus legal counsel, can review the assembled evidence and make recommendations to the senior leadership or governing board.
3. “My supervisor is ordering me around.” Leaders should attempt to document the specific actions and retrain the associates involved. Coaching on transformational leadership is often appropriate. Correction may be called for if retraining fails and the behavior is sufficiently objectionable.
Maintaining Continuous Clinical Improvement The record of clinical failure in American HCOs shows quite clearly that the path to excellence is not easy. All HCOs can improve. (Baldrige winners are typically scored in the 600s out of 1,000 possible points.) Improvement is an ongoing reality for every HCO. It is always incremental; no one leaps to excellence in a single bound. The leadership of an HCO plays a major role in its path toward excellence.
Leadership that maintains continuous clinical improvement supports the identification and systematic pursuit of OFIs. Doing so requires attention to knowledge management, statistical expertise, solid processes for negotiat- ing goals, training, and rewards.42 Baldrige recipients and others committed to excellence have shown that progress can be made incrementally; early steps build resources for later, larger ones.
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Managers evaluate the performance of associates and frontline team leaders for their understanding of continuous clinical improvement and their ability to teach others about quality improvement. People who excel in these areas should be promoted.
A key factor in continuous improvement is leadership consistency. Senior leadership cannot falter. Goals must be realistic; it is far better to achieve a modest goal than to fail at an overly ambitious one. Associates’ concerns must be consistently answered to the asker’s satisfaction. Such responses often involve saying, “I don’t know, but I’ll find out,” and occa- sionally, “You might have a good point, but I can’t find any evidence.”
High-performing HCOs understand both why financial success is important and how it can be obtained. Care that meets National Academy of Medicine goals is inherently less costly than care that falls short. Leaders’ approach to the annual goal-setting cycle begins with asking themselves, “What clinical improvements can we make to bolster profits?” This question is radically different from “Where do we cut costs to balance the books?”
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. Here are four questions often raised by patients, health insurance stakehold- ers, and care providers. What are the answers HCO leaders should convey?
• How do I know care here is any good? • Why are six dimensions (care that is safe, effective, patient centered,
timely, efficient, and equitable) of excellence necessary? • How well does this HCO achieve high reliability and a culture of safety
(e.g., catheter-associated urinary tract infections, patient falls, and so on are pushed to zero)?
• Why is it important that patients have an interprofessional team with perspectives from various health professions?
2. As a leader training new first-line leaders, how would you help them understand the following questions?
• What do patient management guidelines contribute to care? • How does our HCO establish and update patient management
guidelines?
3. Do leaders in supply processing, accounting, and security really need to understand the structure to achieve excellent care?
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4. A large HCO will have more than 100 clinicians leading care-providing teams. Those leaders need to be able to answer the following questions. What are the answers you would like to hear uniformly across the HCO, and how could you increase the likelihood of hearing them?
• When and how can a care provider depart from a patient management guideline?
• Why are individualized IPOCs important? • When and why is case management important?
5. The chief medical officer would like to develop an HCO-wide procedure for creating, validating, and standardizing functional protocols, so that functions like drug administration, which involve many different teams, are uniformly completed. “We use hundreds of protocols,” she says. “How do we know they are any good? What I’m looking for is a checklist on how to write them, as well as a formal approval of the product before it goes in our computer system.”
• What data would support her argument? • How should she proceed? • What are some issues that need to be on the checklist?
Additional Resources
Barry, R., A. C. Smith, and C. E. Brubaker. 2017. High-Reliability Healthcare: Improving Patient Safety and Outcomes with Six Sigma, 2nd ed. Chicago: Health Administra- tion Press.
Institute for Healthcare Improvement. 2018. “Institute for Healthcare Improvement: Improving Health and Health Care Worldwide.” Accessed August 2. www.ihi .org/Pages/default.aspx.
Joshi, M. S., E. R. Ransom, D. B. Nash, and S. B. Ransom. 2018. The Healthcare Quality Book: Vision, Strategy, and Tools, 4th ed. Chicago: Health Administration Press.
Spath, P. L., and D. L. Kelly. 2017. Applying Quality Management in Healthcare: A Sys- tems Approach, 4th ed. Chicago: Health Administration Press.
Notes
1. WhyNotTheBest.org. 2018. “Start Here.” Accessed February 2. www.whynot the best.org.
2. Chassin, M. R. 2013. “Viewpoint: Improving the Quality of Health Care: What’s Taking So Long?” Health Affairs 32 (10): 1761–65.
3. Institute of Medicine. 2014. Establishing Transdisciplinary Professionalism for Improving Health Outcomes: Workshop Summary. Washington, DC: National Acad- emies Press.
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4. Begun, J. W., K. R. White, and G. Mosser. 2011. “Interprofessional Care Teams: The Role of the Healthcare Administrator.” Journal of Interprofessional Care 25: 119–23.
5. Griffith, J. R. 2015. “How Good Are Baldrige Winners?” Journal of Healthcare Management 60 (1): 44–61.
6. World Health Organization. 2018. International Statistical Classification of Dis- eases and Related Health Problems, 10th rev. Accessed February 3. www.who.int/ classifications/icd/en/.
7. Cabot, R. C. 1911. Differential Diagnosis. Philadelphia: W. B. Saunders. 8. Swenson, S. J., J. A. Dilling, D. S. Milliner, R. S. Zimmerman, W. J. Maples, M. E.
Lindsay, and G. B. Bartley. 2009. “Quality, the Mayo Clinic Approach.” American Journal of Medical Quality 24 (5): 428–40. See also Graber, M. L., R. Trowbridge, J. S. Myers, C. A. Umscheid, W. Strull, and M. H. Kanter. 2014. “The Next Orga- nizational Challenge: Finding and Addressing Diagnostic Error.” Joint Commission Journal on Quality and Patient Safety 40 (3): 102–10.
9. Graham, R., M. Mancher, D. M. Wolman, S. Greenfield, and E. Steinberg, eds. 2011. Clinical Practice Guidelines We Can Trust. Washington, DC: National Acad- emies Press.
10. National Guideline Clearinghouse. 2018. “Inclusion Criteria.” Agency for Health- care Research and Quality. Accessed February 2.
11. Nayak, R. K., and S. D. Pearson. 2014. “The Ethics of ‘Fail First’: Guidelines and Practical Scenarios for Step Therapy Coverage Policies.” Health Affairs 333 (10): 1779–819.
12. American College of Healthcare Executives. 2017. Leading a Culture of Safety: A Blueprint for Success. Chicago: Health Administration Press.
13. Hooten, M., D. Thorson, J. Bianco, B. Bonte, A. Clavel Jr., J. Hora, C. Johnson, E. Kirksson, M. P. Noonan, C. Reznikoff, K. Schweim, J. Wainio, and N. Walker. 2017. “Pain: Assessment, Non-Opioid Treatment Approaches and Opioid Manage- ment.” Institute for Clinical Systems Improvement. Updated August. www.icsi. org/_asset/814035/PainTrmtPlanAlg.pdf.
14. Agrawal, A., and W. Y. Wu. 2009. “Reducing Medication Errors and Improving Systems Reliability Using an Electronic Medication Reconciliation System.” Joint Commission Journal on Quality and Patient Safety 35 (2): 106–14.
15. Aspesi, A. V., G. E. Kauffmann, A. M. Davis, E. M. Schulwolf, V. G. Press, K. L. Stupay, J. J. Lee, and V. M. Arora. 2013. “IBCD: Development and Testing of a Checklist to Improve Quality of Care for Hospitalized General Medical Patients.” Joint Commission Journal on Quality and Patient Safety 39 (4): 147–56.
16. Hilty, D. M., D. C. Ferrer, M. B. Parish, B. Johnston, E. J. Callahan, and P. M. Yellowlees. 2013. “The Effectiveness of Telemental Health: A 2013 Review.” Tele- medicine and E-Health 19 (6): 444–54.
17. Boothman, R., S. Anderson, K. Welch, S. Saint, and M. A. Rogers. 2010. “Liability Claims and Costs Before and After Implementation of a Medical Error Disclosure Program.” Annals of Internal Medicine 153 (4): 213–21.
18. Boothman, R., M. M. Hoyler, A. Kachalia, and S. R. Kaufman. 2013. “The Univer- sity of Michigan’s Early Disclosure and Offer Program.” Bulletin of the American College of Surgeons 98 (3): 21–25.
19. Department of Health and Human Services. 2018. “Patient Safety and Quality Improvement Act of 2005 Statute and Rule.” Accessed March 27. www.hhs.gov/ hipaa/for-professionals/patient-safety/statute-and-rule/index.html.
20. Hayes, J. H., D. A. Ollendorf, S. D. Pearson, M. J. Barry, P. W. Kantoff, P. A. Lee, and P. M. McMahon. 2013. “Observation Versus Initial Treatment for Men with
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Localized, Low-Risk Prostate Cancer: A Cost-Effectiveness Analysis.” Annals of Internal Medicine 158: 853–60.
21. Conway, P. H., and C. Clancy. 2009. “Comparative-Effectiveness Research: Impli- cations of the Coordinating Council’s Report.” New England Journal of Medicine 361 (4): 328–30. See also Conway, P. H., and C. Clancy. 2009. “Transformation of Health Care at the Front Line.” Journal of the American Medical Association 301: 763–65.
22. Hayes, J. H., D. A. Ollendorf, S. D. Pearson, M. J. Barry, P. W. Kantoff, P. A. Lee, and P. M. McMahon 2013.
23. Lewis, C. K., M. L. Hoffmann, A. Gard, J. Coons, P. Bichinich, and J. Euclide. 2005. “Development and Implementation of an Interdisciplinary Plan of Care.” Journal for Healthcare Quality 27 (1): 15–23.
24. Christianson, J. B., L. H. Warrick, F. E. Netting, F. G. Williams, W. Read, and J. Murphy. 1991. “Hospital Case Management: Bridging Acute and Long-Term Care.” Health Affairs 10 (2): 173–84. See also Williams, F. G., L. H. Warrick, J. B. Christianson, and F. E. Netting. 1993. “Critical Factors for Successful Hospital- Based Case Management.” Health Care Management Review 18 (1): 63–70.
25. Huntley, A. L., R. Thomas, M. Mann, D. Huws, G. Elwyn, S. Paranjothy, and S. Purdy. 2013. “Is Case Management Effective in Reducing the Risk of Unplanned Hospital Admissions for Older People? A Systematic Review and Meta-analysis.” Family Practice 30 (3): 266–75. See also You, E. C., D. R. Dunt, and C. Doyle. 2013. “Case Managed Community Aged Care: What Is the Evidence for Effects on Service Use and Costs?” Journal of Aging and Health 25 (7): 1204–42.
26. Commission on a High Performance Health System. 2009. “The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way.” Commonwealth Fund. Published February 19. www .common wealthfund.org/publications/fund-reports/2009/feb/path -high -performance -us -health-system-2020-vision-and-policies.
27. Chassin, M., and J. M. Loeb. 2013. “High-Reliability Health Care: Getting There from Here.” Milbank Quarterly 91 (3): 459–90. See also Institute of Medicine. 2013. Best Care at Lower Cost: The Path to Continuously Learning Health Care in America. Washington, DC: National Academies Press.
28. Bohmer, R. M. 2010. “Fixing Health Care on the Front Lines.” Harvard Business Review 88 (4): 62–69.
29. National Association for Healthcare Quality. 2018. “Certification Sets You Apart as a Healthcare Quality Professional.” Accessed February 4. https://nahq.org/ certification/certified-professional-healthcare-quality.
30. Association for Professionals in Infection Control and Epidemiology. 2018. “Devel- opmental Path of the Infection Preventionist.” Accessed February 4. www.apic.org/ Professional-Practice/roadmap.
31. American Society for Healthcare Risk Management. 2018. Home page. Accessed February 4. www.ashrm.org.
32. Wardhani, V., A. Utarini, J. P. van Dijk, D. Post, and J. W. Groothoff. 2009. “Determinants of Quality Management Systems Implementation in Hospitals.” Health Policy 89 (3): 239–51.
33. Starr, P. 1982. The Social Transformation of American Medicine, 21–24. New York: Basic Books.
34. The Joint Commission. 2018. “2018 National Patient Safety Goals.” Accessed Feb- ruary 2. www.jointcommission.org/standards_information/npsgs.aspx.
35. Leapfrog Group. 2018. “Hospital Safety Grade.” Accessed February 2. www . hospital safetygrade.org.
Chapter 5: Foundations of Cl in ical Excel lence 171
36. National Quality Forum. 2018. Field Guide to NQF Resources. Accessed February 2. www.qualityforum.org/field_guide.
37. WhyNotTheBest.org 2018. 38. Centers for Medicare & Medicaid Services. 2018. “Quality Initiatives—General
Information.” Modified April 19. www.cms.gov/Medicare/Quality-Initiatives -Patient-Assessment-Instruments/QualityInitiativesGenInfo/index.html. See also Smith, K. A., J. B. Sussman, S. Bernstein, and R. Hayward. 2013. “Improving the Reliability of Physician ‘Report Cards.’” Medical Care 51 (3): 266–74.
39. Centers for Medicare & Medicaid Services. 2017. “Hospital Value-Based Purchas- ing.” Published September. www.cms.gov/Outreach-and-Education/Medicare -Learning-Network-MLN/MLNProducts/downloads/Hospital_VBPurchasing _Fact_Sheet_ICN907664.pdf.
40. Scott, A., M. Liu, and J. Yong. 2018. “Financial Incentives to Encourage Value- Based Health Care.” Medical Care Research and Review 75 (1): 3–32.
41. Griffith, J. R. 2017. “An Organizational Model for Excellence in Healthcare Deliv- ery: Evidence from Winners of the Baldrige Quality Award.” Journal of Healthcare Management 62 (4): 328–42.
42. White, K. R., S. Thompson, and J. R. Griffith. 2011. “Transforming the Dominant Logic of Hospitals.” Advances in Health Care Management 11: 133–45.
CHAPTER
173
CRITICAL ACTIONS
6 THE CLINICAL STAFF ORGANIZATION
1. Achieving excellent care:
• Build a network of communication so that every clinical staff member is confident of her empowerment.
• Establish clinical staff accountability.
• Meet clinical needs effectively and promptly.
• Develop effective clinical staff leadership.
2. Credentialing:
• Verify the preparation and skills of each clinical staff member for appointment and reappointment.
• Monitor and improve individual performance.
• Maintain periodic review for reappointment.
3. Planning and recruiting:
• Plan clinical staff capacity to ensure excellent care.
• Recruit and retain qualified clinical staff.
• Provide continuing education to clinical staff.
4. Compensating clinical staff:
• Ensure a competitive income for clinical staff.
• Reward excellent practice.
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Purpose
The purpose of the clinical staff organization is to
recruit and retain physicians and other qualified licensed independent prac- titioners (LIPs) and support them to deliver excellent care.
Clinical staffs are groups of professionals licensed and specialty certified to lead patient care. They provide the diagnoses that drive the care processes, undertake interventions such as surgery and obstetrical delivery, monitor the patients’ progress, and transition patients to different levels of care. Physicians were the original clinical staff members. Beginning at the dawn of human existence, healers were ascribed magical powers, granted extraor- dinary confidences, and expected to assume extra moral obligations. As evidence-based medicine has progressed, physicians have pursued specialties and subspecialties, and they have been joined by several other LIPs. Specific practitioner lists differ by state. Nurse practitioners, physician assistants, psychologists, dentists, and podiatrists are commonly included. The high esteem, confidences, and moral obligations continue.
The clinical staff organization addresses how acute care HCOs sup- port these professionals, including processes to promote excellence, ensure qualifications and skill, provide an adequate supply of clinical staff, and arrange compensation.
As noted in chapter 5, individual staff members are granted privileges to affiliate with the HCO. Privileges are a contract allowing the practitioner to provide specific kinds of care through the HCO. The contract is for a lim- ited period, usually two years, granted or renewed after a review process called credentialing. The HCO brings substantial dowry to the contract. It provides facilities, equipment, and trained personnel essential to successful practice. It provides marketing to build patient volume and facilitates the clinical staff ’s compensation through contracts with health insurers. In return, it asks for clinical staff members’ commitment to its mission, compliance with its rules and procedures, and maintenance of professional competence. The privileg- ing contract is increasingly an employment relationship. Physicians were traditionally independent professionals paid fees by patients or their insurers. Even if the clinical staff is not employed, HCOs are liable for errors commit- ted by their clinical staff members, as they are for their employees.1
In fact, excellence in care is difficult to achieve. Several studies show that only about half of all patient–physician encounters result in optimal treatment.2 Although these studies are more than 15 years old, no improve- ment has been documented. Large HCOs do not automatically improve clinical staff performance.3 Baldrige winners and others have reported suc- cess implementing the functions outlined in this chapter. Their model seeks
Chapter 6: The Cl inical Staff Organizat ion 175
high reliability—the concept that clinical errors should be driven to zero by improvement of care processes and their application—through a combina- tion of empowerment, measured performance, continued improvement, and, increasingly, direct financial incentives. It creates an environment where both individual and collective clinical excellence are prized and where collegial commitments reinforce personal ones, so that clinical staff members can rely on colleagues and form effective teams to achieve patient care goals.
Functions
In excellent HCOs, the purpose is fulfilled in six major functions: achieving excellent care, reviewing credentials and recommending privileges, deter- mining and recruiting for clinical staff need, providing clinical education for physicians and other professionals, negotiating compensation arrangements, and improving continuously (see exhibit 6.1).
Achieve Excellent Care Although different service lines provide very different kinds of care, the lead- ership actions that promote excellence are the same for each. Excellent care is built on evidence-based foundations—the right protocols—and healthcare teams that are well trained and empowered. Clinical staff members are criti- cal in both. They lead the protocol design, make the diagnoses, initiate the interdisciplinary plan of care (IPOC), and implement it through their own efforts and the team’s. Each clinical staff member accepts responsibility for the care of his patients, including collaboration with care teams involved.
Expectations of Clinical Staff as Clinical Team Leaders The clinical staff is expected to believe and exemplify the ancient commit- ments of the physicians’ Hippocratic oath, to support their patients and “do no harm,” and to provide safe, effective, patient-centered, timely, efficient, and equitable care. The Accreditation Council for Graduate Medical Educa- tion (ACGME) suggests that this care requires mastery of six competencies:
1. Patient care that is compassionate, appropriate, and effective for the treatment of health problems and the promotion of health
2. Medical knowledge about established and evolving biomedical, clinical, and cognate (e.g., epidemiological and social behavioral) sciences and the application of this knowledge to patient care
3. Practice-based learning and improvement that involves investigation and evaluation of their care for patients, appraisal and assimilation of scientific evidence, and improvements in patient care
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4. Interpersonal and communication skills that result in effective information exchange and teaming with patients, their families, and other health professionals
5. Professionalism, as manifested through a commitment to carrying out professional responsibilities, adherence to ethical principles, and sensitivity to a diverse patient population
6. Systems-based practice, as manifested by actions that demonstrate an awareness of and responsiveness to the larger context and system of healthcare and the ability to effectively call on system resources to provide care that is of optimal value4
Only patient care, medical knowledge, and professionalism were empha- sized in the twentieth century. Learning and improvement, interpersonal
Function Contribution Examples
Achieve excellent care
Supporting each clinical staff member to provide excellent healthcare
Empowerment, effective protocols, use of the IPOC, team leadership, “high-reliability,” PITs
Review credentials and recommend privileges
Ensuring continued effectiveness and clinical competence of clinical staff members
Verification of individual clinical staff credentials
Ongoing review of clinical staff performance
Determine, and recruit for, clinical staff need
Ensuring an adequate, but not excessive, supply
Identification of and response to shifts in demand for and supply of clinical staff
Provide clini- cal education for physicians and other professionals
Ensuring MOC require- ments are met for all LIPs
Use of case reviews, protocol development, PITs, and continuing education to help clinical staff and other care team members remain current
Negotiate compensation arrangements
Allowing each care provider a competitive financial reward
Complying with legal and regulatory requirements
Employment of or contracts with individual clinical staff members
Negotiation of risk-sharing contracts with payers and intermediaries
Improve continuously
Identifying, communi- cating, and resolving OFIs in clinical staff relationships
Ongoing, responsive communica- tion with individual clinical staff
Participation in governing board, strategic planning, budgeting
Note: IPOC = interdisciplinary plan of care; LIP = licensed independent practitioner; PIT = process
improvement team; MOC = maintenance of certification; OFI = opportunity for improvement.
EXHIBIT 6.1 Functions of the
Clinical Staff
Organization
Chapter 6: The Cl inical Staff Organizat ion 177
skills, and systems-based practice were added to adapt to the changing needs. Thus an HCO can expect both understanding and commitment from its younger clinical staff. More experienced physicians—with the most robust clinical practices, which are important to HCOs—often have learned all these skills, but some may need assistance mastering the recent additions. HCOs provide assistance and reinforce these basic professional commitments princi- pally by example and selection, primarily in the four following ways:
1. All the HCO’s LIPs share the commitment, are trained in the skills, and are expected to model them at all times.
2. Clinical staff members are frequently assisted by nonclinical leaders who can informally coach empowerment concepts and effective leadership.
3. Senior leadership makes extensive contacts with clinical staff members in a deliberate effort to empower them and meet their professional needs.
4. Clinical staff members accepting leadership in service lines are selected for these skills in addition to their clinical acumen. These leaders provide role models and mentors for colleagues.
Creating and Managing Guidelines Guidelines for local use are designed by process improvement teams (PITs) from the service lines that will use them. The PITs assemble and review pub- lished sources, examine the practicality of each step, modify the guideline or operating practices as necessary, test the guideline, and recommend the final guideline. The clinical guideline PIT may be organized around the following seven assumptions:
1. Leadership of the committee is usually assigned to the clinical staff who treats the largest percentage of patients with the disease or condition.
2. Committee leaders are supported by staff trained in committee management; in Lean or similar problem analysis; and in using financial analysis, knowledge management, and training resources.
3. Each committee has a charge, membership, and a timetable: .a The charge is to establish the initial set of care procedures for
typical patients with a specific disease or condition. .b Membership must represent all potential users. .c The timetable is flexible but requires evidence of progress.
4. The committee’s recommendations must meet criteria: .a Clinical indications and contraindications for assigning the guideline
to patients must be clear. .b Each step of the guideline must be achievable by the designated
team members, meaning that they must have the training,
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information, supplies, and equipment they need every time the step arises.
.c Several versions of the guideline may result, reflecting the needs of patient subsets.
5. In most cases, the guideline must be tested in realistic settings. 6. Management must plan for and acquire necessary equipment, provide
new training, and review scheduling to see that care providers are available when patients need the care.
7. The committee’s recommendation must be reviewed and approved at a clinical staff meeting of the appropriate service lines or clinical staff departments.
Active clinical staff participation throughout these steps empowers indi- vidual members, improves the resulting guidelines, and speeds smooth implementation.
Pursuing High Reliability Leading HCOs report substantial success using clinically oriented PITs focused on high reliability, improving outcome measures such as mortality or readmissions. The concept is strongly endorsed by The Joint Commission.5 PITs that focus on high reliability cross service lines and often involve several HCOs. They require a strong supporting organization that can identify spe- cific opportunities, address them through protocol revisions, and implement the changes using training, incentives, and team leadership.6 Consider the following examples of success:
• “With support from leadership and a conceptual model to communicate goals, use robust improvement methods, and ensure accountability, The Johns Hopkins Hospital achieved high reliability for The Joint Commission accountability measures.”7
• “Implementation of Complete Care at [Kaiser Permanente Southern California] was followed by six-year quality gains that outpaced changes in the . . . national percentiles for many measures.”8
• Yale–New Haven Hospital (YNHH) pursued “organization-wide method changes . . . standardizing the discharge process, using status boards for visual control, and improving accuracy and timeliness of data entry. . . . Between FY 2008 and FY 2011, YNHH experienced an 84% improvement in discharges by 11:00 A.M. . . . The average length of stay decreased from 5.23 to 5.05 days.”9
• The University of Pennsylvania Health System established the Mortality Review Committee, a hospital-wide, systematic process to review and address inpatient deaths. “During the committee’s first six
Chapter 6: The Cl inical Staff Organizat ion 179
years of activity, the . . . observed mortality decreased from 2.45% to 1.62%.”10
• “Sutter Medical Center, Sacramento [California] chartered a multidisciplinary Perinatal Data Committee to improve and simplify data capture for six obstetric quality measures. . . . All six quality measures showed significantly improved trends from 2010 through 2012.”11
• Memorial Hermann Health System (MHHS) “partnered with The Joint Commission Center for Transforming Healthcare . . . to establish reliable hand hygiene behaviors, which improved MHHS’s average hand hygiene compliance rate from 44% to 92% currently. Soon after compliance exceeded 85% at all 12 hospitals, the average rate of central line–associated bloodstream and ventilator-associated pneumonias decreased to essentially zero.”12
These results document substantial shifts in important outcomes, demon- strating practical implementation of The Joint Commission’s campaign for high reliability.
Review Credentials and Recommend Privileges The governing board of the HCO is responsible for granting LIPs clinical staff privileges to participate in the clinical staff organization and to provide spe- cific treatment within their training and experience and within the capabilities of the HCO. Each clinical staff member’s credentials and recent performance are evaluated by clinical staff peer review bodies with a recommendation to the governing board, which grants privileges for up to two years.
Privileging fulfills the HCO’s obligation to patients to ensure that each clinical staff member meets minimum levels of competence and profi- ciency. It is important to the clinical staff as well. Each clinical staff member can rely on all colleagues to have the necessary skills and diligence. Privileg- ing is a small but critical component of a larger strategy to improve clinical care.13 It is a safeguard against serious clinical staff failure, a foundation for a general program of quality improvement.
Elements of Privilege The privilege agreement is nationally standardized by the accrediting orga- nizations—the National Committee for Quality Assurance and The Joint Commission—and by various court decisions. It is a contract with four criti- cal elements:
1. Bylaws. The clinical staff collectively establishes mutually acceptable rules and regulations, subject to governing board approval. These
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define the rights to participate in the clinical staff organization and to provide care with HCO teams and the obligations to meet ethical standards, to ensure quality and economy of care to their own patients, and to participate in educational and quality improvement activities. The bylaws define how the clinical staff organization makes decisions, its accountability hierarchy, and how the rules may be amended. They may also define rules for compensation. Given the complexity of most of these issues, the bylaws themselves are supplemented by various procedural statements included by reference. Clinical staff accept the bylaws as part of the privilege agreement.
The bylaws are the principal source of due process protection for the clinical staff. They establish all procedural elements of privileging, including application requirements, timing, review processes, confidentiality, committees and participants, methods of establishing expectations, sources of data, and appeals procedures. Regular review and updating of bylaws are important.
2. Privileges. The organization extends the privilege of treating patients in the HCO to clinical staff who are willing to accept the bylaws and are judged competent in their field. The initial appointment and granting of privileges is for specific kinds of patient care matching the individual’s training, specialty certification, and demonstrated capability. Reappointment is based on peer review of actual clinical performance as well as completion of appropriate continuing education and maintenance of certification.
3. Independent patient relationship. The contract recognizes that each LIP establishes his own relationship to each patient including an obligation to represent the patient and see that the patient’s needs are fulfilled. The obligation is independent of clinical staff compensation; that is, salaried clinical staff have the same obligations to patients as those who work under fee-for-service.
4. Continuous improvement and peer review. Privileged clinical staff are expected to participate in the ongoing activities of the organization, including continuous improvement assignments such as PITs. They are also expected to participate in review of the quality of care of their peers and be the subject of such review. The concept of peer review is a central element of professional autonomy. It is highly prized by most clinical staff, and they invest much time and energy in carrying out their obligations.
For hospitals and all HCOs, the contractual consideration is access to HCO resources; on the part of the clinical staff, it is willingness to practice good medicine and accept obligations.
Chapter 6: The Cl inical Staff Organizat ion 181
Specialization Criteria It is increasingly common to insist on full certification by the appropriate national specialty board as a condition of privileges. The American Board of Medical Specialties (ABMS) and its member boards specify the educational and professional standards for certification in medical specialty practice. The ABMS Standards for Maintenance of Certification identify three general standards for initial certification—professionalism; education and training; assessment of knowledge, judgment, and skills—and six core competencies shared with the ACGME criteria for residency training:
1. Practice-based learning and improvement 2. Patient care and procedural skills 3. Systems-based practice 4. Medical knowledge 5. Interpersonal and communication skills 6. Professionalism
These competencies are supportive of transformational management and continuous improvement in excellent HCOs. To maintain specialty cer- tification, every specialty that is part of the ABMS requires its members to pursue continuing education addressing clinical advances and also to work toward standards in the following areas:
• Professionalism—how physicians carry out their responsibilities safely and ethically
• Patient Safety—how physicians use patient safety knowledge to reduce harm and complications
• Performance Improvement—how physicians use the best evidence and practices compared with peers and national benchmarks to treat patients
• Incorporating Judgment into Examinations—assessing not just what the physicians know but what they do with that knowledge14
Criteria Beyond Specialization While specialty certification is a strong foundation for credentialing individ- ual LIPs, it is not sufficient to establish privileges. Excellent HCOs recognize three areas of importance that are not addressed in the specialty certification criteria:
1. Privileges are granted for specific clinical activities at a more detailed level than specialty certification.
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Most specialties cover a broad range of diseases and clinical responses. HCO privileges are much more specific. Obstetrics and gynecology, for example, is an ABMS specialty. Privileges are far more detailed: prenatal care without disease or complication, prenatal care with disease or complication, normal delivery, forceps delivery, caesarian section, and so on.
2. Maintenance of a minimum number of cases treated annually to ensure that the skills of both the clinical staff and the hospital support team remain up-to-date.
Clear evidence supports the need for continued practice of clinical skills. Excellent HCOs develop specific standards for minimum surgeries per year and require practitioners to meet the minimums to continue each privilege.
3. Privileging must consider comprehensive excellence as well as procedural excellence.
Privileging says, and only says, that a practitioner is competent to do specific medical tasks. The tasks are not inflexibly assigned to only one specialty. The role of the HCO is to promote excellence in comprehensive care. It is not automatic that a specialist can provide better care than a generalist. Primary care clinicians argue that they can handle a great many cases without referral, while obstetricians, pediatricians, and medical subspecialists argue that their specialized skills are more likely to promote quality.
There are two issues involved. The first is correctly identifying the patient’s total needs, placing the excellence of a specific treatment in a con- text of overall recovery. The higher the value placed on comprehensive care, the stronger the generalists’ argument. Many thoughtful analysts believe that comprehensiveness is undervalued in US healthcare and that the balance has shifted too far toward specialization. The second issue is the effect on clini- cal staff income. Decisions to limit obstetrics to obstetricians and newborn care to pediatricians transfer income from primary care LIPs to specialists. By reducing the income of primary care clinicians, the decisions may reduce primary care availability in the community. It will also increase the total cost of care. The issue is particularly clear in palliative care, where continued spe- cialist attention is difficult to justify.
Privilege Review Process Privileges are granted only through a precisely defined process intended to protect the rights of all parties. The major steps are specified in detail in the bylaws and are shown in exhibit 6.2. The first substantive decision is by the service line or specialty department, thus ensuring review by peers,
Chapter 6: The Cl inical Staff Organizat ion 183
staff whose clinical practice is similar to the applicant’s. For new applicants, the reviewers rely on references, certifications, and the applicant’s portfolio of previous work. For renewal of privileges, they rely on evidence of main- tenance of certification, measures of quality of care, reports of unexpected events, and in some cases direct observation.
The credentials committee review is the first of several steps beyond specialty review to ensure objectivity and equity in the process. The commit- tee represents the HCO as a whole, covering all service lines. Ideal members of the credentials committee possess the attributes of a good judge: They are patient, consistent, thorough, factual, and considerate. Clearly, clinical knowledge and skill are useful, but detailed clinical evaluation should occur in specialty review. Committee members should be widely respected. Clinical staff with other key leadership roles should not serve simultaneously on the
Applicant submits application and
documentation of education and certi�cation
Executive staff reviews application for completeness, checks against national database and consistency
with need
Review by service line or specialty department
Review by credentials committee
Privilege granted for speci�c activities and
for 1- to 2-year appointments
Executive staff reviews compliance with outcomes standards, checks against
national database
Appeal hearing before credentials committee*
Negative Decision Positive Decision
Reappointment process
Review by executive committee of medical
staff organization
Review by institutional governing board
EXHIBIT 6.2 Flowchart of
Clinical Staff
Credentialing
*Both positive and negative decisions by the appeals body are subject to further review by the governing board.
The Wel l -Managed Healthcare Organizat ion184
credentials committee, and membership should rotate fairly frequently. The committee may seek additional opinions from specialists outside the HCO.
The committee must follow the bylaws rigorously. HCOs are liable for failure to provide due process, failure to remove incompetent clinical staff, and failure to establish appropriate standards of practice.15 The individuals participating in the credentialing process must practice the duty of funda- mental fairness, which includes constitutional provisions, when applicable; state nondiscrimination statutes; the public policy of fundamental fairness as expressed in judicial decisions; state and federal antitrust statutes prohibiting unlawful restraints of trade; and tort law precedents prohibiting malicious interference with a physician’s right to practice.16
A senior leader, usually the chief medical officer (CMO), staffs the committee, both to assist with the workload and to ensure compliance with the bylaws. That leader implements all procedures under the bylaws and the direction of the chair. Formal procedures for advance notice, agenda, atten- dance, minutes, and appeal mechanisms are mandatory. The summary of the candidate’s activities must be compiled in writing and documented.17 Candi- dates must have the opportunity to see the information compiled about them and to comment on it. Because the committee should function at a secondary level, evaluating the report of the service line or specialty department rather than actual patient care, the need for new direct testimony is minimized. When necessary, the statements must be carefully identified and recorded. Participation by legal counsel is desirable.
Should either leadership or the candidate appeal the credentials com- mittee decision, the HCO must provide documentation for its decision. Both the HCO and the clinical staff should be represented by counsel in the appeals session. Final decision must be made by the governing board, again subject to the rules established in the bylaws. Clinical staff denied privileges not infrequently sue the HCO. Excellent HCOs prevent lawsuits by assisting all LIPs in maintaining their knowledge and skill, by rigorously following due process, and by documenting evidence in support of the committee’s decisions. They also protect committee members and other individuals in the credentialing chain with insurance and legal counsel.
The Health Care Quality Improvement Act of 1986, Title IV of P.L. 100-177, mandates reporting of loss of credentials or other disciplinary action to a federal information bank. The purpose of the act is to reduce the chance of incompetent clinical staff moving to a new location and misrepre- senting her skills. Specifically, the act requires HCOs to do two things:
1. Notify the National Practitioner Data Bank of any
• clinical staff reduction or loss of privileges for any period greater than 30 days,
• voluntary surrender of privileges to avoid investigation,
Chapter 6: The Cl inical Staff Organizat ion 185
• requirement for medical proctoring or supervision imposed as a result of peer review, and
• malpractice settlement against any member of the medical staff or “other health practitioner” as defined in the act.
2. Check the information bank prior to initial privileging.
The act also protects any person reporting to or working for a profes- sional review body, such as an accredited organization’s credentialing com- mittee, by raising the standard of proof for any legal action by the individual disciplined.18 Although the act was well intended, there is little or no evi- dence that it changed behavior. It appears that many credentialing commit- tees seek alternatives that evade the reporting requirement.19
Standards for Granting and Renewing Privileges The use of scientifically based guidelines and measured clinical performance (chapter 5) effectively simplifies the credentialing review for individual LIPs to five questions:
1. Does the clinical staff member comply with general requirements for continuing education, standards for maintenance of certification, and minimum levels of activity?
2. Does the clinical staff member correctly perform the procedures that are his direct responsibility, including appropriate selection of, compliance with, and departure from protocols?
3. Does the clinical staff member achieve outcomes consistent with the expectations of the community, with due consideration of differences in the population being treated?
4. Has the clinical staff member avoided all activity that directly threatens the rights or safety of patients or colleagues?
5. Does the clinical staff member have appropriate interpersonal communication skills and abstain from disruptive behavior?20
The committee seeks evidence that substantially affirms the five ques- tions and that any circumstances prompting negative answers are unlikely to be repeated. In reviews of new applicants, the first question is verified by documentation, and evidence for the remaining questions is sought from training or prior affiliations. In subsequent reviews, emphasis is placed on recent actual performance. The committee reviews relevant complaints, and unexpected event reports, if any, are reviewed for questions 4 and 5. The cre- dentials process should address only these questions, and result in approval, disapproval, or contingent approval. The process is a minimum standard, not a performance or promotion evaluation.
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Properly run, the credentials process will not be a prominent element in HCO operations. A sound monitoring process at the service line level will identify clinical staff who need help before the two-year credentialing review. Service line leadership, working in a supportive culture, will assist any clinical staff encountering difficulty. Failure to renew privileges will be rare.
Clinical Staff Impairment The credentials committee faces certain predictable problems, among them impaired clinical staff members. Clinicians, like other human beings, can be disabled by age, physical or mental disease or condition, declining cogni- tive ability, personal trauma, or substance abuse. The prevalence of these difficulties among practicing physicians is hard to estimate, but it is gener- ally conceded to be between 5 percent and 15 percent.21 Thus, a medium- sized HCO could have a dozen clinical staff either impaired or in danger of impairment at any given time. The response of the service line and the credentials committee should be tailored to the kind of problem. Aging and uncorrectable physical or mental disability must force reduction of privileges. Depression and substance abuse should be treated, and programs designed especially for clinical staff can be reached through state medical societies. Arrangements can be made to assist impaired clinical staff with their practices during the period of recovery, thus ensuring that patients receive acceptable care without unduly disrupting patient relationships or the clinical staffs’ income. Larger HCOs often have a committee or group set up specifically to deal with this problem. Although it usually keeps affected clinical staffs’ iden- tities secret, its activities must be coordinated with those of the credentials committee. While every reasonable effort at rehabilitation should be made, the credentials committee is ultimately accountable for recommending the suspension or removal of privileges.
Clinical staff must uphold the HCO values, including respect for members of their team and other associates. Privileges can be withdrawn for repeated failure to adhere to values. The best programs to support this requirement train service line leaders to recognize disruptive behavior and act promptly to assist the associate to take more appropriate actions. Training programs and professional counseling are available when the individual does not immediately respond. These programs are appropriate for clinical staff, and successful application has been reported.22
Determine, and Recruit for, Clinical Staff Need A successful clinical staff organization must be properly scaled to the commu- nity it serves. If it is too large, individual clinical staff income and professional satisfaction goals will not be met, skills may be lost through lack of practice, and clinical staff members may face strong temptations to pursue unnecessary treatment.23 If it is too small, patients will be unable to get timely service and
Chapter 6: The Cl inical Staff Organizat ion 187
an adequate choice of practitioners. The clinical staff may be overworked, endangering quality of care and the satisfaction of both practitioners and patients. Best practice is to plan the staff size as part of the strategic and long- range planning of the institution.
The HCO can recruit for needed specialists and it can limit the num- ber of practitioners it allows to access its treatment facilities. Well-managed HCOs use the best available planning information to determine how many of each specialty the community needs. Doing this effectively helps their com- munities overcome shortages, maintain quality of care, and avoid excess cost.
The HCO’s medical staff planning activity exercises indirect control over LIPs’ fee-for-service income. By putting planned goals and recruit- ment strategies in place, the HCO makes a clear statement about the kind of medical practice it wants for the community. It also begins to implement the underlying philosophy of compensation: that any associate’s income should be the same as she could earn for equivalent effort elsewhere.
Forecasting Future Need for Clinical Staff The conceptual model for forecasting future staffing demands is an exten- sion of the general epidemiologic planning model discussed in chapter 3. It is applied to each specialty. In model 1, the epidemiologic model forecasts equation (1). The services provided per care leader can be estimated from history. The clinical staff involved are surveyed about their work intentions, such as retirements, leave, and plans to change their HCO affiliation. They can also comment on trends in treatment and market share.
(1) Number of services
needed
Population at ris
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ = kk
Average services per patient year
Market share{ } × { } × { }
(2) Number of care leaders
needed
Number of serv
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ = iices
needed
Services provided per care leader
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ ÷ { }
(3) Care leader
recruitments needed
Number of care leaders
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ =
needed
Number of care leaders
available
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ −
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬⎬ ⎪
⎭⎪
While model 1 works well with major clinical events, such as neurosur- gery and advanced cancer treatment, it is impractical for primary care and the more general specialties. An alternate model, model 2, uses standard ratios of clinical staff per population based on the aggregate service experience of existing health systems and communities.24
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(1) Number of care leaders
needed
Population at ri
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ = ssk
Standard care leaders
per population { } ×
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪
(2) Care leader recruitments
needed
Number of care leaders
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ =
needed
Number of care leaders
available
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ −
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬⎬ ⎪
⎭⎪
Both models require surveys of clinical staff intentions. The models have a number of limitations. They assume that the cur-
rent care protocols will continue to be used. New technology, prevention, and improved protocols can change the incidence, treatment, and specialty required. For example, changes in the US Preventive Services Task Force recommendations for breast cancer screening reduced the potential need for screening by more than half.25 Actual market response is also difficult to forecast. Breast screening criteria in effect before the task force made their revisions were only implemented by about half of eligible women.
Changes in the payment system can have an important impact on the need for clinical staff members. Prepaid group practices have witnessed an increased use of specialist physicians while maintaining an overall physician- to-population ratio that is 22–37 percent below the national rate.26 Even with these limitations, the HCO is positioned to make constructive decisions about clinical staff recruitment.
The clinical staff supply plan allows the hospital to move to meet com- munity needs in a timely manner. It also allows the hospital to protect the income of its clinical staff.
Good practice calls for a careful analysis of the present situation and anticipated changes, using the models with varying assumptions, to explore a range of possible outcomes and their consequences. A forecast of treat- ments based on local history is usually obtained through the cross-functional teams and the specialties involved. One based on national data should also be used, with due regard to benchmarks and published scientific opinion. The committee should consider several referents, such as values used by health maintenance organizations that operate according to staff models, conditions in similar-sized cities, and means adjusted for anticipated insurance trends, to evaluate current levels and show the implications for clinical staff supply.
The analysis and the alternative forecasts should be used to stimu- late discussion among clinical staff and the governing board. Widespread understanding of the opportunities will improve individual decision-making. Discussion may prompt early retirements or deliberate recruitment. The governing board is obligated to address indications of undersupply and severe oversupply.
Chapter 6: The Cl inical Staff Organizat ion 189
Few communities have a surplus of primary care providers. A recruit- ment strategy is essential in order to remain competitive. It must specify the need by type of provider and location and then consider incentives necessary to attract qualified applicants. A sound approach will promote discussion of the issue among all affected groups, leading to recommendations from the medical staff organization and final acceptance by the institutional board.
High-volume specialties (e.g., cardiology, endocrinology, obstetrics) should be individually forecast. High-cost, low-volume specialties (e.g., neu- rosurgery, neonatology) should be carefully justified before the institution commits capital and personnel. A plan to provide a specific referral specialty service affirms that sufficient local demand will exist to maintain the qual- ity and to justify the cost. In general, highly specialized treatment of disease incurs high fixed costs that must be spread over large populations to be cost-effective. The income expectations of the specialists themselves are high, and substantial clinical support is necessary. Unit cost falls rapidly as volume increases. Treatment teams caring for higher volumes of patients will have higher-quality results.27 As exhibit 6.3 shows, for any given treatment there is an increasing quality structure, a declining cost structure, and increasing specialist incomes as volume increases. There are also competitive standards for all three. If competitive standards are not met, patients and payers will select other sources after allowing for any inconvenience, such as travel to a distant site. The standards dictate a critical volume, Vq, Vi, Vc. An HCO that operates a specialty below its critical volumes faces poor quality, inefficiency, and often financial losses.
The clinical staff recruitment plan protects clinical staff members from new competitors because the HCO will decline privileges to applicants exceeding the planned numbers. If clinical staffs were to do this themselves,
Vq
Quality
Qc
Vc
Unit Cost
Cc
V i
Physician Income
I c
Volume
Establishing a critical (or target) level of quality, unit cost, or clinical staff income also establishes a critical volume of patients.
EXHIBIT 6.3 Critical Volumes
for Specialty
Services
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it would be collusion in restraint of trade, a violation of antitrust law. Because of this, although medical staff comment should be solicited on the plan, final approval must rest with the governing board.
Integrating the Clinical Staff Recruitment Plan with Other HCO Plans The healthcare institution must make capital investments to support the clini- cal staff supply. The investment decisions are part of the strategic or long- range plan of the institution discussed in chapter 14. Decisions are made first on the question of scope of service—“Should we have a cardiovascular surgery program?”—and second on the actual facilities and number of clini- cal staff members required.
The advantages of formal planning are summarized in exhibit 6.4. These help sell the HCO to clinical staff and, when backed by an effective plan of service, make the HCO “a great place to give care.”
Recruiting Clinical Staff In HCOs of excellence, proper recruiting of clinical associates is vital. In most communities, population growth, aging, and retirements create vacan- cies that must be filled. Good clinical staff members have their choice of practice location, and they are actively recruited even in times of relative
Advantage Clinical Staff Benefit Institution Benefit
Restriction on entry of competing clinical staff
Protection against excessive competi- tion; assurances of “fair” income
Medical staff commit- ment to effective care
Shared information and cooperative analysis
See future sooner and more clearly; have more time to react
Improve safety, return, and market attractive- ness of investments
Facility and employee needs integrated with physician needs
Support available when needed
Volumes adequate to keep costs and quality competitive
Better management of clinical supply
Facilitate poten- tially painful staff transitions
Anticipate retire- ments and recruit for replacements
Meet community demand for access
Reduce pressure for inappropriate treatment
Better management of insurance contracts
More options for insur- ance contracts
More income stability More market share
Broader array of options for customers
More market share
EXHIBIT 6.4 Advantages of
Clinical Staff
Supply Planning
Chapter 6: The Cl inical Staff Organizat ion 191
surplus. A recruitment offer frequently includes arrangements for office facili- ties and services, income guarantees, health insurance participation contracts, malpractice coverage, membership in a medical partnership or group, and introductions to referring clinical staff or available specialists. Substantial financial resources are necessary for the HCO to assemble these elements, but it must consider additional complications during the recruitment process. At the same time, the clinical staff members want to work with capable and friendly colleagues; complex offers require early assurance that medical cre- dentials are acceptable; and selecting the right candidate involves assessment of clinical skills.
Recruitment has become a relatively well-codified activity, carried out by a search committee of the clinical staff organization. It includes the fol- lowing six components:
1. Establishment of criteria for the position and the person sought 2. Establishment of compensation and incentives 3. Advertising and solicitation of candidates 4. Initial selection 5. Interviews and visits 6. Final selection and negotiation
Recruitment is commonly a collaborative activity with existing clinical staff members. The HCO’s support contributes to success.
Provide Clinical Education All HCOs are responsible for promoting the continuing education of their own employees and for assisting in the clinical education of other associates. Many larger HCOs and academic medical centers have responsibilities for undergraduate (medical students) and graduate medical education (residents and fellows) as well.
The interrelation of education, continuous improvement, and pro- tocol development should not be overlooked by the HCO. Analysis of past performance, benchmarking, the design of new processes, and the prepara- tion of protocols are educational activities in themselves, affecting the quality improvement, credentialing, planning, and educational functions simulta- neously. Increasingly, the educational function is driven by the continuous improvement process.
Continuing Medical Education Continuing education for the clinical staff is routinely required for licensure and specialty certifications. Many educational programs are offered outside the HCO; these do not substitute for the continued learning from experi- ences with the HCO’s own patients. Much education now occurs through the
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protocol development teams. Education helps ensure that every care provider fully understands the protocols; develops group pressure to encourage com- pliance; and, by changing behavior beforehand, eliminates blame for failures.
Continuing education need not be limited to clinical subjects. Programs to help the clinical staff understand the corporate approach to decision-making; gain skills in organized activities such as team building; and learn fundamentals of technologies, such as quality control and cost account- ing, are also important.
How much money and time to invest in staff education are difficult judgments. It is worth noting that large, successful organizations, such as Kaiser Permanente, Sentara Healthcare, Henry Ford Health System, and Intermountain Healthcare, invest heavily in education. They use their size to assemble programs that might not be cost-effective for smaller institutions. Programs for clinical staff are often expensive to mount, but they are more expensive to attend. The opportunity cost of clinical staff time is very high, and educational time must be judged in the context of other demands from practice, family, and HCO. The Joint Commission and all clinical staff pro- fessional associations agree that all clinical staff members should have access to sufficient educational opportunity to stay current. This currency requires, and The Joint Commission specifies, at least monthly educational meetings with required attendance.
Education of HCO Associates By tradition, professional preparation, and law, the clinical staff member is the leader of the healthcare team. With this leadership comes an obligation to educate others, not only other clinical professionals but also trustees, executives, and other management personnel. A particularly important part of this education deals with new clinical developments. New approaches to care frequently require retraining for personnel at several levels, and clinical staff should participate in that education. In addition, trustees and planners rely on the medical staff to identify new opportunities for care and to make clinical implications clear in terms that promote effective decisions. Many of these educational requirements are met through participation on various committees and day-to-day associations.
Graduate Medical Education Medicine has acknowledged its obligation to train new generations since Hip-
pocrates. Clinical training of medical students occurs in a limited number of institutions that incorporate such training in their mission. In 2018, there were nearly 400 teaching hospitals and health systems offering postgraduate medical education programs for 129,000 residents and fellows—licensed physi- cians completing specialty education.28 (Residents
Residents Licensed physicians who pursue postgradu- ate education in a medical specialty.
Fellows Residents who pursue advanced study, usu- ally in a subspecialty.
Chapter 6: The Cl inical Staff Organizat ion 193
and fellows are also called house officers.) Many of these sites are in academic medical centers, but most are in larger HCOs.
The content of this education is controlled through certification by individual specialty boards and is coordinated through the ACGME. House officers are paid stipends during their residencies because they provide important direct service, because hospitals feel they are a valuable source of recruits, and because their presence has long been thought to improve overall quality of care. An important benefit to both the community and the attending staff is that house officers are expected to cover patient needs at times when attending clinical staff are not present. In addition, many of the programs suitable for house officers are appropriate continuing education for attending clinical staff, and educating house officers is often a learning experience for the senior clinician.
Negotiate Compensation Arrangements All HCOs rely on their clinical staff to accept patients for care, but the financial relationship with clinical staff has been and continues to be com- plex. The underlying goal is to provide each clinical staff member with compensation equal to what he could earn in another, equivalent setting. This goal is a market criterion; departing from it is unwise. Paying more than market wastes customers’ money and can jeopardize tax-exempt status. Paying less than market will make recruiting of qualified applicants difficult and could cause valued associates to leave. That said, “market” is difficult to determine, and doing so does not address the structure of the compensa- tion contract.
The early twentieth-century tradition of financial independence between the physician and HCO has eroded steadily and seems almost certain to erode further. It too often fails to provide either patients or buy- ers with safe, effective, patient-centered, efficient care. It is now estimated that more than 50 percent of practicing physicians, and probably a larger percentage of all clinical staff, are employees of corporations. Various corpo- rate structures have arisen over the past 50 years. For HCOs, multispecialty physician corporations or direct payment from the HCO are emerging as the dominant employment models. Joint venture corporations, linking a not-for- profit hospital and a small physician group, remain common.
In these corporate forms, the trend has been to provide a base salary with incentives for desirable performance. The financial relationship should be designed to reinforce the organizational functions shown in exhibit 6.1, providing incentives for clinical staff to act consistently and aggressively in pursuit of the HCO’s mission. A growing body of evidence supports the use of incentives; they help clinical staff meet quality,29 patient satisfaction,30 and length-of-stay goals. One study found incentives effective among low-per- forming physicians.31 Best practice on clinical staff compensation is unclear, but a solid contract will be built around
The Wel l -Managed Healthcare Organizat ion194
• a base salary; • incentives for meeting quality-of-care goals; • incentives for meeting patient volume needs, such as a payment for
each patient; • incentives for meeting patient satisfaction goals; and • incentives for team leadership and participation in continuous
improvement activities.
Individual contracts will vary. Service line and unit chiefs will have a different distribution of incentives from clinical staff within the units. Thomas H. Lee and Toby Cosgrove suggest that clinical staff compensation must be imbed- ded in a broader strategy. It should have four “levers”:
1. Begin with clear goals that can be shared by individuals and the HCO, such as the mission and values.
2. Appeal to the clinical staff ’s self-interests, recognizing that offers must be competitive with other alternatives.
3. Earn the respect of colleagues, by which they mean routine sharing of quality scores of individual clinical staff among their peers.
4. Embrace the HCO’s traditions. Their examples, from Mayo and Cleveland Clinics, are from long-standing tradition of the highest clinical and ethical standards. They note, “Organizations must be willing to part company with physicians who refuse to work with their colleagues toward a shared purpose.”32
Lee and Cosgrove also offer four guidelines for compensation design:
1. Avoid attaching large sums to any single target. HCOs have found small incentives surprisingly effective.
2. Watch for conflicts of interest. The incentive must remain in the patient’s best interest. Programs that rewarded physicians for cost saving have not been successful; they created a conflict between patient needs and HCO costs.
3. Reward collaboration. Although physicians prefer incentives that they alone control, it is better to use incentives that encourage teamwork.
4. Communicate. They suggest that good incentives are “continually modified.”33
Financial contracts between HCOs and physicians are subject to important legal constraints. Explicit payment for increasing the profit of the HCO is illegal under a ruling of the Office of Inspector General of the US Department of Health and Human Services.34 Specific arrangements that
Chapter 6: The Cl inical Staff Organizat ion 195
might have the impact of increasing profits to the HCO or earnings to the physician fall under Stark law and fraud and abuse provisions of the Medicare contract.35 Many states have laws that regulate physician incentive compen- sation.36 Excellent HCOs always obtain legal counsel for financial contracts with physicians.
The Medicare Access and CHIP Reauthorization Act of 2015 created the Quality Payment Program, which
• repeals the Sustainable Growth Rate formula, • changes the way that Medicare rewards clinicians for value over
volume, • streamlines multiple quality programs under the new Merit-based
Incentive Payments System, and • gives bonus payments for participation in eligible alternative payment
models.37
As more LIPs are employed by HCOs, credentialing must be indepen- dent of compensation. Compensation should be based entirely on the LIP’s ability to achieve quality outcomes, as described in exhibit 1.1. HCOs should provide rewards for achieving negotiated goals, emphasizing the transfor- mational culture, and applying the service excellence and patient-centered approaches described in chapter 2.
Improve Continuously Continuous improvement focuses on empowerment of the clinical staff. The emphasis that transformational management places on two-way communi- cation applies to the clinical staff. Excellent HCOs make several systematic efforts to build a communicating culture:
1. Clinical staff voices are included in all major decision discussions, as shown in exhibit 6.5.
2. Senior managers devote significant time to individual and group contact with the clinical staff.
3. Formal surveys are used to measure clinical staff satisfaction, as with other associates.
4. Clinical staff members in management roles are trained to empower their colleagues and pursue servant leadership.
5. Clinical staff members are invited to serve on the governing board. 6. A complex accountability structure (see exhibit 6.6 later in the chapter)
provides two avenues for discussion of most issues. 7. Formal mechanisms for conflict resolution are built into the medical
staff bylaws but are used as a last resort.
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One goal of transformational culture is a structure where all clinical staff members are empowered and confident that their voice will be heard in decisions affecting their practice. This goal means not only listening but also taking effective action to identify issues, discuss implications, and resolve conflicts.38 Trust between the parties is a critical factor.39 Success requires a
Decision Type Example Physician Participation
Mission/vision Visioning exercise Extensive individual participation Review committees Governing board membership
Resource allocation
Environment assessment
Strategic plans
Governing board membership Leaders participate in annual review
Services plan Financial plan
Membership on board planning and finance committees
Facilities and human resources plans
Representation on committees and consultation for services directly involved
Clinical staff recruit- ment plan
Advice from each specialty unit Opportunity for individual comment
Budgeting Participation between line units and services particularly involved
Capital budgeting Major voice in ranking all clinical equipment purchases
Participation in general ranking of capital equipment
Clinical care issues
Process design Participation by service line in all patient management protocol development
Review of relevant functional protocols
Participation or consultation in clinical PITs
Organizational Personnel selection Credentialing of all clinical staff Participation on executive search
committees
Implementation plans Participation by service line
Information plan Participation in plan and relevant pilot programs
Conflict resolution Membership in mediation efforts and appeals panels
Note: PIT = process improvement team.
EXHIBIT 6.5 Clinical Staff
Representation
on Decision
Process
Chapter 6: The Cl inical Staff Organizat ion 197
robust network of communications that identifies issues promptly, solicits and organizes opinion about them, and resolves them fairly.40 All clinical staff members should be close to someone whom they respect and who can hear their concern and either resolve it for them or explain how the staff can par- ticipate in the resolution. Encouraging comment and discussion and resolv- ing it creates an environment where issues can be openly aired, discussed, and decided. Ideally, all clinical staff members should be convinced that they have heard the issue, that they have had a fair opportunity to be heard about the issue, and that the final decision optimizes market realities.
The major constraint is clinical staff time. Efforts outside their practice reduce the time they have for patient care. Many prefer patient care, and all generate income from it. Some specialties are more constrained than others. Primary care clinicians may have offices some distance away from the HCO and full calendars in their clinics. Specialists are more likely to be nearby and, because they earn more per minute of clinical effort, are more able to devote time to management issues. This unevenness creates an imbalance that must be explicitly addressed. Clinical staff time is saved by training leadership and by preparation and flexibility in committee activities. Meetings and meet- ing agendas should be designed with respect for clinical staff time. Advance preparation and distribution of relevant background material make a notice- able difference; so does proper preparation by the chair. Teleconferencing and attendance as needed should be encouraged. Special efforts should be made to hear the primary care viewpoint.
Most clinical staffs learn the communications culture by multiple means, with experience as the most important. Training and reviews of pro- cesses at the start of major discussions are helpful. Where communication and trust are supported by a strong formal system, informal methods can be used to great advantage. If all staff members are confident of their empower- ment, much can be accomplished through informal discussions. In well-run HCOs, nonmedical managers make a deliberate effort to maintain informal communications with the medical staff, including going to their offices to meet them. Many successful CEOs and chief operating officers undertake the monitoring function personally. By visiting clinical staff in their offices, hos- pital managers and executives demonstrate their understanding of the value of the clinical staffs’ time and show a willingness to become acquainted with clinical staff on a more personal level.41
People
There is an average of almost three clinical staff (714,000 physicians, 250,000 advanced practice nurses,42 123,000 physician assistants43) for every 1,000 persons in the United States. These practitioners tend to concentrate in urban areas, although most disadvantaged areas have shortages.44 Larger HCOs
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have several hundred clinical staff representing a wide variety of specialties and growing numbers of nonphysician practitioners.45 Technology and econom- ics have increased the differences among clinical staff. Less than half are in primary care, which is believed to be a shortage area. Most are specialists who work mostly in institutional settings and, by definition, see a limited range of conditions in which they are expert. Excellent HCOs must pay careful atten- tion to the organization and leadership of the clinical staff organization.
Clinical Staff Organization Clinical staffs in larger HCOs are organized by service line. The service lines form the foundation for performance measurement and goal setting, privileg- ing, continuous improvement, and compensation negotiations. HCOs also maintain a medical staff organization that serves to address issues that cross ser- vice lines, such as credentialing (see exhibit 6.2), participation in strategic plan- ning, and ranking capital budget proposals. Exhibit 6.6 shows the basic concept of the structure. The medical staff executive committee serves as a coordinat- ing body, with powers delegated in the bylaws. Senior leadership interacts frequently with the service lines, their subordinate units, and the clinical staff themselves. Senior leadership attends meetings of the medical staff and advises the governing board on all matters reaching the board, including privileging.
The president of the clinical staff (sometimes called chief of staff) is an elected leader of the clinical staff organization. The CMO is usually a physician with advanced education in healthcare management who serves as a member of the senior executive leadership team. Even though physicians or
Governing board
CEO Governing Board
Vice president, medical affairs/CMO
Credentials committee
Executive committee
Medical staff organization
Joint governing boards
Membership includes
service line leadership and HCO senior management.
Service lines with joint venture corporations
These service lines
have governing boards and
negotiate goals subject to reserved powers designated in their charters.
Service lines without
joint venture corporations
These service lines negotiate goals as part of the general
HCO process.
Clinical support services
Anesthesia,
imaging, pathology,
rehabilitation
EXHIBIT 6.6 Institutional
Clinical
Organization
Structure
Note: HCO = healthcare organization; CMO = chief medical officer.
Chapter 6: The Cl inical Staff Organizat ion 199
other LIPs may be employed by the organization in clinical or administrative roles, they are almost always credentialed and privileged in their specialty, and they sometimes retain a small active practice. In larger organizations, their time is largely committed to leadership duties.
Clinical Staff Leadership Clinical leaders form the backbone of the service line organization, filling the key positions and forming the communications network. Leaders are not dif- ficult to identify. They emerge naturally in informal discussions and on PITs. A sound program identifies leaders early in their careers and begins assigning activities appropriate to their skills. As the clinical staff member matures, her experience deepens and assignments become more complex. Clinical staff members are appointed by the governing board. They progress through the ranks, toward the critical committee assignments, executive positions, and board membership. They join the HCO’s executive leadership team. They are deliberately nurtured and trained, often relying on mentors and coaches, with just-in-time training as their duties expand and they gain experience.
Measures
Like any other accountable unit of the HCO, the clinical staff organization should have measures of performance and formal expectations for the coming year. The service lines and clinical support services shown in exhibit 6.6 will have strategic scorecards if they are separately incorporated and unit score- cards if they are part of the HCO corporation. The medical staff organization should also have a unit scorecard. Exhibit 6.7 suggests some measures of the staff organization that will identify opportunities for improvement (OFIs).
Dimension Applicable Measures
Cost Cost budgets for assigned functions
Associate satisfaction
Surveys of clinical staff satisfaction Meeting attendance Incidents causing excessive disruption
Outcomes and efficiency
Cost per clinician served can be calculated and compared to similar organizations
Review by internal or external consultants
Operations Review by internal or external consultants Items arising from associate satisfaction
Customer satisfaction*
Surveys of patient service line quality and patient satisfaction
*The customers of the clinical staff organization components are the associates they serve. The
customers of clinical support units are both patients and associates.
EXHIBIT 6.7 Operational
Measures of
Clinical Staff
Organization
Performance
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Managerial Leadership
Clinical staff–HCO relations are a traditional “hot spot” in HCOs, but the functions outlined in this chapter create organizations for which clinicians want to work and do not intend to leave. The trends suggest that large HCOs and HCO systems will prevail, using their scale and automation to support evidence-based medicine, clinical measures, benchmarks, and guide- lines. Payment systems will continue to move toward quality-based rewards. Profession associations will continue their focus on quality, continuous improvement, and leadership. Transformational cultures will help HCOs identify and correct causes of stress in the clinical staff–HCO relationship. The typical twenty-first-century clinician will think of herself as a team leader employed by an HCO. She will look to that organization for continued pro- fessional support, and she will receive it.
The Managerial Leadership section of chapter 5 suggested that excel- lence requires a technical foundation of supportive information, a culture of respect, and an overall commitment to continuous clinical improvement. In chapter 6, we argue that senior leadership should support these fundamentals with deliberate efforts to build supportive relationships, to maintain govern- ing board relations with clinical staff, and to systematically recruit clinical staff. Our argument is strongly supported by research on care provider satisfaction.46
Building Supportive Relationships Clinical staff deal directly with life and death. They undertake tasks that are both intellectually and emotionally challenging. Burnout, the loss of emo- tional reward and commitment, is an ongoing reality—and it is estimated as high as 50 percent of all physicians. The Mayo Clinic Health System has developed nine strategies that have helped the system address the problem, quoted in the following sections.47 The strategies were developed by exten- sive review of published literature and informal experimentation. The authors are the Mayo Clinic’s top executives, and they note, “We do not consider these principles to be exhaustive or definitive. Rather, they represent tangible organizational actions that are supported by evidence and experience.”
Strategy 1: Acknowledge and Assess the Problem The Mayo Clinic measures engagement, burnout, and satisfaction using nationally standardized surveys with benchmarks. Each clinician is surveyed annually. In addition, substantial efforts are made to communicate with indi- vidual clinicians and clinical leaders.
Strategy 2: Harness the Power of Leadership Clinical leaders should be selected for the ability to listen, engage, develop, and lead. The individuals selected should be prepared for their leadership role
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by training and coaching. Their leadership performance should be regularly assessed by the individuals they lead.
Strategy 3: Develop and Implement Targeted Interventions The Mayo Clinic recognizes that the causes of frustration differ by clinical specialty. It treats burnout causes as OFIs and responds with local PITs “to identify local factors that could be rapidly altered to improve physician burn- out and satisfaction.”
Strategy 4: Cultivate Community at Work The Mayo Clinic deliberately strives to create collegial relationships. For example, “Physicians signed up with a group of 6 to 7 colleagues, shared a meal together at a restaurant in town once every 2 weeks, and spent the first 20 minutes of that gathering discussing a question that explored the virtues and challenges of being a physician. Funds to cover the cost of the meal were provided by Mayo Clinic.”
Strategy 5: Use Rewards and Incentives Wisely The Mayo Clinic recognizes that “the effectiveness of financial incentives in improving quality is . . . [not] clear [; the incentive] can have unintended consequences, and does not address the third potential problem of produc- tivity-based physician pay: the incentive to overwork.”
That is, residency training routines, ethical commitment, “unhealthy role modeling by colleagues,” and excessive debt from education may com- bine to encourage overwork, especially in volume-based compensation. “Rewards such as greater flexibility (which can facilitate work–life integra- tion) or protected time to pursue ‘personally meaningful aspects of work’ may be a valuable approach, and ‘simple financial incentive may be less effective.’”
Strategy 6: Align Values and Strengthen Culture The Mayo Clinic undertook a visioning exercise among its several thousand clinicians to build consensus around its values, developing a document detail- ing the partnership between the organization and its physicians. The docu- ment is part of the work contract.
Strategy 7: Promote Flexibility and Work–Life Integration “Providing physicians with the option to adjust professional work effort (with a commensurate reduction in compensation) allows them to tailor their work hours to meet both personal and professional obligations. Evidence suggests that reducing professional work hours can help individual physicians recover from burnout. . . . Organizations should seek to make this option available to the greatest extent possible.”
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Strategy 8: Provide Resources to Promote Resilience and Self-care Organizations help clinicians implement individual strategies to prevent burnout, deal with distress, and promote well-being. These include “tools for self-calibration, resources to promote self-care, and training in skills that promote resilience.” To be successful, the tools must be backed by a credible organizational response, aggressively implementing strategy 3.
Strategy 9: Facilitate and Fund Organizational Science “Vanguard institutions . . . have the additional responsibility of develop- ing the evidence-based strategies that . . . other centers will implement. The Mayo Clinic Program on Physician Well-being, founded in 2007, was launched precisely to provide such evidence. Many of the approaches out- lined in strategies 1 through 8 are derived from the scientific efforts of this program during the past decade.”
The nine strategies are consistent with transformational management and continuous improvement. They are not inexpensive to implement, and as the authors of the strategies concede in other publications, they do not eliminate all burnout.48 They are a tested, documented best practice, success- fully improving care and reducing costs while protecting a critical resource for excellence.
Representing Clinical Staff on the Governing Board Scholars have found evidence that HCOs with physician board membership are higher in quality.49 The practice has become almost universal among large, community-based HCOs. The clinical staff members nominate their colleagues in many organizations. To satisfy tax-exemption rules, the board majority must remain nonphysicians; rarely do physicians constitute more than a substantial minority. These few individuals, with only a fraction of the specialties, ages, and financial arrangements of the staff as a whole, cannot represent the complex needs of all clinical staff members. Like other board members, they are expected to vote for the best interests of the community rather than for any short-term advantage to themselves or to the clinical staff. They serve the medical staff more by making sure the clinical staff opinions are fully and fairly heard than by any specific representation.
Senior leadership and the board chair should maximize the contribu- tion of physicians on the board. Physician members should participate in board education programs. They should recognize board members’ obliga- tion to represent the community as a whole and strictly observe conflict- of-interest rules. Leadership at HCOs of excellence also supports physician members with an overall strategy such as the Mayo Clinic’s—one that empowers clinical staff and resolves individual concerns through continuous improvement. When that strategy is effective, the clinical staff can join the community members in seeking to advance the mission. Conflict resolution will occur during goal negotiation and capital budget processes. The board
Chapter 6: The Cl inical Staff Organizat ion 203
will select among competing proposals. The losers’ main concern is whether the decision was fair and fully explored. Defeat is more easily accepted when the overall culture and performance are systematically supportive.
Ensuring Adequate Clinical Staff Supply It is likely that most HCOs will work in an environment of care shortages. Research by the Association of American Medical Colleges predicts an increasing shortage reaching 40,000 to 100,000 physicians by 2030.50 That is 5 to 10 percent of the number now in practice. The estimate focuses on phy- sicians; other practitioners will be important in meeting the need. The aging population, which consumes an increasing quantity of healthcare services, is the major contributor to this demand.
HCOs that delight their clinical staff will recruit successfully, thereby recruiting less. Delighted clinical staff stay with the organization. They are more open to the experimentation that will be necessary to meet the future. They are also effective recruiters. The key to clinical staff satisfaction is clear enough: It is a network of communication and effective response to issues of concern. Excellent HCOs achieve satisfaction by maintaining the culture and system described by the Mayo Clinic strategies and in this text.
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. You will be lunching with newly appointed clinical staff members. How will you explain to them why and how the HCO supports its clinicians and other associates? What are the critical takeaways you want them to have?
2. The process for credentialing and clinical staff appointment (see exhibit 6.2) looks overwhelming to many starting clinical staff members. What should you say to reassure one of them who expresses concern?
3. “Yale–New Haven Hospital pursued organization-wide method changes . . . standardizing the discharge process, using status boards for visual con- trol, and accuracy and timeliness of data entry” (see the Pursuing High Reli- ability section). Your CMO says, “We should do that here.” What should she do to get started?
4. Every clinical staff member assumes a professional commitment to fulfill his patients’ needs and provides the diagnoses that drive plans of care. A trustee who runs a successful manufacturing company says, “That’s a lot of authority in one person. How do we know these people are really fulfilling our excellence-in-care mission?” Identify the key phrases he needs to take away and explain them to him.
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5. Some flash points in clinical staff relations are recurring and predictable. In an interview for a leadership promotion, you are asked, “How should our HCO deal with these issues?”
• Interspecialty disputes (e.g., Which births require a certified obstetrician? Can primary care providers administer certain anesthetics and do certain simple surgeries? Must an imagist confirm every examination?)
• Emergency referrals (providing specialist care to emergency patients, who often arrive at inconvenient times and without insurance or financing)
• Impaired clinical staff members • Disruptive clinical staff members
Additional Resources
Burroughs, J. 2015. Redesign the Medical Staff Model: A Guide to Collaborative Change. Chicago: Health Administration Press.
Joint Commission, The. Updated annually. Comprehensive Accreditation Manual for Hos- pitals. Oakbrook Terrace, IL: Joint Commission Resources.
Showalter, J. S. 2017. The Law of Healthcare Administration, 8th ed. Chicago: Health Administration Press.
Shanafelt, T. D., and J. H. Noseworthy. 2017. “Executive Leadership and Physician Well- being.” Mayo Clinic Proceedings 92 (1): 129–46. doi:10.1016/j.mayocp .2016 .10.004.
Starr, P. 2017. The Social Transformation of American Medicine, rev. ed., 198–232, 420–49. New York: Basic Books.
Notes
1. Darling v. Charleston Community Memorial Hospital, 33 Ill.2d 326, 211 N.E.2d 253, 14 A.L.R.3d 860 (Ill. Sep 29, 1965).
2. McGlynn, E. A., S. M. Asch, J. Adams, J. Keesey, J. Hicks, A. DeCristofaro, and E. A. Kerr. 2003. “The Quality of Health Care Delivered to Adults in the United States.” New England Journal of Medicine 348 (26): 2635–45. See also Casalino, L., R. R. Gillies, S. M. Shortell, J. A. Schmittdiel, T. Bodenheimer, J. C. Robinson, T. Rundall, N. Oswald, H. Schauffler, and M. C. Wang. 2003. “External Incentives, Information Technology, and Organized Processes to Improve Health Care Quality for Patients with Chronic Diseases.” Journal of the American Medical Association 289 (4): 434–41. See also Clark, A. 2005. “Measuring Quality of Care Nation- wide.” Caring 24 (3): 42–45.
3. McWilliams, M. J., M. E. Chernew, A. M. Zaslavsky, P. Hamed, and B. Landon. 2013. “Delivery System Integration and Health Care Spending and Quality for Medicare Beneficiaries.” JAMA Internal Medicine 173 (15): 1447–56.
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4. Accreditation Council for Graduate Medical Education. 2017. “ACGME Com- mon Program Requirements.” Accessed February 23, 2018. www.acgme.org/ Portals/0/PFAssets/ProgramRequirements/CPRs_2017-07-01.pdf.
5. Chassin, M. R., and J. M. Loeb. 2013. “High-Reliability Health Care: Getting There from Here.” Milbank Quarterly 91 (3): 459–90.
6. Perla, R. J., E. Bradbury, and C. Gunther-Murphy. 2013. “Large-Scale Improve- ment Initiatives in Healthcare: A Scan of the Literature.” Journal for Healthcare Quality 35 (1): 30–40.
7. Pronovost, P. J., R. Demski, T. Callender, L. Winner, M. R. Miller, J. M. Austin, S. M. Berenholtz, and National Leadership Core Measures Work Groups. 2013. “Demonstrating High Reliability on Accountability Measures at the Johns Hopkins Hospital.” Joint Commission Journal on Quality and Patient Safety 39 (12): 531–44.
8. Kanter, M. H., G. Lindsay, J. Bellows, and A. Chase. 2013. “Complete Care at Kaiser Permanente: Transforming Chronic and Preventive Care.” Joint Commission Journal on Quality and Patient Safety 39 (11): 484–94.
9. Jweinat, J., P. Damore, V. Morris, R. D’Aquila, S. Bacon, and T. J. Balcezak. 2013. “The Safe Patient Flow Initiative: A Collaborative Quality Improvement Journey at Yale–New Haven Hospital.” Joint Commission Journal on Quality and Patient Safety 39 (10): 447–59.
10. Barbieri, J. S., B. D. Fuchs, N. Fishman, C. C. Cutilli, C. A. Umscheid, C. Kean, S. Koshy, P. G. Sullivan, P. J. Brennan, and R. R. Kelz. 2013. “The Mortality Review Committee: A Novel and Scalable Approach to Reducing Inpatient Mortality.” Joint Commission Journal on Quality and Patient Safety 39 (9): 387–95.
11. Gilbert, W. M., M. C. Bliss, A. Johnson, W. Farrell, L. Gregg, and C. Swanson. 2013. “Improving Recording Accuracy, Transparency, and Performance for Obstet- ric Quality Measures in a Community Hospital-Based Obstetrics Department.” Joint Commission Journal on Quality and Patient Safety 39 (6): 258–66.
12. Shabot, M. M., D. Monroe, J. Inurria, D. Garbade, and A. C. France. 2013. “Memorial Hermann: High Reliability from Board to Bedside.” Joint Commission Journal on Quality and Patient Safety 39 (6): 253–57.
13. Gardner, L. A., V. Snow, K. B. Weiss, G. Amundson, E. Schneider, D. Casey, E. R. Hornbake, S. Manaker, L. G. Pawlson, P. Reynolds, M. Sha, and D. Baker. 2010. “Leveraging Improvement in Quality and Value in Health Care Through a Clinical Performance Measure Framework: A Recommendation of the American College of Physicians.” American Journal of Medical Quality 25 (5): 336–42.
14. American Board of Medical Specialties. 2018. “Steps Toward Initial Certifica- tion and MOC.” Accessed April 16. www.abms.org/board-certification/steps -toward-initial-certification-and-moc.
15. Showalter, J. S. 2017. The Law of Healthcare Administration, 8th ed. Chicago: Health Administration Press.
16. Ibid. 17. Ramsey, P. G., M. D. Wenrich, J. D. Carline, T. S. Inui, E. B. Larson, and J. P.
LoGerfo. 1993. “Use of Peer Ratings to Evaluate Physician Performance.” Journal of the American Medical Association 269 (13): 1655–60. See also Norman, G. R., D. A. Davis, S. Lamb, E. Hanna, P. Caulford, and T. Kaigas. 1993. “Competency Assessment of Primary Care Physicians as Part of a Peer Review Program.” Journal of the American Medical Association 270 (9): 1046–51.
18. Health Care Quality Improvement Act of 1986, P. L. 99-177. 19. Credentialing and Peer Review Legal Insider. 2009. “Lack of NPDB Reporting
Brings Peer Review Practices into Question.” Credentialing and Peer Review Legal Insider 6 (8): 1542–1600.
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20. Rosentein, A. H., and M. O’Daniel. 2008. “A Survey of the Impact of Disruptive Behaviors and Communication Defects on Patient Safety.” Joint Commission Jour- nal on Quality and Patient Safety 34 (8): 464–71. See also McLaren, K., J. Lord, and S. Murray. 2011. “Perspective: Delivering Effective and Engaging Continuing Medical Education on Physicians’ Disruptive Behavior.” Academic Medicine 86 (5): 612–17. See also Landon, B. E., S. L. Normand, D. Blumenthal, and J. Daley. 2003. “Physician Clinical Performance Assessment: Prospects and Barriers.” Journal of the American Medical Association 290 (9): 1183–89.
21. Williams, B. W. 2006. “The Prevalence and Special Educational Requirements of Dyscompetent Physicians.” Journal of Continuing Education in the Health Profes- sions 26 (3): 173–91.
22. Hickson, G. B., J. W. Pichert, L. E. Webb, and S. G. Gabbe. 2007. “A Complemen- tary Approach to Promoting Professionalism: Identifying, Measuring, and Address- ing Unprofessional Behaviors.” Academic Medicine 82 (11): 1040–48.
23. Rice, T. H., and R. J. Labelle. 1989. “Do Physicians Induce Demand for Medical Services?” Journal of Health Politics, Policy and Law 14 (3): 587–600.
24. Holm, C. E. 2004. “A Guide to Medical Staff Development Planning.” In Allies or Adversaries: Revitalizing the Medical Staff Organization, 27–52. Chicago: Health Administration Press.
25. US Preventive Services Task Force. 2016. “Breast Cancer: Screening.” Pub- lished January. www.uspreventiveservicestaskforce.org/Page/Document/Update Summary Final/breast-cancer-screening1.
26. Weiner, J. P. 2004. “Prepaid Group Practice Staffing and U.S. Physician Supply: Lessons for Workforce Policy.” Health Affairs (web exclusive): W4-43–W4-59.
27. Post, P. N., M. Kuijpers, T. Ebels, and F. Zijlstra. 2010. “The Relation Between Volume and Outcome of Coronary Interventions: A Systematic Review and Meta- analysis.” European Heart Journal 31 (16): 1985–92.
28. Association of American Medical Colleges. 2018. “About the AAMC.” Accessed April 7. www.aamc.org/about.
29. Gilmore, A. S., Y. Zhao, N. Kang, K. L. Ryskina, A. P. Legorreta, D. A. Taira, and R. S. Chung. 2007. “Patient Outcomes and Evidence-Based Medicine in a Pre- ferred Provider Organization Setting: A Six-Year Evaluation of a Physician Pay-for- Performance Program.” Health Services Research 42 (6, pt .1): 2140–59.
30. Kirschner, K., J. Braspenning, R. P. Akkermans, J. E. A. Jacobs, and R. Grol. 2013. “Assessment of a Pay-for-Performance Program in Primary Care Designed by Tar- get Users.” Family Practice 30 (2): 161–71.
31. Chen, J. Y., N. Kang, D. T. Juarez, K. A. Hodges, and R. S. Chung. 2010. “Impact of a Pay-for-Performance Program on Low Performing Physicians.” Journal for Healthcare Quality 32 (1): 13–22.
32. Lee, T. H., and T. Cosgrove. 2014. “Engaging Doctors in the Health Care Revolu- tion.” Harvard Business Review 92 (6): 104–16.
33. Ibid. 112. 34. Wiehl, J. G., and S. L. Murphy. 1999. “Gainsharing: A Call for Guidance.” Journal
of Health Law 32 (4): 515–63. 35. Centers for Medicare & Medicaid Services. 2018. “Help Fight Medicare Fraud.”
Accessed April 7. www.medicare.gov/forms-help-and-resources/report-fraud-and -abuse/fraud-and-abuse.html.
36. Stauffer, M. 2000. “Finance Issue Brief: Bans on Financial Incentives.” Issue Brief: Health Policy Tracking Service (June 1): 1–10.
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37. Centers for Medicare & Medicaid Services. 2018. “MACRA.” Accessed August 15. www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value -Based-Programs/MACRA-MIPS-and-APMs/MACRA-MIPS-and-APMs.html.
38. Gillies, R. R., H. S. Zuckerman, L. R. Burns, S. M. Shortell, J. A. Alexander, P. P. Budetti, and T. M. Waters. 2001. “Physician–System Relationships: Stumbling Blocks and Promising Practices.” Medical Care 39 (7, Suppl.): I-92–I-106.
39. Zazzali, J. L. 2003. “Trust: An Implicit Force in Health Care Organization The- ory.” In Advances in Health Care Organization Theory, edited by S. S. Mick and M. E. Wyttenbach, 233–52. San Francisco: Jossey-Bass.
40. Holm, C. E. 2004. “Techniques to Foster Effective Working Relationships.” In Allies or Adversaries: Revitalizing the Medical Staff Organization, 85–103. Chicago: Health Administration Press.
41. Ibid. 42. US Bureau of Labor Statistics. 2018. “Physicians and Surgeons.” US Department of
Labor. Modified June 11. www.bls.gov/ooh/healthcare/physicians-and -surgeons. htm.
43. American Academy of Physician Assistants. 2018. “About.” Accessed April 7. www .aapa.org/about.
44. Health Resources and Services Administration. 2018. “Shortage Designation.” US Department of Health and Human Services. Accessed April 6. https://bhw.hrsa .gov/shortage-designation.
45. White, K. R., D. G. Clement, and M. Roczen. 2015. “Healthcare Professionals.” In Human Resources in Healthcare: Managing for Success, 4th ed., edited by B. Fried and M. Fottler. Chicago: Health Administration Press.
46. Sterbenz, J., and K. Chung. 2017. “The Affordable Care Act and Its Effects on Physician Leadership: A Qualitative Systematic Review.” Quality Management in Health Care 26 (4): 177–83. See also Panagioti, M., E. Panagopoulou, P. Bower, G. Lewith, E. Kontopantelis, C. Chew-Graham, S. Dawson, H. van Marwijk, K. Geraghty, and A. Esmail. 2017. “Controlled Interventions to Reduce Burnout in Physicians: A Systematic Review and Meta-analysis.” JAMA Internal Medicine 177 (2): 195 –205. See also Skillman, M., C. Cross-Barnet, R. F. Singer, S. Ruiz, C. Rotondo, R. Ahn, L. P. Snyder, E. M. Colligan, K. Giuriceo, and A. Moidud- din. 2017. “Physician Engagement Strategies in Care Coordination: Findings from the Centers for Medicare & Medicaid Services’ Health Care Innovation Awards Program.” Health Services Research 52 (1): 291–312. See also Shanafelt, T. D., and J. H. Noseworthy. 2017. “Executive Leadership and Physician Well-Being.” Mayo Clinic Proceedings 92 (1): 129–46. See also Henson, J. W. 2016. “Reducing Physician Burnout Through Engagement.” Journal of Healthcare Management 61 (2): 86–89.
47. Shanafelt and J. H. Noseworthy 2017. 48. Shanafelt, T. D., G. Gorringe, R. Menaker, K. A. Storz, D. Reeves, S. J. Buskirk, J.
A. Sloan, and S. J. Swensen. 2017. “Impact of Organizational Leadership on Physi- cian Burnout and Satisfaction.” Mayo Clinic Proceedings 90 (4): 432–40.
49. Bai, G., and R. Krishnan. 2015. “Do Hospitals Without Physicians on the Board Deliver Lower Quality of Care?” American Journal of Medical Quality 30 (1): 58–65.
50. Association of American Medical Colleges. 2018. “GME Funding and Its Role in the Physician Shortage.” AAMC News. Published May 29. https:///news.aamc .org/for-the-media/article/gme-funding-doctor-shortage.
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CRITICAL ACTIONS
7 NURSING
1. Deliver excellent care:
• Build effective nursing and interdisciplinary teams to deliver individualized, patient-centered care.
• Plan, deliver, and evaluate care that is safe, effective, and evidence-based.
• Provide training and support logistical needs.
• Measure and improve nursing team performance.
2. Communicate for comprehensive patient care:
• Ensure full transfer of knowledge between nurses, physicians, and other team members.
• Use team huddles for patient safety, quality, and care planning.
• Use the electronic health record to integrate care from direct and indirect care providers.
3. Educate patients, families, and communities:
• Use the patient–HCO encounter to address preventive and continuing needs.
• Consider cultural and linguistic competence.
• Support community health initiatives.
4. Sustain the supply of nurses:
• Ensure healthy work environments.
• Promote nursing as a career choice in elementary, middle, and high school.
• Provide learning and advancement opportunities for nursing personnel.
• Reach out to groups previously underrepresented in nursing.
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Purpose
The purposes of nursing are to
deliver safe and excellent evidence-based care to each patient
and
maintain a work environment that ensures nursing associates’ competence and engagement.
Nursing is by far the largest clinical profession. Its contribution is clearly recognized by patients. Gallup’s annual survey on the honesty and ethical standards of various professions reports that Americans rate nurses at the top of the list.1 Most people, when asked to evaluate their inpatient care, speak first not of the doctor but of the nurse. Furthermore, if they think well of the nursing care, they tend to rate the whole experience, even the bill, more favorably.
Florence Nightingale saw the nursing role as stretching from emo- tional support to control of hazards in the environment. In 1859, she articu-
lated the objective of assisting the patient to homeostasis—a state of equilibrium with one’s envi- ronment—when she said that nursing consists of those activities that “put the patient in the best con-
dition for nature to act upon him.”2 This concept prevails in most of the more modern definitions, with the added goals of restoring the patient’s indepen- dence and of nursing advocacy for individuals, families, communities, and populations through participation in health policy, education, and the cre- ation of patient and health management.3
Obviously, preventing the loss of equilibrium is better than trying to regain it. Prevention of illness and promotion of health have always been important in nursing. The work that nurses perform with healthy individu- als and families includes immunization, education, environmental safety, and disease screening. For persons who are ill or injured, the route to homeo- stasis includes a nursing assessment or diagnosis, the development of an individualized care plan, the implementation of the plan, and the evaluation of the plan according to specific nursing care or activities requested of other services. Even for the person who is ill, preventing the spread of disability is as important as correcting losses. Nurses educate patients and their families in adapting to disease and disability, speeding recovery, and minimizing the risk of further impairment.
The role of nursing is to see that the purposes are uniformly imple- mented for all patients across the HCO’s spectrum of outpatient, inpatient, and continuing care.
Homeostasis A state of equilibrium with one’s environment.
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Functions
As shown in exhibit 7.1, the nursing organization must perform five func- tions, beginning with the provision of excellent patient care. Nurses must also coordinate interdisciplinary team–based care. Nurses provide the bulk of patient and family education and much of community health education. As the day-to-day leaders of most patient care teams, nurses must have manage- rial skills, including the ability to sustain and improve the transformational environment, plan staffing and resource management, and provide staff development. The nursing voice is critical on most planning committees, guideline selection committees, and process improvement teams (PITs). Nurses are expected to improve their own performance as well as to engage in clinical research to improve patient care.
Deliver Excellent Care The extensive contribution of nursing and the breadth of nurses’ roles make nursing a critical focal point for high-performing HCOs. In meeting the Institute of Medicine’s goals of safe, effective, patient-centered, timely, efficient, and equitable care, nursing contributes to higher levels of per- formance.4 The leading institutions are achieving this with a sophisticated program of knowledge management; enhanced education and development; improved protocols; better logistic support; and, above all, attention to an organizational culture that promotes nurses’ value, autonomy, personal and professional needs, and job engagement. Exhibit 7.2 summarizes the contri- butions of nursing in delivering excellent care.
Implementation of the Nursing Process Nurses deliver excellent care by implementing the nursing process, a system of assessing patients, diagnosing individual nursing care needs, planning care, implementing plans, and evaluating care. Exhibit 7.3 shows the elements of the nursing process with knowledge management resources and examples.
Assessment Upon the patient’s admission, the nurse assesses the patient using the nursing process (see exhibit 7.3) and takes into con- sideration the patient’s total set of diseases and disabilities, general physical and emotional condition, family and social history, and the medical history. Family views are important, and a description of the patient’s home environ- ment is frequently required. At this time, the nurse also notes medication allergies and advance directives (e.g., living will, durable power of attorney for healthcare).
The nursing assessment includes objective and subjective information. Objective criteria are based on facts, such as visual inspection, palpation, and
Nursing process A system of assessing patients, diagnosing individual nursing care needs, planning care, implementing plans, and evaluating care.
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EXHIBIT 7.1 Nursing Functions
Function Activities Results
Deliver excel- lent care
Implement the nursing process: identify patients’ needs, nursing diagnosis, and care plan.
Integrate nursing process with IPOCs. Coordinate IPOC implementation. Evaluate patient progress. Use case management for compli-
cated cases.
Optimal outcomes are achieved for safe, effective, patient-centered, timely, efficient, and equitable care.
Each patient has a nursing diagnosis and care plan. The plan is coordinated with patient management
protocols and IPOCs. Progress toward maximal function is monitored. Nursing care is evidence based.
Coordinate interprofes- sional care
Ensure effective communication and integration with physicians, other CSSs, and other service lines.
Pursue and correct gaps or problems in care management.
Interdisciplinary patient rounds and IPOCs are used to coordinate care.
Schedule coordinates diagnostic testing and therapeutic interventions.
Patient and family needs for spiritual care, social services, palliative care, or ethics consultation are identified and met.
Educate patients, families, and communities
Meet or exceed expectations of patients and other stakeholders.
Consider cultural, literacy level, and linguistic competencies.
Participate in discussions about pallia- tive care and advance care planning.
Patient education materials are available for appropriate cultural and literacy level and language.
Knowledge gaps are identified and teaching plans are carried out.
Prevention and continuing care needs are identified and applied to care plans and documented in the EHR.
Patients and families have knowledge of advance care planning options.
Inpatient readmissions are minimized.
Maintain the nursing organization
Use shared governance to plan, orga- nize, and evaluate the work and outcomes of nursing.
Maintain professional nursing model and advancement in knowledge and skill-based competencies.
Project future personnel and facil- ity needs, budget, and ensure appropriate number and skill of staff complement.
Recruit, select, retain, and motivate an effective workforce based on partici- pation, HCO decision involvement, and empowerment.
Nursing practice councils are in place for improvement, education, research, standards.
Effective skill mix (RN, unlicensed assistive personnel, contract), expertise (specialty certified, experienced), and numbers of personnel to match patient needs are achieved.
All nurses participate in practice decisions. Facility, equipment, and supply needs are met.
Improve continuously
Commit to continuous improvement of nursing practice.
Offer in-house nursing education programs.
Participate in clinical nursing research. Translate nursing research into
practice improvements. Integrate organizational structures and
management processes with plan and deliver nursing care.
Inspire shared vision, commit- ment, and creative responses to challenges.
Participate in professional nursing organizations.
Pursuit of professional certifications and advancement is supported.
Management and leadership development programs are offered.
Mentoring and residency programs are in place. Performance reviews are conducted regularly. Competitive salaries and benefits are offered. Positive relationships are established within HCO and
community. Budgets, facilities, equipment plans, emergency prepared-
ness plans and drills, and marketing strategies are in place.
Professional development plans are codeveloped with all nursing staff.
Patient and nursing advocacy is practiced through profes- sional organizations.
Note: CSSs = clinical support services; EHR = electronic health record; HCO = healthcare organization; IPOC = interdisciplinary plan of care; RN = registered nurse.
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Goal Nursing Role Examples
Safe Eliminate biological, physical, human, and psychological risks in all HCO and home environments.
Maintain safe care environment in HCO settings.
Any safety hazard that nursing identifies in a patient care setting is corrected by nursing or by the appropriate support unit.
Nurses work with patients and families in home settings to promote safety.
Nursing administers drugs and moni- tors all treatments, promotes hand washing, and assesses patient mobility and psychological status.
Effective Monitor the care pro- cess and provide early warning for any deviation from the plan.
Evaluate patient progress toward comprehensive recovery; identify and remove barriers.
In critical care settings, nurses are in continuous contact with patients.
As recovery progresses, nurses set recovery goals and milestones, teach, motivate, and celebrate progress.
Patient centered
Identify each patient’s unique characteristics and adapt protocols to accommodate them.
Provide compassionate care to every person and their family.
Nurses evaluate tastes and prefer- ences as well as allergies and sensitivities.
Nursing identifies cultural variations and adapts to provide culturally competent care.
Timely Minimize the duration of the patient’s disability.
Respond to patient requests and condition changes in a timely way.
Nursing schedules and coordinates many treatments and activities. Effective nursing speeds recovery and eliminates complications. It shortens length of stay and prevents relapse.
Efficient Minimize the total cost of care and disability.
Nursing cost is measured by correct- able disability and the direct cost of care. Drug errors, falls, adverse events, delays in care, and failures to respond are all partially within nursing’s control. These occurrences make inadequate nursing care expensive.
Equitable Ensure that care is equally available without regard to ethnicity, culture, gen- der, or sexual orientation.
Ensure patients’ rights, including the right to refuse treatment.
Nurses monitor their own and other caregivers’ behavior to eliminate prejudice and unjust responses.
Nurses explain care options to patients and families, help them reach decisions, and implement those decisions.
Note: HCO = healthcare organization.
EXHIBIT 7.2 Nursing and
the Goals of
Excellent Care
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vital signs (i.e., temperature, pulse, respirations, blood pressure). Subjective information is also obtained based on the experienced and intuitive observa- tions of the nurse and the patient’s verbal and nonverbal responses to ques- tions, such as “On a scale of 1 to 10, what is your level of pain now?”
Nursing Diagnosis After an assessment is completed, the nurse identifies one or more nurs- ing diagnoses. A nursing diagnosis is a standardized statement about the health of a client (who can be an individual, a family, or a community) for the purpose of providing nursing care. Nursing diagnoses are identified from a master list of nursing diagnosis terminology maintained by NANDA
Nursing diagnosis A standardized statement about the health of a client for the purpose of providing nursing care; identified from a master list of nursing diagnosis terminology.
Elements of the Nursing Process
Resources and Guidelines Example
Assessment Objective and subjective data
Vital signs, breath sounds, observation of difficulty breathing.
Laboratory results. Physical examination.
Nursing diagnosis List of diag- noses from NANDA International.
Ineffective airway clearance and excess thick secretions as evidenced by abnormal breath sounds.
Crackles, wheezes. Change in rate and depth of respiration. Effective cough with sputum.
Plan of care IPOC Effective airway clearance as evidenced by normal breath sounds.
No crackles or wheezes. Respiration rate 14–18 per minute. No cough within one week.
Implementation of care
NIC Instruct and assist patient to TCDB for assistance in loosening and expecto- rating mucus every two hours.
Evaluation of care NOC Monitor improvements in breathing, expectorating mucus, and objective measures of oxygen profusion by physical examination and results of diagnostic tests.
Adjust goals, communicate with physi- cian and CSS for modifications to patient management.
Provide education on smoking cessa- tion, if applicable.
Note: CSSs = clinical support services; IPOC = interdisciplinary plan of care; NIC = Nursing
Interventions Classification; NOC = Nursing Outcomes Classification; TCDB = turn, cough, deep
breathe.
EXHIBIT 7.3 Nursing Process
Example
for Airway
Management
Chapter 7: Nursing 215
International.5 Nursing diagnoses provide the basis for a common language in identifying interventions and measuring outcomes, which lays the foundation for a more evidence-based approach to nursing care.
Plan of Care The nursing care plan establishes nursing procedures and expectations for outcomes. It is established for each encounter, such as a hospitalization or an emergency department visit, or over the course of a disease or condition, such as ongoing ambulatory or chronic care. It expands and individualizes the patient management protocol to reflect nursing’s more comprehensive assessment. The care plan is more formal in inpatient and extensive outpatient care and is often left unwritten in brief, uncomplicated outpatient encounters. A good care plan does the following:
• Adapts the clinical guideline to the specific needs of the patient • Anticipates individual variations to prevent complications • Establishes a plan for nursing interventions from the Nursing
Interventions Classification (NIC) (patient-specific nursing treatments are defined and standardized by a NIC list and may be classified according to 433 interventions)6
• Organizes the major events in the disease episode to minimize overall duration
• Establishes realistic clinical outcomes based on the Nursing Outcomes Classification (NOC) and a timetable for their achievement (the NOC is a comprehensive, standardized classification of 490 patient or client outcomes developed to evaluate the effects of nursing interventions)7
• Incorporates a discharge plan • Identifies potential barriers to prompt discharge and plans to
investigate and remove them • Is integrated into the interdisciplinary plan of care (IPOC)
Throughout the encounter (episodic care) or over the course of a disease or condition (ambulatory or chronic care), the nurse evaluates the effectiveness of the nursing interventions and adapts or modifies the plan as needed. With input from the patient, family members, and physicians and other clinical professionals, the nursing care plan is integrated into the IPOC. Advance care planning for potential barriers to goal attainment improves quality while potentially reducing length of stay and cost per case.
Care plans are written for problems for which the patient is at risk as well as for maintaining patient wellness. These follow a similar format, but one is designed to prevent problems from occurring and the other to con- tinue or promote healthy behavior.
vital signs (i.e., temperature, pulse, respirations, blood pressure). Subjective information is also obtained based on the experienced and intuitive observa- tions of the nurse and the patient’s verbal and nonverbal responses to ques- tions, such as “On a scale of 1 to 10, what is your level of pain now?”
Nursing Diagnosis After an assessment is completed, the nurse identifies one or more nurs- ing diagnoses. A nursing diagnosis is a standardized statement about the health of a client (who can be an individual, a family, or a community) for the purpose of providing nursing care. Nursing diagnoses are identified from a master list of nursing diagnosis terminology maintained by NANDA
Nursing diagnosis A standardized statement about the health of a client for the purpose of providing nursing care; identified from a master list of nursing diagnosis terminology.
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A major role for nurses in planning care is to recognize early signs of a patient’s changing or worsening condition and to communicate those changes to the physician or another provider for early intervention and modi- fication of patient care management protocols. If a patient’s condition wors-
ens quickly, nurses may contact a rapid response team to intervene with preapproved emergency treatment protocols. Rapid response teams have additional training in critical care patient manage- ment and teamwork and have been shown to improve patient outcomes when nurses feel safe and sup- ported in deploying the teams.8
Information technology significantly aids patient care plan develop- ment. Models for specific diseases, analogous to the clinical guidelines dis- cussed in chapter 5, may be incorporated. Components of the care plan can be assembled from standard nursing practice protocols. Nurses can develop a plan more quickly and with less risk of omission by modifying a disease model to individual needs. They can control the specific content of several thousand activities by relying on approved nursing practice protocols.
Implementation and Evaluation The nursing care plan, like medical care, is heuristic. The evidence of the patient’s progress is reviewed regularly, and the care plan is modified as nec- essary. With many diseases and conditions, the patient is returned to health, and the plan is fulfilled. With chronic conditions, the plan is modified regu- larly as the patient progresses or in some cases fails. The nursing care plan is fully compatible with palliative care, hospice care, and acceptance of death. Standardized language developments that classify and measure nursing diag- noses, interventions, and associated outcomes (e.g., NANDA, NIC, NOC) have strengthened an evidence-based foundation for nursing.9 The American Nurses Credentialing Center’s (ANCC) Magnet Recognition Program rec- ognizes organizations that provide quality patient care and evidence-based nursing excellence.
Case Management For patients with multiple diseases or complex conditions that exceed the scope of patient management protocols, case management is used for manag- ing care across the span of illness and various sites of care. Case management has emerged as an effective device for managing complicated disease processes, for patients who require long courses of convalescence, and for those at risk for costly care. Case management begins with a sophisticated IPOC, often developed by a multidisciplinary team of caregivers, and may involve integrat- ing several protocols. The plan identifies specific goals, clinical support services
Rapid response team Care providers with advanced training in criti- cal care management and emergency treat- ment protocols; deployed when a patient’s condition suddenly worsens.
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and clinical provider services to meet them, measures of improvement, and timetables. Nurses often manage the cases once the plan has been agreed on, working to see that the various services are effectively coordinated.
Coordinate Interprofessional Care Major medical care is a multiple-team event. Nurses generally coordinate and monitor the teams throughout the episode of care, whether it is in an inpa- tient, outpatient, or home setting. The goal is to organize all elements of care in the least costly and most patient-satisfactory elapsed time. Nursing’s over- sight responsibility includes recording progress against the IPOC, sequenc- ing and scheduling clinical support services (CSSs) diagnostic and treatment interventions (including transportation), and monitoring for irregularities in logistics and patients’ responses to interventions.
Maintaining Progress of the IPOC During the patient’s episode of inpatient or outpatient care, it is necessary to maintain a comprehensive, current record of the activities contributing to diagnosis and treatment. The patient record, also called the medical record, is increasingly computerized as the electronic health record (EHR). The patient’s EHR is accessible to all caregivers and is constantly being updated. In critical care environments, data may be entered directly from monitor- ing equipment. The IPOC includes symptoms and problems, concurrent disease or complications, working diagnosis, medical orders, and the nursing care plan. The IPOC must also include safety alerts, such as hearing deficits, patient allergies, and language or literacy barriers. The medical record also summarizes diagnostic orders and results, treatment to date, and the patient’s response. The professional members of the patient care team are responsible for their own entries into the record, as well as considering what has been entered by other care team members.
Nurses are responsible for monitoring patients’ progress toward the IPOC goals of care through the following activities:
• Ensure that the patient’s licensed independent practitioner has completed diagnosis, treatment, and follow-up activities in an appropriate and timely manner
• Report clinical observations to other members of the care-providing team
• Identify progress of patient goals as identified in the IPOC • Assess and report relevant psychosocial and family-related factors • Assess effectiveness of nursing interventions • Ensure transportation to and from the CSS
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• Receive and transmit results of reports from the CSSs • Prepare and forward unexpected-events reports
Nurses use the information to identify omitted, inconsistent, or incorrect actions and actions that had unintended outcomes.10 Nurses are often the first to detect unexpected results and unsatisfactory responses to treatment, and they intervene to manage the unexpected—a quality of high-reliability organizations.11 Swift intervention with clear communication techniques is often necessary to improve the situation or to prevent it from further escalation.12
The nurse as a patient advocate is expected to take appropriate action diplomatically and effectively. Nurses catch omitted, wrong, lost, conflicting, and delayed reports and orders on a daily basis. Organizational cultures that are group oriented, with a greater extent of quality-improvement program implementation, tend to promote higher reporting of quality assessment and risk management data, such as medication administration errors.13
Patient Scheduling Inpatient and outpatient support service scheduling is generally performed via computer scheduling systems that are integrated with other clinical support service functions, such as the laboratory, radiology, and surgery. Nurses or scheduling personnel obtain information directly from patients and coordinate care with support service departments. Scheduling must accommodate limitations in the patient’s physical condition and compet- ing demands of various support services. Most of the services require direct physical contact with the patient, and many of the services have sequencing requirements (e.g., perform before meals or before certain other procedures or services).
Nursing’s responsibility is to actively monitor the automated sched- uling process for more effective preparation of each patient. For improved quality, advance scheduling permits prospective review of compliance with the patient management guideline, even though it may be only a few hours before the events are to take place. Monitoring can reduce duplicated or unusable tests and orders. Prompt fulfillment of scheduled orders also reduces stat (immediate) requests. All these activities reduce the cost of care.
Patient Transportation Nursing may also be responsible for the safe transport of inpatients. Although many outpatients can follow wayfinding services to reach the various CSSs, inpatients are frequently impaired by their illness and must be moved by hospital associates. The task is time-consuming but important to patient safety and satisfaction. Transportation associates may be supplied by nursing or a unit of guest services (see chapter 12). They should be trained to follow
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protocols in patient transfer, in guest relations, and in handling the medical emergencies that may arise while the patient is in transit.
Educate Patients, Families, and Communities Nursing’s constant contact with patients and their visitors contributes to a prime role in educating and communicating. Its prominent role in satisfac- tion surveys stems from the fact that patients and families see more of nursing than any other care providers and from the fact that nurses take on a sup- portive role. People expect nurses to be sympathetic and sensitive to human needs. They are vocally grateful when nurses are compassionate, and they are sensitive and disappointed when nurses are not. Patient satisfaction is a pow- erful marketing tool, as satisfied customers are less likely to switch provider services and more likely to recommend services to others.14 Patient satisfac- tion is also an outcome measure of Medicare’s value-based purchasing, and scores are linked to financial incentives or penalties.
Nurses’ success in communicating with the patient and family or other significant persons in the patient’s life is a critical element of patient-centered care and overall patient satisfaction. Nurses must evaluate and be sensitive to the patient’s cultural, literacy, and language needs in order for interven- tions to be patient centered and family focused. The patient and family are involved in the broad outline of the care plan, including the anticipated dates of key events such as surgery and discharge. Whenever possible, the patient and family participate with the interprofessional team in discussions about treatment choices and goals of care.
For patients with life-limiting illnesses, goals of care are particularly important. Nurses can improve the effectiveness of advance care planning and the discussion about advance directives and patient advocacy, both by encourag- ing patients and families to address the issues involved and by supporting the patient’s advocate in stressful decisions. When curative treatments are no longer effective, palliative care focuses on pain and symptom management (e.g., short- ness of breath, anorexia, nausea, fatigue, depression, insomnia) to allow a natural death to be as peaceful as possible, whether it occurs at home or in an institu- tion.15 Nursing support for the patient and family during the dying process and afterward is useful to promote and manage healthy grief and bereavement.
Nursing has extensive educational responsibilities relating to health management. HCO nurses teach individual patients and their families about the role of prevention and risk factor management. Community health nurses teach prevention and health promotion to groups of citizens for primary prevention and advocate appropriate secondary prevention. If these activi- ties are performed well, future disease is reduced. Patient, professional, and community satisfaction levels improve. Thus, expectations for prevention are an essential part of care plans. As a consequence of much shorter hospital stays, the site for health education is shifting to ambulatory care settings, particularly the patient-centered medical home and the accountable care
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organization. When education and communication are appropriately carried out with patients, inpatient readmissions are minimized.
General education, offered to the public at large and usually provided to group settings, is another vehicle. Nurses provide educational programs and counseling, and they organize and assist disease- or disability-oriented support groups (e.g., ostomy care, alcohol abuse, hemophilia), and groups centered around stressful events other than disease (e.g., divorce, childbirth, caregiving) have become popular following the disease-oriented model.
Maintain the Nursing Organization
Sustaining the Transformational Culture The nurse leader plays a central role in the unit culture and is accountable for goals in patient care quality and safety and nurse engagement and retention. To
achieve and sustain a high-performing nursing organi- zation, the nurse manager must be specifically trained in transformational leadership: how to encourage asso- ciates, respond to recurring questions, implement process and protocol changes, and celebrate gains. These skills are taught through programs in human resources and in nursing education. Leading HCOs
have implemented systems of care that promote nurse empowerment. Shared governance is a nonhierarchical organizational structure that coordinates gov- ernance, other leaders, nursing leadership, and staff nurses, bringing them together in both purpose and discipline.16 A matrix of councils with authority and accountability for professional practice and decision-making work interde- pendently with organizational leadership and authority to achieved desired outcomes.17 Shared governance gives nurses more control over their practice and accountability at the point of care. This increased engagement of nurses in practice decisions at the bedside is a key component of autonomous practice, a requirement of the ANCC Magnet Recognition Program.18
Nurse leaders back up formal education with responsive listening. They routinely assign coaches and mentors to new nurse managers, and they use a mentoring system or nurse residency program to develop new staff nurses. They engage in personal and professional development programs for their nurses and other team members. The result is that Magnet HCOs and others pursuing transformational cultures have low turnover, attractive work settings, and a stable nursing associate group that gains skills from experience and training. These systems that empower nurses to have autonomy in their professional practice have substantially increased nurse engagement while elevating quality and cost outcomes.19
Nurse managers must be skilled in the importance of effective listening and meaningful recognition. They are supported and coached by both HCO senior and nursing leaders. They are expected to carry out the practices of
Shared governance An organization model that ensures nursing leadership and staff nurse participation in practice decisions and other activities that influence their work environment.
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servant leadership, as described in chapter 2. Because the interface between management and frontline care providers often involves interprofessional col- laboration, nurse leaders maintain proficiency in teamwork, mediation, and consensus building.
Staffing Staffing decisions establish the number of professional, technical, and cleri- cal nursing associates required for each nursing unit. The results of staffing decisions establish scheduling and daily assignment requirements and set the nursing expense budget. Combined with forecasts of patient demand, they generate long-range human resource plans. The American Nurses Associa- tion recommends that nurse staffing be tailored to the specific needs of each unit, based on factors including patient acuity, the experience of the nursing staff, the skill mix of the staff, available technology, and the support services available to nurses.20 Although California has had mandated minimum nurse staffing levels since 2004, and other states have attempted to follow suit,21 there is little evidence that regulatory approaches are effective in improving quality.22 Involving nurses in the decision-making role in the care they pro- vide is the most important consideration in developing staffing approaches.
Given that up to 90 percent of nursing costs are labor costs, getting the right number of nurses for the patients’ immediate needs is a critical man- agement function. The nursing care functions are time-consuming activities that cannot be properly performed when nurses are in short supply.
The staffing process establishes expectations for hours of care per patient day by skill level. It is based on forecasts of demand and patient need (acuity) and generates a forecast of fixed staffing and, in some units, variable staffing. Inpatient nurse staffing decisions are made for each nursing unit and shift. They establish the number and mix of personnel (e.g., registered nurses [RNs], unlicensed assistive personnel, coordinators) required for the expected range of acuity and census. The decision about the level of staff is negotiated; increases in staffing must be justified by the marginal improve- ment in quality, cost per case, or patient and worker satisfaction. The labor expense budget is determined almost automatically once the staffing pattern and the forecasts of demand are selected.
Fixed staffing is used in settings where demand does not vary (such as outpatient clinics and long-term care) and where demand cannot be predicted (such as in the obstetrics and inpatient care units). Flexible labor budgets use variable staffing models to adjust the actual staff according to patient need, usually on a shift-by-shift schedule. They use estimates of care needs per patient for several levels of acuity and forecast counts of each level to develop staffing needs for each unit. Float pools at various skill categories are supported and assigned to units on a shift-by-shift basis.
Patient requirements are radically different in long-term care, critical care, emergency departments, and surgical services such as the operating
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room and the postanesthesia care unit. In many of these areas, requirements differ by day of week and by random variation in patient arrivals and acuity. Team approaches are aimed at reducing costs by substituting less skilled per- sonnel under the supervision of professional nurses.23
Scheduling The budgeted staffing plan must be translated to work schedules for spe- cific employees. Predictable absenteeism, educational leaves, holidays, and non-patient-care assignments must be accommodated in the schedule. A well-designed scheduling system has the following characteristics, listed in approximate order of importance:
• Desired staffing mix is ensured for safe patient care; overstaffing and understaffing are minimized.
• Time and effort required to create complex staff schedules are minimized.
• Overtime, float, and agency usage is reduced, and personnel are scheduled according to their designated specialization, professional competence, and agreed-on work commitment (i.e., full-time or part-time).
• Schedules for individuals are maintained four or more weeks in advance, but with the ability to manage staffing on a daily basis.
• Weekends, late shifts, and other less desirable assignments are equitably distributed. (“Equitably” is usually not “equally”; one nurse’s preferences are not the same as another’s.)
• Personal requests for specific days off are accommodated equally, so long as they are submitted in advance; can be met within cost and quality constraints; and do not exploit other workers.
Assignment Assignment makes the final adjustment of staff on each unit and shift, based on the best available estimate of immediate need, by changing the number of personnel on a given unit or, in some cases, by changing the number of patients on a unit. Some variation can be handled by the ability of the nursing staff to adapt to higher workload demands. Although nurses may be expected to increase productivity in dealing with workload peaks, it is not sustainable and contributes to fatigue, burnout, and eventually turnover. Higher nurse- to-patient ratios enhance job satisfaction, thereby contributing to recruit- ment and retention strategies.24
Census management can also be used to reduce variation in nurse staffing requirements. Many leading HCOs employ sophisticated bed-man- agement systems and specially trained personnel to assign patients to units with adequate nurse staffing levels, appropriate professional competencies
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of nurses, and proximity of the patient to important CSSs. When possible, patients are scheduled to reduce variation in weighted census. In organiza- tions with several similar treatment units, incoming patients can be placed in units with surplus staff.
Remaining staffing variation is usually met by calling in part-time or float pool nurses, requesting overtime from available workers, and trans- ferring cross-trained workers between units. The use of backup staff and transfers may be necessary, but it should be minimized. Agency personnel brought in on contract are expensive, and training is outside the HCO’s control. Transfer of nurses from one location to another within the hospital presents similar difficulties. Most nurses do not like to be transferred, and the problems of cross-training and unfamiliar work reduce job satisfaction. Quality may deteriorate as a result.
Improve Continuously Improvement goals can be negotiated with the specific unit, with service lines, or for groups of several service lines. All nursing unit leaders are responsible for maintaining the transformational culture and for improving individual and unit performance. They monitor the operating scorecard of their unit as described below. In addition, the nursing organization must monitor and improve over- all clinical performance. It does this by aggregating the individual unit data on common measures. Care must be taken to ensure similarity, but many quality measures, patient satisfaction measures, and staff satisfaction measures can be reviewed across multiple nursing units. Improvements often involve new functional protocols or enhanced training to raise compliance across the HCO.
Improving Individual and Unit Performance Nurse unit leaders are expected to monitor individual performance as well as performance of their units, identify areas that lag behind similar units or goals that might be in danger, and help team members improve perfor- mance. When opportunities for improvement (OFIs) are identified, training programs are developed to improve knowledge and skill development. For individual development and advancement, additional skills attainment and professional certifications are encouraged.
Nursing leaders are actively supported by both the nursing organiza- tion and senior leadership, who are frequent visitors and responsive listeners. Support is provided by knowledge management (see chapter 10) and internal consultants (see chapter 14) skilled in identifying root causes, devising new processes, and testing them.
The nursing organization includes clinical specialists who can assist with nursing process issues. Many excellent HCOs also provide nurse man- agers with resource specialists—more experienced nurses who are not in the direct accountability hierarchy. Under this system, each team has support for any kind of problem, as shown in exhibit 7.4.
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Improving Protocols and Multiple-Unit Performance Nurses implement evidence-based practices that lead to improved patient out- comes. This involves participation in clinical nursing research and translation of research into practice improvements. The nursing organization manages a large number of functional protocols that define the nursing activities. Nurs- ing is responsible for the continuous improvement of its functional protocols. It is a major contributor to patient management guidelines. Its central posi- tion gets it involved with many CSS functional protocols. Campaigns focused on implementing new functional protocols would include all nursing units where the protocols are used, often crossing several service lines. Changes in nursing protocols are carried forward in a sophisticated program of training and development of associates, demonstrated proficiency of revised protocols, and inclusion of the required competencies in evaluations of performance. These activities usually take place across multiple nursing units.
The service lines implement patient management guidelines. Active nurse participation is essential to developing and implementing patient management guidelines. Nurse specialists have a particular role here because
Problem Support Available
Equipment, supply, or facilities failure
Plant services associates are trained to respond promptly. Their operating scorecards assess both delays and satisfaction of nurses as customers.
Personal difficulty of team member
Human resources has counseling and retraining services.
Harassment or inap- propriate behavior toward a team member
Harassment is identified by the associates. Human resources, the nursing organization, and senior man- agement are trained in effective responses.
Staffing shortage The nursing organization runs the staffing model and is committed to an effective solution. The solution may involve a PIT addressing ways to improve staff productivity or reduce variability in patient demand.
Unexpected clinical event
Reporting is mandatory. The unit team is trained to make an emergency response. It may participate in service recovery, further analysis, or a PIT address- ing risk management.
Unexpected customer or associate event
The unit team is expected to pursue appropriate ser- vice recovery, emergency response, and reporting for review of trends. Reporting is mandatory.
Note: PIT = process improvement team. In all these examples, an unanswered call can be reported
either to the nursing organization or to senior leadership, who are expected to correct the problem
and eliminate recurrence.
EXHIBIT 7.4 Assistance
Available to
Nursing Teams
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their specialization makes them experts on particular diseases and conditions. Leaders must ensure that appropriate consultation occurs and is constructive.
People
Team Members Nursing as a profession and as a unit of HCOs is almost as diverse as medi- cine. Nurses have careers that reach from high-tech in the operating room and intensive care unit to high-touch in the home and hospice and to general and public health services that do not involve individual patient care. In addi- tion, the field has a significant number of leadership positions. The patterns of education, specialization, and practice sites reflect this diversity.
Educational Levels Nursing has a broad scope of educational programs, practice boundar- ies, and licensure restrictions. Within nursing are certified nursing assis- tants, licensed practical nurses (LPNs), RNs, and advanced practice nurses (APRNs). RNs have a variety of educational backgrounds—a two-year associate’s degree, a three-year hospital diploma, a four-year baccalaureate degree—or for advanced practice, a master’s degree in nursing, as can be seen in exhibit 7.5.
An Institute of Medicine (IOM) report titled Future of Nursing: Leading Change, Advancing Health recommends higher levels of education in the nursing profession to prepare nurses for more complex care needs of sicker patients and the sophisticated technologies available for providing care.25 This report was followed by a federal goal to increase the propor- tion of baccalaureate-prepared nurses to 80 percent by 2020. In 2013, 55 percent of the RN workforce held a baccalaureate degree or higher.26 Many organizations have a hiring preference for baccalaureate-prepared nurses and tuition assistance programs to facilitate baccalaureate degree attainment.27 Job satisfaction and career retention have been shown to be more positive in bachelor’s-level nurses than in associate’s-level nurses.28 In Magnet Recogni- tion hospitals, bachelor-of-nursing preparation and specialty certification are strongly promoted and required in certain specialty areas.
Types of Specialization
Advanced Practice Nurses An APRN is a nurse who has done, or continues to do, the following:
1. Acquired advanced clinical knowledge and skills preparing him to provide direct care to patients by completing an accredited graduate- level education program
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2. Passed a licensure examination for one of the four recognized APRN roles: certified registered nurse anesthetist, certified nurse midwife, clinical nurse specialist, or certified nurse practitioner
3. Passed a national certification examination that measures APRN-role and population-focused competencies
4. Maintains continued competence as evidenced by recertification in the role through the national certification program
Title Education Required Certification/Examination Required
Registered nurse Diploma National Council Licensure Examination
Associate degree in nursing
National Council Licensure Examination
Baccalaureate degree in nursing
National Council Licensure Examination
Advanced Practice Nurses—Master’s Degree Required
Nurse anesthetist Master of science in nursing, doctor of nursing practice (DNP), doctor of nurse anesthesia practice
Certified registered nurse anes- thetist (CRNA)
Nurse practitioner (primary care or acute care that is population specific—e.g., adult/gerontol- ogy, pediatric, neonatal)
Master of science in nursing, doctor of nursing practice
Family nurse practitioner (FNP) Adult nurse practitioner (ANP) Adult/gerontology acute care
nurse practitioner (AGACNP) Neonatal nurse practitioner
(NNP) Pediatric nurse practitioner (PNP)
Nurse midwife Master of science in nursing, doctor of nursing practice
Certified nurse midwife (CNM)
Clinical nurse specialist
Certification in area of specialization
Nurse manager/ leader
Master of science in nursing, master of health administration, master of business, doctor of nursing practice, or doctor of public health
Nurse Executive Advanced (NEA)
Clinical nurse leader
Clinical nurse leader (CNL)
Nurse doctorate Certification required if DNP is advanced practice role; PhD is research focused
Note: The degrees and certifications held by nurses are commonly abbreviated, e.g., “RN,” “DNP.”
EXHIBIT 7.5 Educational
Levels of Nurses
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Each state maintains its own laws and regulations regarding recognition of an APRN, but the general requirements in all states include licensure as an RN and successful completion of a national specialty examination that measures APRN role- and popula- tion-focused competencies, which include continued competence renewal.
APRNs have mastered a greater depth and breadth of knowledge, a greater ability to synthesize data, increased complexity of skills and interventions, and greater role autonomy. They are educationally prepared to assume responsibility and accountability for health promotion and maintenance as well as the assessment, diagnosis, and management of patient problems, which include the use and prescription of pharmacologic and non- pharmacologic interventions.29
Title VIII of the Public Health Service Act of 1994 authorizes federal support to recruit new nurses into the profession, attempting to promote career advancement within nursing to improve care delivery and safety. The Affordable Care Act includes several sections that specifically address the role of the APRN, specifically as it relates to opportunities for new programs and innovation pilots, as well as funding for education and nursing workforce development.30
The APRN role is defined by seven core competencies or skillful perfor- mance areas. The first core competency of direct clinical practice is central to and informs all of the other areas, as follows:
1. Direct clinical practice (central) 2. Expert coaching and guidance of patients, families, and other care
providers 3. Consultation 4. Research- and evidence-based practice 5. Clinical, professional, and systems leadership 6. Collaboration 7. Ethical decision-making31
Although the wording is different, these concepts are similar to those of the Accreditation Council for Graduate Medical Education for physicians (see chapter 6).
Additional core competencies enhance each specialty area that an APRN pursues. The largest number of APRNs is made up of nurse practitio- ners (NPs), who may further specialize in primary
Nurse anesthetist A registered nurse who has advanced educa- tion and certification to administer anesthe- sia without direct physician supervision.
Nurse midwife A registered nurse who has advanced educa- tion and certification to practice uncom- plicated obstetrical care, including normal spontaneous vaginal delivery, without direct physician supervision.
Nurse practitioner (NP) A registered nurse who has advanced educa- tion and certification to carry out expanded healthcare evaluation and decision-making regarding patient care. Boundaries of her independent practice are set by state laws. Nurse practitioners are licensed and certified in primary care or acute and specialty care.
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or acute care of families and individuals across the life span, care of adults or gerontology, neonatology or pediatrics, women’s health, or psychiatric and mental health.
Other Advanced Nursing Roles Case managers assist care teams in finding the least costly solution in a lengthy and complex treatment.32 Patients with permanent or long-term ill-
ness or disability develop complex medical and social needs. They often require services from several medi- cal specialties, and social services are necessary to allow them to function at the highest possible level. Nurses, particularly those with postbaccalaureate education and considerable clinical experience, are well positioned to become case managers. Certifica- tion is available but not required by law.
Nurse Executives Nurses are represented in senior leadership, and they make up a significant proportion of middle management. Directors, managers, and supervisors are responsible for oversight of large staffs, and they are accountable for assist- ing their subordinates in achieving excellence. Nurse clinicians with graduate education in the problems of certain patient populations are particularly well prepared for this role in service lines. An acute care nursing unit is a substan- tial managerial challenge that involves 50 or more associates working around the clock; an annual budget in excess of $3 million; and routine contact with many physicians and most CSSs as well as finance, human resources, and environment-of-care management. Nurse executives must blend leadership competencies with the core ideology of nursing,33 drawing on the model developed by the American Organization of Nurse Executives.34
Explicit in the ANCC Magnet Recognition Program is a style of leadership that listens, supports, empowers, and shares decision-making with nurses based on evidence, benchmarks, and best practices. The principles of Magnet are supported by many HCOs that do not seek the designation but that pursue both the empowerment concepts and the shared-governance professional model of nursing.35
Practice Settings Nurses practice in the community as well as in HCOs. HCO nursing is far larger, but community nursing is important to improving the health status of communities.
HCO Nursing Most nurses work in HCOs and specialize both by activity and by patient characteristics, as shown in exhibit 7.6. Some specializations, such as
Case manager A health professional who advocates for the patient to receive the most appropriate treat- ment, with acceptable quality, in the most effective manner and appropriate setting, at the best price.
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operating room and critical care nursing, emphasize technical skills. Others, such as extended care of the chronically ill, emphasize comfort and pallia- tive care. Most specializations blend both. All facets of nursing require an understanding of pathophysiology, pharmacology, and health assessment. Unlicensed assistive personnel—nursing assistants, technicians, and unit coordinators—support nurses in most specialties. Nursing assistants and
Site Nature of Activity Common Subspecialization*
Acute care hospital
Operating rooms
Collaboration with surgical team
Pediatric, surgical specialty
Birthing suite Pre- and postpartum care; delivery assistance
High-risk obstetrics, neonatology
Intensive care and post- anesthesia care
Demanding, technically com- plex bedside care
Surgical, cardiovascular, and neonatal
Intermediate care
Less-demanding bedside care, patient instruction, and emo- tional support
Medical, surgical, and pediatric
Emergency services
Wide variation Trauma, flight
Ambulatory care Direct care, patient instruction, and emotional support
Surgery, oncology, and cardiology
Primary care office
Screening, case management, patient instruction, and lim- ited direct care
By primary care specialty
Rehabilitation center
Direct care, patient instruction, and emotional support
Cardiovascular, stroke, and trauma
Long-term care facility
Bedside care, emotional support
Skilled and extended care
Home care Bedside care, emotional and family support
Palliative care
End-of-life care
Palliative care Hospice
Bedside care, emotional and family support
Inpatient, home, and com- munity palliative care; pain management
*Nurses also practice other specializations, such as pediatric subspecialties.
EXHIBIT 7.6 Nursing Practice
Specialties
in Healthcare
Organizations
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technicians are likely to possess certifications and specialty training for the site and type of patient population being served.
Community Nursing Community nursing emphasizes prevention and health promotion for the well population. Contacts and encounters are often with groups outside the healthcare framework, providing group and individual counseling and limited personal care in settings where people congregate, such as schools, workplaces, churches, public health departments, and senior citizen centers. Efforts are made to reach particular populations at risk, and financing often includes elements outside the usual health insurance structures. Unlicensed assistive personnel are often used in this setting.
Community nursing’s advantages lie in the respect for nurses among the target populations and in the nurses’ ability to relate the specific topics to a broader context of health and disease. Well-run HCOs have moved deci- sively toward preventive services as a way not only to improve the health sta- tus of the communities being served but also to reduce the total cost of care.
Organization In excellent HCOs, service lines may be headed by a nurse, physician, or administrator. Within each service line, nurse leaders work directly with physician leaders, identifying OFIs, participating in PITs, and negotiating improvement goals. They are also supported by a strong nursing organiza- tion led by a chief nursing officer (CNO) who recruits and retains a compe- tent and proficient nursing workforce, ensures credentialing requirements are met, manages nurse training and development, implements evidence-based nursing practice standards and functional protocols, and maintains consistent performance of nursing activities. The CNO is a member of senior manage- ment and acts as the principal strategic and operational executive to ensure uniform achievement of good nursing practice.
Inpatient nursing units usually divide their work among several tem- porary teams assigned to specific patients—led by an RN, varied in size and skill level, dependent on patient needs. The shift leader, or charge nurse, of the unit is usually a baccalaureate or higher-educated nurse. The nurs- ing organization design can be modified to fit home care, hospices, and rehabilitation and extended care facilities. Specific policies, procedures, and skills differentiate the various services. Clearly, the procedures for operating rooms are different from those for outpatient psychiatry, but the structure of teams and accountability hierarchy are the same. The staff nurse for chronic care may be an RN or an LPN or, for acute and specialty care units, an RN with a baccalaureate or master’s degree. The skill required for outpatient care depends on the role.
The nursing organization in larger HCOs often provides a manage- ment structure to support first-line nurse managers, completing the structure
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described in exhibit 5.7. The nurse teams have one accountability—to their service line—but two lines of support, from their service line and from the nursing organization, as shown in exhibit 7.7. This structure is flexible and powerful, and it promotes excellent care. It requires ongoing communication among the professional caregivers; in planning sessions, PITs, and training activities; and when resolving issues.
Measures
The combined developments of evidence-based medicine, electronic infor- mation management, and the NOC have made measuring performance of most nursing teams feasible. Formal schemes for measuring nursing care in educational environments36 and care settings are implemented in excellent hospitals.37 Exhibit 7.8 shows the kinds of measures that should be routinely reported, benchmarked, and used to set goals for the team. The growing body of data from NIC and NOC, using the NANDA paradigm, will provide increasingly valuable answers to core nursing questions about best practice, staffing levels, and training methods. As EHRs make application of the mea- sures more practical, the ability of nursing to identify outcomes and relate them to nursing practice will contribute to evidence-based nursing.
The typical nursing accountability center can measure, set expecta- tions according to comparative norms, and achieve improvements in patient outcomes. Data are collected according to the USA Nursing Management
Logistic and strategic support
Credentialing, functional protocols, training, and
personal development support
Service Line Management
Nursing Management
Nursing Care Team
EXHIBIT 7.7 Nursing Team
Support
Structure
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Dimension Inpatient Examples
Outpatient Examples (Home Care Program)
Community Nursing Examples
Demand Number and acu- ity of patients, overall percentage emergencies
Scheduled home visits, delay for visit
Enrollment in programs, percentage eli- gibles attracted
Costs Nursing hours per patient day, medi- cal supplies
Payroll costs, home supplies, travel costs
Faculty cost, facility cost, promotional cost
Human resources
Skills mix, education and certification, nurse engagement, turnover vacancies
Skill mix, satisfac- tion, turnover vacancies
Skill mix, satisfac- tion, turnover vacancies
Output/ productivity
Discharges, cost per discharge, cost per member-month
Visits, visits per patient, patients per visiting nurse, costs per patient-month
Number of presentations, attendance, cost per member
Outcomes quality
NDNQI (incidence of urinary tract infections, venti- lator-associated pneumonia, falls, prevalence of restraint, pressure ulcers)
Daily living scores, hospitalizations, transfers to long-term care
Percentage members smoking, percentage seek- ing prenatal care, counts of child trauma
Process quality
NDNQI (incidence of complete care plans, medication errors, presurgery patient education, pain assessment)
Percentage visits late or missed, errors in equipment or supplies
Member aware- ness, curriculum evaluation, facility evaluation
Patient satisfaction
HCAHPS scores (several ques- tions), number of complaints
Percentage “very satisfied,” fam- ily satisfaction
Audience evalu- ation, member satisfaction
Physician satisfaction
Referring and attend- ing physicians “very satisfied,” complaints
Percentage refer- ring physicians “very satisfied,” complaints
Physician aware- ness, satisfaction, complaints
Note: HCAHPS = Hospital Consumer Assessment of Healthcare Providers and Systems; NDNQI =
National Database of Nursing Quality Indicators.
EXHIBIT 7.8 Nursing
Performance
Measures
Chapter 7: Nursing 233
Minimum Data Set uniform standards for the collection of comparable essential patient data.38 These data then may be reported to the National Database of Nursing Quality Indicators (NDNQI), a repository of informa- tion for comparison of nursing-sensitive outcomes.39 Examples of nursing performance measures are shown in exhibit 7.8.
The measurement set depends heavily on information systems. As the systems are installed, obvious avenues of improvement appear and are explored. Initially, these are at the level of a single process; integrated and service line opportunities appear later. The process of identifying and addressing these opportunities appears to take several years in most organi- zations. A third, more rewarding and more challenging, phase is beginning, in which medicine, nursing, and CSSs collaborate to achieve a goal of cost- effective care.
Managerial Leadership
The nursing workforce is essential to safe, effective, patient-centered, timely, efficient, and equitable care. It provides critical services to virtually every patient and is about one-quarter of the HCO’s total operating costs. Clearly, excellence is consistent with Magnet principles and with transformational management and continuous improvement.40 These foundations give leaders four basic tasks—sustaining the nurse supply, providing adequate training, supporting empowerment, and delivering continuous improvement.
Sustaining the Nurse Supply There continues to be national concern about projected shortages of nurses.41 Although the total numbers of younger entrants are growing,42 baccalaureate nursing school enrollments have slowed and are not keeping pace with the demand despite calls for a more educated nursing workforce.43 Maintaining a sufficient cadre of qualified nurses begins with a deliberate effort to reduce turnover by increasing associate engagement and work satisfaction. Excellent HCOs keep turnover below 10 percent. Many HCOs have much higher staff nurse turnover, sometimes exceeding 50 percent per year. Low turnover has multiple complementary advantages. Retention is less expensive than recruit- ment; hiring adds several thousand dollars to the cost of a nurse’s first year of employment. More important, the retained nurse’s experience will pay off in better patient quality44 and patient satisfaction.45 Perhaps most important, the satisfaction of current staff is quickly sensed by potential recruits, and a reputation as a good place to work is a powerful asset. The starting point for the nurse supply is involving nurses in decisions and equipping patient care teams to make changes that are needed to improve care.46
Excellent HCOs build a satisfied staff through empowerment and continuous improvement. Nurses’ needs become OFIs that are quickly
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and effectively addressed by continuous improvement. Factors important to nurse safety and comfort are not allowed to linger. Nurses participate in guideline development. Guidelines and protocols are revised and pretested for nurse convenience. Adequate staffing is provided. While the traditional model was “as many nurses as we can afford and can recruit,” the Baldrige model is “as many nurses as we need to deliver excellent care.” The excel- lent HCO can recruit the nurses it needs because it retains existing staff and attracts new associates. It can afford optimal numbers of nurses because it eliminates clinical errors and delays, reducing cost per case to below Medicare and other negotiated prices.47
HCOs should also actively recruit young people into nursing. Excel- lent HCOs develop recruitment programs for schoolchildren, provide scholarships to their employees seeking promotion, and provide practice experience for nursing students at local colleges. A satisfied nursing work- force also promotes nursing as a career.
Providing Adequate Training Training is essential to completing a nurse’s tasks correctly and promptly. The IPOC and protocols develop specific, detailed actions for each patient, and nursing delivers these actions or arranges for support services to deliver them. Although many nurses arrive with specific training and certification, the HCO must explain the specifics of “how we do it here.” The lowest nursing skill levels have no nursing training; they are taught bedside care at the HCO. The training is done through classes and supervised practice and nurse residency programs, backed up by internet documentation, and audited as needed to ensure understanding and compliance. Similarly, every nurse leader must be trained in servant leadership (see chapter 2). The train- ing is expensive—ten days per associate per year amounts to about half of the profit margin of many HCOs.
Coaches and preceptors are essential. High-performing HCOs assign a proven associate to coach each newcomer. New RNs frequently spend sev- eral months working directly with their coach, and nurse residency programs support formal orientation, as well as preceptor-guided learning and skill- building goals. Similarly, nurse managers and leaders are trained in the class- room, but learn the skill by example and coaching. Every new first-line nurse manager completes a classroom program, is assigned a successful coach, and can rely on superiors to respond to questions and concerns. That is, first-line managers are empowered, but they also learn to be empowering.
Supporting Empowerment Empowerment is created by servant leadership. Sustaining it requires con- tinuing investment in leadership training, so that every leader responds constructively to associates’ expressed concerns, and encourages expression of those concerns. Leaders of every part of the HCO have daily interactions
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with nursing, but senior, medical, and nursing leaders have a particularly critical role. Rounding is an important leadership activity to monitor and extend empowerment. Nursing leaders at every level are expected to round at least four hours per week. They should round on their own units, other nursing units, and important support teams. On nursing units, they can often join team members in patient care. Pitching in like this supports associate empowerment and promotes comment. Nonnurse leaders should also round on nursing units. Rounding means that every associate gets access to multiple leaders. The availability of multiple leaders means that concerns cannot be suppressed by a leader in a critical position.
Delivering Continuous Improvement Transformational management identifies large numbers of OFIs. Excellent HCOs have hundreds or thousands. The HCOs rank them based on both their contribution to excellence and the cost and complexity of implementa- tion. Easy targets are immediately pursued; more complex ones are referred to the PIC, which allocates resources to the most promising. The PIC then studies the underlying processes to identify improved processes. Care is taken to hear all users’ concerns and pre-test the proposed protocol (chapter 3).
Two elements are critical in successful continuous improvement: Major improvements are identified and implemented, and every important associate or customer concern is met by the improvement. To the nursing associate (and others), this means, “If something is seriously wrong, we will fix it. My concerns will be heard, and where possible, met.” It also means, “Nobody will surprise me with a protocol or guideline change I don’t understand.”
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. You are thinking about taking a senior leadership position at an HCO you know little about. You are meeting tomorrow morning with the chief nursing officer (CNO). What are some “trigger” comments to make or questions to ask, so that he discusses achievements and OFIs in nursing?
2. In your conversation with the CNO (question 1), he remarks that “a couple service lines seem to have trouble coordinating with their physicians” and asks what you think could be done about that. How do you reply? What questions do you ask?
3. As this conversation develops, it turns out that the CNO’s troubled units are the lowest scoring in patient satisfaction, nursing satisfaction, and read- missions. The CNO asks what you would do if you were in senior leadership.
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4. Your last interview is with the CEO, a Fellow of the American College of Healthcare Executives who is respected by her peers. She says she thinks the HCO has not developed leadership skills in its nursing group and asks, “How would you deal with this?” (Her question is deliberately vague; part of your answer must be to identify what programs are important, and part of it must be explaining what measures will indicate improvement.)
5. She likes your answer; she hints that you are the preferred candidate. Then she asks, “What are your questions?” You’ve decided you want the job; do you raise any issues about the CNO, the problems the CNO raised, or other possible OFIs you may have observed?
Additional Resources
American Nurses Association. 2016. Nursing Administration: Scope and Standards of Practice, 2nd ed. Silver Spring, MD: American Nurses Association.
. 2010. Nursing’s Social Policy Statement: The Essence of the Profession, 3rd ed. Silver Spring, MD: American Nurses Association.
Buppert, C. 2017. Nurse Practitioner’s Business Practice and Legal Guide, 6th ed. Burl- ington, MA: Jones & Bartlett Learning.
Institute of Medicine. 2014. Dying in America: Improving Quality and Honoring Individ- ual Preferences Near the End of Life. Washington, DC: National Academies Press.
. 2010. The Future of Nursing: Leading Change, Advancing Health. Washington, DC: National Academies Press.
Keeling, A. W., M. C. Hehman, and J. C. Kirchgessner. 2018. History of Professional Nursing in the United States: Toward a Culture of Health. New York: Springer Publishing Company,
Leger, J. M., and J. Dunham-Taylor. 2017. Financial Management for Nurse Managers: Merging the Heart with the Dollar, 4th ed. Burlington, MA: Jones and Bartlett Learning.
Powell, S. K., and H. A. Tahan. 2018. Case Management: A Practical Guide for Education and Practice, 4th ed. New York: Lippincott Williams & Wilkins.
Sullivan, E. J. 2017. Effective Leadership and Management in Nursing, 9th ed. Upper Saddle River, NJ: Pearson-Prentice Hall.
White, K. R., and D. K. Fontaine. 2017. Boost Your Nursing Leadership Career: 50 Lessons That Drive Success. Chicago: Health Administration Press.
Notes
1. Gallup. 2017. “Nurses Keep Healthy Lead as Most Honest, Ethical Profession.” Published December 23. http://news.gallup.com/poll/224639/nurses-keep -healthy-lead-honest-ethical-profession.aspx.
2. Florence Nightingale, quoted in V. Henderson. 1966. The Nature of Nursing, 1. New York: MacMillan.
3. Abrams, S. E. 2007. “Nursing the Community: A Look Back at the 1984 Dialog Between Virginia A. Henderson and Sherry L. Shamansky.” Public Health Nursing 24 (4): 382–86. See also American Nurses Association. 2010. Nursing’s Social Policy
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Statement: The Essence of the Profession, 3rd ed. Silver Spring, MD: American Nurses Association. See also American Nurses Association. 2010. Nursing: Scope and Stan- dards of Practice, 2nd ed. Silver Spring, MD: American Nurses Association. See also International Council of Nurses. 2018. “Definition of Nursing.” Accessed April 21. www.icn.ch/who-we-are/icn-definition-of-nursing.
4. Institute of Medicine. 2001. Crossing the Quality Chasm: A New Health System for the 21st Century, edited by L. T. Kohn, J. M. Corrigan, and M. S. Donaldson. Washington, DC: National Academies Press.
5. NANDA International. 2018. “Welcome to NANDA International.” Accessed April 21. www.nanda.org.
6. Bulechek, G. M., J. M. M. Dochterman, C. Wagner, and H. K. Butcher. 2018. Nursing Interventions Classification, 7th ed. St. Louis, MO: Mosby.
7. Moorhead, S., E. Swanson, M. Johnson, and M. L. Maas. 2016. Nursing Outcomes Classification, 6th ed. St. Louis, MO: Mosby.
8. Donaldson, N., S. Shapiro, M. Scott, M. Foley, and J. Spetz. 2009. “Leading Suc- cessful Rapid Response Teams: A Multisite Implementation Evaluation.” Journal of Nursing Administration 39 (4): 176–81.
9. Muller-Staub, M. 2009. “Evaluation of the Implementation of Nursing Diagnoses, Interventions, and Outcomes.” International Journal of Nursing Terminologies and Classifications 20 (1): 9–15.
10. American Society for Healthcare Risk Management. 2013. “Disclosure of Unan- ticipated Events in 2013.” Accessed April 21, 2018. www.ashrm.org/pubs/files/ white_papers/Disclosure-of-Unanticipated-Events-in-2013_Prologue.pdf. See also The Joint Commission. 2018. Comprehensive Accreditation Manual. Oakbrook Ter- race, IL: The Joint Commission.
11. Henriksen, K., E. Dayton, M. A. Keyes, P. Carayon, and R. Hughes. 2008. “Understanding Adverse Events: A Human Factors Framework.” Patient Safety and Quality: An Evidence-Based Handbook for Nurses, edited by R. G. Hughes. AHRQ Publication No. 08-0043. Accessed August 31, 2018. www.ahrq.gov/professionals/ clinicians-providers/resources/nursing/resources/nurseshdbk/ nurseshdbk.pdf.
12. De Meester, K., M. Verspuy, K. G. Monsieurs, and P. Van Bogaert. 2013. “SBAR Improves Nurse–Physician Communication and Reduces Unexpected Death: A Pre and Post Intervention Study.” Resuscitation 84 (9): 1192–96.
13. Wakefield, B. J., M. A. Blegen, T. Uden-Holman, T. Vaughn, E. Chrischilles, and D. S. Wakefield. 2001. “Organizational Culture, Continuous Quality Improvement, and Medication Administration Error Reporting.” Journal of Medical Quality 16 (4): 128–34.
14. Thomas, R. K. 2014. Marketing Health Services, 3rd ed. Chicago: Health Admin- istration Press.
15. White, K. R., P. J. Coyne, and U. B. Patel. 2001. “Are Nurses Adequately Prepared for End-of-Life Care?” Journal of Nursing Scholarship 33 (2): 147–51.
16. Porter-O’Grady, T., and S. Finnigan. 1984. Shared Governance for Nursing. Rock- ville, MD: Aspen Systems.
17. Porter-O’Grady, T. 1992. Implementing Shared Governance. St. Louis, MO: Mosby. 18. Clavelle, J. T., Porter-O’Grady, T., and K. Drenkard. 2013. “Structural Empower-
ment and the Nursing Practice Environment in Magnet Organizations.” Journal of Nursing Administration 43 (11): 566–73.
19. Griffith, J. R. 2008. “Finding the Frontier of Hospital Management.” Journal of Healthcare Management 54 (1): 57–72.
20. American Nurses Association. 2018. “Advancing Nursing to Improve Healthcare for All.” Accessed April 21. www.nursingworld.org.
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21. Nelson, R. 2008. “California’s Ratio Law, Four Years Later.” American Journal of Nursing 108 (3): 25–26.
22. Sochalski, J., R. T. Konetzka, J. Zhu, and K. Volpp. 2008. “Will Mandated Mini- mum Nurse Staffing Ratios Lead to Better Patient Outcomes?” Medical Care 46 (6): 606–13. See also Chapman, S. A., J. Spetz, J. A. Seago, J. Kaiser, C. Dower, and C. Herrera. 2009. “How Have Mandated Nurse Staffing Ratios Affected Hospitals? Perspectives from California Hospital Leaders.” Journal of Healthcare Management 54 (5): 321–35.
23. Sullivan, E. J. 2017. Effective Leadership and Management in Nursing, 9th ed. Upper Saddle River, NJ: Prentice Hall.
24. Havens, D. S., and L. H. Aiken. 1999. “Shaping Systems to Promote Desired Outcomes: The Magnet Hospital Model.” Journal of Nursing Administration 29 (2): 14–20.
25. Institute of Medicine. 2010. The Future of Nursing: Leading Change, Advancing Health. Washington, DC: National Academies Press.
26. Health Resources & Services Administration. 2013. “The U.S. Nursing Workforce: Trends in Supply and Education.” Published October. https://bhw.hrsa.gov/sites/ default/files/bhw/nchwa/projections/nursingworkforcetrendsoct2013.pdf.
27. Pittman, P., C.-N. S. Herrera, K. Horton, P. A. Thompson, J. M. Ware, and M. Terry. 2013. “Healthcare Employers’ Policies on Nurse Education.” Journal of Health Administration 58 (6): 399–411.
28. Rambur, B., B. McIntosh, M. V. Palumbo, and K. Reinier. 2005. “Education as a Determinant of Career Retention and Job Satisfaction Among Registered Nurses.” Journal of Nursing Scholarship 37 (2): 185–92.
29. National Council of State Boards of Nursing. 2008. “Consensus Model for APRN Regulation: Licensure, Accreditation, Certification, and Education.” Published July 7. www.ncsbn.org/Consensus_Model_for_APRN_Regulation_July_2008.pdf.
30. American Nurses Association. 2014. “Health Care Transformation: The Affordable Care Act and More.” Updated June 14. www.nursingworld.org/~4afc9b/global assets/practiceandpolicy/health-policy/healthcare-reform-document.pdf.
31. Tracy, M. F., and E. T. O’Grady. 2018. Hamric and Hanson’s Advanced Prac- tice Nursing: An Integrative Approach, 6th ed., edited by M. F. Tracy, and E. T. O’Grady. St. Louis, MO: Elsevier Saunders.
32. Park, E., and D. L. Huber. 2009. “Case Management Workforce in the United States.” Journal of Nursing Scholarship 41 (2): 175–83.
33. Jennings, B. M., C. C. Scalzi, J. D. Rodgers III, and A. Keane. 2007. “Differenti- ating Nursing Leadership and Management Competencies.” Nursing Outlook 55: 169–75.
34. American Organization of Nurse Executives. 2015. “Nurse Executive Competen- cies.” Accessed April 21. www.aone.org/resources/nec.pdf.
35. Porter-O’Grady, T. 2008. Interdisciplinary Shared Governance: Integrating Practice, Transforming Health Care, 2nd ed. Boston: Jones & Bartlett.
36. Canham, D., C.-L. Mao, M. Yoder, P. Connolly, and E. Dietz. 2008. “The Omaha System and Quality Measurement in Academic Nurse-Managed Centers: Ten Steps for Implementation.” Journal of Nursing Education 47 (3): 105–11.
37. Hendrix, S. E. 2009. “An Experience with Implementation of NIC and NOC in a Clinical Information System.” CIN: Computers, Informatics, Nursing 27 (1): 7–11.
38. Delaney, C. 2015. “Implementation Guide for LOINC® Coding the Nursing Management Minimum Data Set: NMMDS©.” University of Minnesota School of Nursing. Published October. www.nursing.umn.edu/sites/nursing.umn.edu/files/ nmmds_ig.pdf.
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39. Press Ganey. 2018. “About NDNQI.” Accessed April 21. www.pressganey.com/ solutions/clinical-quality/nursing-quality#faq-about.
40. Kol, E., E. Ilaslan, and M. Turkay. 2017. “The Effectiveness of Strategies Similar to the Magnet Model to Create Positive Work Environments on Nurse Satisfaction.” International Journal of Nursing Practice 23 (4). doi:10.1111/ijn.12557. See also McHugh, M., L. Aiken, M. Eckenhoff, and L. Burns. 2016. “Achieving Kaiser Per- manente Quality.” Health Care Management Review 41 (3): 178–88. doi:10.1097/ HMR.0000000000000070.
41. American Association of Colleges of Nursing. 2014. “DNP Talking Points.” Accessed April 21. www.aacnnursing.org/DNP/About/Talking-Points.
42. Auerback, D., P. Buerhaus, and D. Staiger. 2012. “Registered Nurse Supply Grows Faster than Projected Amid Surge in New Entrants Ages 23–26.” Health Affairs 33: 81474–80.
43. American Association of Colleges of Nursing. 2017. “Contributing Factors Impacting the Nursing Shortage.” Accessed April 21. www .aacnnursing.org/News -Information/Fact-Sheets/Nursing-Shortage.
44. Griffith 2008, 62. 45. Aiken, L. H., J. P. Cimiotti, D. M. Sloane, H. L. Smith, L. Flynn, and D. F. Neff.
2011. “Effects of Nurse Staffing and Nurse Education on Patient Deaths in Hos- pitals with Different Nurse Work Environments.” Medical Care 49 (12): 1047–53.
46. Snide, J., and R. Nailon. 2013. “Nursing Staff Innovations Results in Improved Patient Satisfaction.” American Journal of Nursing 113 (10): 42–50; Needleman, J., and S. Hassmiller. 2009. “The Role of Nurses in Improving Hospital Quality and Efficiency: Real-World Results.” Health Affairs 28 (4): w625–33. doi:https:// dx.doi.org/10.1377/hlthaff.28.4.w625.
47. Griffith, J. R. 2017. “An Organizational Model for Excellence in Healthcare Deliv- ery: Evidence from Winners of the Baldrige Quality Award.” Journal Healthcare Management 62 (4): 328–42.
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CRITICAL ACTIONS
8 CLINICAL SUPPORT SERVICES
1. Support evidence-based patient care:
• Provide prompt, comprehensive, reliable support for every patient.
• Reach benchmark for safety and reliability of clinical support service (CSS) activities.
• Eliminate underuse and overuse of CSS.
• Keep pace with best practice protocols.
2. Provide comprehensive service:
• Coordinate multiple clinical support needs.
• Support computerized order entry and results reporting.
• Provide convenient consultation and interprofessional collaboration for physicians and nurses.
• Manage complex patients who have multiple diseases or conditions.
3. Recruit and retain qualified CSS professionals:
• Make the organization the best place to work.
• Reward performance improvement.
• Provide continuing education.
4. Outsource and contract for CSSs:
• Keep CSS costs and service comparable to those of the competition.
• Devise relationships that benefit both customer and associate stakeholders.
• Understand and capture benefits of scale in CSSs.
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Purpose
Healthcare delivery requires services from dozens of specialized profession- als providing important clinical information (diagnostic services) or specific interventions (therapeutic services). Laboratory testing, imaging, endoscopic procedures, cardiac, and other invasive vascular procedures are common diagnostic services. Drug selection and administration, surgery, anesthesia, obstetric delivery, and physical therapy are common therapeutic services. Many patients also require behavioral, spiritual, and psychological services such as health education, pastoral care, and social service. Challenging ethi- cal dilemmas arise in patient care, and HCOs provide resources to deal with them, such as ethics consult services and ethics committees. These clinical support services (CSSs) are provided through centralized support units or by professionals assigned to a service line accountability center. CSSs are ordered by interprofessional care teams. They are needed at several sites—outpatient offices, the acute care hospital, long-term care facilities, and home. A serious illness may require several hundred diagnostic, therapeutic, and consultative services from the CSSs listed in exhibit 8.1.
The purpose of any CSS is to
provide its specialized services at a level that fully meets patients’ and care providers’ needs.
The purpose of the HCO is to assist each CSS in achieving its purpose and to
provide each patient with exactly the set of services needed and integrate those services into an excellent interprofessional plan of care.
These two purposes are different, but they are both possible under a common mission, vision, and values. The differences establish the relationship between the CSS and the HCO, giving each critical functions. When the functions are understood, there are several alternatives for affiliation between the CSS team and the HCO. Employment is the most common, but contracts, joint ventures, and corporate subsidiaries are also possible.
An HCO’s profile of clinical support services must be consistent with its mission and strategic plan. This consistency means that the size and scope of each CSS must be defined by the HCO, and the annual goals must be negotiated with the CSS and ultimately approved by the HCO governing board. At the same time, each CSS professional has multiple options for pursuing his career. To make that negotiation attractive to the CSS profes- sionals, the HCO must make itself the preferred place to practice—the “best place to give care.”
Chapter 8: Cl in ical Suppor t Ser vices 243
Functions
It is obvious from exhibit 8.1 that CSSs have different characteristics, yet similarities emerge at one level of abstraction above these differences. The managers of social service and radiation oncology, for example, share com- mon functions, which are identified in exhibit 8.2.
Provide Excellent Care Both diagnostic and treatment CSSs are integral parts of healthcare. They must individually and collectively meet the National Academy of Medicine goal of safe, effective, patient-centered, timely, efficient, and equitable care. They do that with the following four processes:
1. Patient management guidelines. These are adopted by selection committees in which CSS members participate. The guidelines control
Diagnostic Services Therapeutic Services
Audiology Cardiopulmonary Electrophysiology Pulmonary function Interventional cardiology Clinical laboratory Chemistry Hematology Histopathology Bacteriology and virology Autopsy and morgue Consultative services Ethics committee Internal review board Diagnostic imaging Radiography Computerized tomography Positron emission tomography Radioisotope studies Magnetic resonance imaging Ultrasound Electroencephalography Electromyography Telemedicine
Anesthesia Acute pain management Surgical and obstetric anesthesia Blood bank and transfusion services Interventional imaging Nursing Birthing suite Surgery and postanesthesia care Wound, ostomy, and continence care Optometry Orthotics Palliative and hospice care Pharmacy Dispensing and counseling Intravenous admixture Radiation oncology Rehabilitation services Physical therapy Respiratory therapy Speech pathology Occupational therapy
Social and counseling services
Community support groups Grief counseling Pastoral care Psychological care Social service
EXHIBIT 8.1 Clinical Support
Services in a
Large Healthcare
Organization
The Wel l -Managed Healthcare Organizat ion244
effectiveness because they specify when CSSs are required, optional, or not recommended. As a result, they also control the demand for service, placing the sizing of the CSS as an HCO function.
2. Functional protocols. Virtually all CSS activities are learned processes that are formalized and scripted as functional protocols. The protocols
Function CSS Role HCO Role
Provide excel- lent care
Provide safe, effective, patient-centered, timely, efficient, and equitable patient services
Select, use, maintain, and teach functional protocols
Participate in patient man- agement guideline selec- tion and development
Assist in designing work processes and training programs
Ensure appropriate voice in patient management guide- line–selection committees
Maintain patient relationships
Schedule patients effectively Train associates in identifying
patient needs and using techniques to improve acceptability of care
Maintain cultural and linguis- tic competence
Provide for uninsured patients
Maintain a central scheduling system
Provide associate sensitivity training
Provide translators and cul- tural competence training
Recognize burden of un- or underinsured patients and health disparities
Maintain consultative relationships
Assist care providers with protocol administration
Consult on questionable cases
Provide training to other pro- fessions on advances in their CSSs
Support CSS involvement in PITs and planning activities
Incorporate consultation and training into contract
Resolve rules for nonprofes- sional administration of CSSs
Plan and manage operations
Negotiate appropriate long- term relationships
Negotiate goals for operational scorecard dimensions
Maintain regulatory compliance
Negotiate appropriate long- term relationships
Establish compensation, con- tribution from HCO’s annual strategic goals
Provide resources for regula- tory compliance; ensure compliance reporting
Improve continuously
Benchmark, identify OFIs, establish and participate in PITs
Negotiate, support, and reward improvement
Note: CSS = clinical support service; HCO = healthcare organization; OFI = opportunity for improve-
ment; PIT = process improvement team.
EXHIBIT 8.2 Functions of the
Clinical Support
Services,
Showing Service
and Healthcare
Organization
Contributions
Chapter 8: Cl in ical Suppor t Ser vices 245
must be designed to conform to standard work, achieve benchmark safety, effectiveness, patient comfort, and efficiency. Each CSS profession designs, tests, and maintains the processes it uses. Many functional protocols must be carefully integrated with other care activities. The CSS identifies and validates performance measures based on the functional protocols. The HCO includes the measures and continuous improvement in its contract.
3. Scheduling systems. It is important not only to provide each patient with timely service but also to maintain an orderly workflow within the CSS. Sophisticated scheduling systems achieve this by managing the demand stream. The best scheduling systems integrate all CSSs to minimize the length of the patient care event.
4. Training. Each CSS must rely on a mix of professional and nonprofessional associates. Maximizing the contribution of each associate is important to improve safety, patient-centeredness, and costs. It is achieved by careful training and transformational supervision. The HCO shares the training duties, providing training in leadership and continuous improvement, cultural and linguistic competence, and other issues shared by several CSSs. The CSS provides training for its functional protocols, but it often collaborates with human resources management to implement and evaluate the training.
Throughout all the functions, the HCO role can be summarized as providing coordination and support. It maintains the scheduling system (see the Maintaining Patient Relationships section below). It uses process improvement teams (PITs) and planning committees to negotiate protocols and resolve questions that care providers and CSSs face. These questions range from coordination and availability of services (What arrangements are made for inpatient meals delayed by testing?) to coverage of uninsured patients (Who pays the rehabilitation costs for a trauma patient without insurance?). They even encompass privileges for a specific CSS assigned to various associate groups. For example, will images taken in outpatient offices be included in the electronic health record, and which ones will be read by the imagist?
Maintain Patient Relationships All CSSs have both patient and care provider customers. Care teams order the services; patients receive them; care teams receive notice of results. Although the clinical laboratory works principally with specimens and the pharmacy supplies many drugs through nursing, most CSSs require intimate patient contact. Given an excellent care function, the issues in satisfying patients are scheduling, amenities, and identifying unusual needs.
The Wel l -Managed Healthcare Organizat ion246
The scheduling issues are demanding. Many patients need prompt attention for both safety and caregiving efficiency. CSS delays often add to the total length of stay and increase the cost per case. The CSS needs a manageable workflow. Its associates need planned schedules, but they also need to have work to do. Idle time drives up the cost per test and reduces associates’ skills.
Sophisticated scheduling systems allow CSSs to balance workflow to their teams while meeting patient needs, including emergencies. The con- cept for the scheduling system is shown in exhibit 8.3. Unless volumes of work are large (the laboratory and pharmacy, for example), a CSS that sim- ply accepts patients as they come will have periodic idle times and overflow demand. The first wastes financial resources, and the second endangers safety and effectiveness. Sophisticated scheduling systems can substantially reduce both problems. The secret is to identify a set of patients who do not have emergency needs and are willing and able to come on call. Nonemergency patients already in the HCO are an example. As exhibit 8.3 shows, emer- gency patients get immediate care. On-call patients get a fixed future date, but they also can be called sooner. Scheduled patients get a fixed future date.
Requests for service
Separate according to clinical need
Schedulable Treat at agreed
future date
Urgent and Reschedulable
Treat when opportunity arises
Emergency Treat without
delay
Results: No emergencies are turned away or delayed. More urgent and schedulable patients are seen sooner. Patients who seek a �xed date get a �xed date. Clinical support service ef�ciency (cases per associate or cost per test or treatment) is higher.
EXHIBIT 8.3 Conceptual
Model of a
Sophisticated
Scheduling
Process
Chapter 8: Cl in ical Suppor t Ser vices 247
At a given level of emergency allowance, overall efficiency will increase and overall delays will decrease by calling in patients.
Sophisticated computerized scheduling systems are available for major support services and for admission and occupancy management. These programs keep records, print notices, send telephone or email reminder messages for appointments, and provide real-time prompts to clinical associ- ates. They automatically monitor cancellations, overloads, work levels, and efficiency. They are integrated with ordering and reporting systems so that the entire process of obtaining a CSS is automatic from the point of the doctor’s decision to order it. Most scheduling systems can also be operated in a simulation mode to analyze the costs and benefits of alternative strate- gies. Simulation outputs are useful in both short- and long-term planning to evaluate potential improvements in demand categorization, resource avail- ability, and scheduling rules.
The scheduling system requires each CSS to establish available hours. The hours should be based principally on efficiency considerations. CSSs should be open only when sufficient demand is expected to support effi- ciency and skill in the minimum team. Arrangements must be made to call in associates for life-threatening emergencies.
The HCO provides logistic services for many CSSs. These include knowledge management, training and other human resources management, environmental services, accounting and financial services, and internal con- sulting. They also include sensitivity training for cultural competence, trans- lators, and assistance with patients who present unusual circumstances. The CSS is the customer and final monitor of these services. It should alert HCO leadership about any failure and expect prompt response.
Maintain Consultative Relationships CSSs must view care providers and interprofessional teams as customers and recognize that care providers often have alternative sources. Although a few CSSs can work directly with patients, most require physician or advanced practice nurse orders. To complete the orders, CSSs must meet several dif- ferent aspects of care needs.
• Comprehensive. The CSS’s level of service must match the requirements of the patient management protocols.
• Accurate and effective. Errors in diagnostic tests create unnecessary costs and dangers for patients. Care providers need to be confident in CSS results.
• Prompt. Delays in CSS prolong the care process, reducing efficiency. They also erode patient satisfaction.
• Supportive of patient needs. The patients’ overall response to the care, both clinically and in terms of satisfaction, is often influenced by the CSS.
The Wel l -Managed Healthcare Organizat ion248
In addition to patient-related considerations, CSS must support sev- eral needs of the care team:
• Consultative advice. Each CSS is an expert resource. Care providers need to rely on CSS expertise when questions arise about individual patients.
• Guideline and protocol development. Many questions that emerge from adopting guidelines require CSS participation to answer. Most protocols must be agreed to by the CSS involved.
• Training. CSS advances can change how care is given. Many procedures originated in CSS but have moved to general usage; care providers must often be trained to do them. Various procedures have complex implications for other parts of care, and care providers must be trained to understand those interactions.
• Assistance with uninsured patients. The plans must be worked out in advance and specified in the contract with the HCO (see the Plan and Manage Operations section on the next page).
The care provider needs are met by CSS availability, participation in PITs and planning committees, and support of training activities. Those items must be negotiated in the CSS–HCO contract.
Behind several of these issues lies an unfortunate consequence of the payment system. The CSSs have various relationships to payment. Some, such as social service and bereavement counseling, are almost never billed separately. Others, such as outpatient imaging and laboratory, can have dual physician and hospital payments. By regulation, the physician portions of these payments are not limited to CSS professionals. Primary care or specialist physicians who use imaging equipment in their office can collect for each image from most insurance plans. Alternatively or in addition, the physician can order an image from the HCO’s imaging service. The pay- ment to the HCO is substantially larger, but it goes to the radiologist and the HCO and not to the primary physician. There are three critical patient care questions here:
1. Is the imaging necessary? 2. Is the radiologist’s consultation necessary? 3. Which path is better—the one at the office or the one at the HCO?
The patient care questions are confounded by a fourth, which cre- ates serious conflict of interest: Who gets the money? The problem is not limited to imaging. In one form or another, it affects any CSS for which there is direct payment, although it has essentially been solved in pharmacy.
Chapter 8: Cl in ical Suppor t Ser vices 249
Technology improvements change the patient care answers. A consultation that was important in 2016 may not be in the patient management guide- lines in 2020.
Bundled payments, which Medicare and many private insurance companies are adopting, will improve solutions to these questions because they will force all three parties—the referring physician, the CSS, and the HCO—to negotiate a more cost-effective approach. In the meantime, the HCO plays a major role, negotiating the specific solutions in each protocol and service line. The key to the negotiations is commitment to a mission of excellent care and evidence-based medicine. The patient management proto- col should specify when tests or treatments are appropriate and allow comple- tion by the lowest-cost associate who can do the test or treatment safely. That associate must have adequate training and support in case difficulties arise. The principles—evidence-based medicine and commitment to the mission— and the negotiating process must both be included in the contract between the HCO and CSS. The principles must be scrupulously implemented by the HCO, but at the same time, the HCO must assure the CSS associates of a competitive income opportunity. Patient satisfaction, primary care provider satisfaction, outcomes quality, and process quality measures are all critical in maintaining excellence.
Plan and Manage Operations Almost any CSS can be envisioned as a small retail business. In fact, many are operated in exactly that way. The HCO’s strategy is to bring these businesses under one organization. It will ask for commitment to its mission and to evidence-based medicine and management. It will implement these requests by asking for explicit measures of performance, benchmarking, and continu- ous improvement. It will make its proposal attractive by offering a large, reli- able book of business, a record of capability in meeting operating needs, and a culture that is appealing as a place to work. In addition, the HCO must show that it will offer competitive compensation. This concept is a difficult one, given healthcare financing. It does not mean “as much as you can earn someplace else,” because the HCO will expect care limited to standards of appropriateness and assigned to the lowest capable level of worker. It does mean “as much as you could earn someplace else given that you accept our commitment to mission and evidence-based medicine.”
Excellent HCOs implement that approach to CSS management using a three-part strategy. First, the CSS must be carefully sized to realistic market needs, and the HCO must control the size. Second, the HCO must imple- ment its transformational culture to make the work attractive to professional and nonprofessional associates. Third, the HCO must implement evidence- based management in all the logistic and strategic services the CSS needs. The contract must be competitive in the CSS associates’ eyes.
The Wel l -Managed Healthcare Organizat ion250
Planning and Sizing the CSS CSS planning is based on the community epidemiologic planning approach described in chapter 3. For CSSs drawing directly from the community, populations are age-specific community censuses, the incidence rate is the occurrence of disease in the general population, and the market share is the institution’s anticipated share of the particular market, as shown in equation 1.
Equation 1
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ × { } ×
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ × { }Demand for a service =
Forecast population
at risk
Incidence rate
Average use per
incidence
Market share
For example, the demand for postoperative physical therapy (POPT):
⎧
⎨ ⎪⎪
⎩ ⎪
⎫
⎬ ⎪
⎭ ⎪
× ⎧
⎨ ⎪
⎩ ⎪
⎫
⎬ ⎪
⎭ ⎪
× ⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ ×
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬⎬ ⎪
⎭⎪
Forecast procedures requiring
POPT
Demand for POPT = Percent of patients referred for PT
PT visits per patient
referred
HCO’s market share
or for breast examinations, where average use per incident is 1:
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ =
⎧
⎨ ⎪
⎩ ⎪
⎫
⎬ ⎪
⎭ ⎪
× ⎧ ⎨ ⎪
⎩⎪
⎫⎫ ⎬ ⎪
⎭⎪ × ×
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ 1
Forecast age-speci�c
female population
Age-speci�c incidence
rate
Demand for breast
examination
HCO’s market share
The equation can be specified or aggregated as desired. It might apply to MRI (magnetic resonance imaging) demand by type of procedure, cardiovas- cular surgeries, births, or any condition for which incidence rates are known.
CSS demand that arises from many different diseases is calculated from general rates of admissions or outpatient visits. Using equation 2, many CSS demands can be estimated from the history of use per patient and forecasts of the number of patients. The equation can be specified or aggregated as needed to obtain reliable results.
Equation 2
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪⎪
⎭⎪ ×
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪
Number of services
per encounter
Forecast patient
encounters Demand for widely used CSS =
Chapter 8: Cl in ical Suppor t Ser vices 251
For example:
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ =
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ ×
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎭⎪
Number of presciptions
per admission
Inpatient pharmacy demand
Forecast inpatient
admissions
The equations must be forecast several years into the future and trans- lated into a business plan for the CSS that projects staff requirements by skill level, supply and facility requirements, expected costs, and unit costs. The unit costs can be compared to benchmarks, competitive data, and income forecasts. Annual volumes can be compared to quality minimums. The busi- ness plan is presented to both the CSS associates and referring care teams for their comments. The plan is presented to the governing board with manage- ment’s recommendation and both sets of comments. It is adjusted as needed in the annual goal-setting process.
The planning process implements the HCO’s mission for quality and cost-effectiveness. The service will be started, continued, or expanded when both cost and quality expectations are favorable. The service should be dis- continued, outsourced, or reorganized whenever quality is threatened or cost is not competitive.
Meeting CSS Support Needs The HCO’s offer to the CSS is that it will thrive under closer affiliation. That requires the HCO to provide a full range of logistic and support services and an attractive work environment. Closer affiliation usually means greater capital investment by the HCO.
The CSS associates work side by side with the care teams, and they share the same logistic support and strategic support. The support must be better than the CSS could acquire elsewhere. CSS associates, like all other associates, must feel that the HCO is “a great place to give care.” The trans- formational culture is sustained by three elements:
1. Responsive listening by senior leadership. Rounds should include CSSs, and CSS associates should feel empowered.
2. Training for CSS managers. Just as nurse managers and logistic support leaders are trained to be responsive listeners and to encourage empowerment, CSS managers should be trained. Because of the small size of many CSSs, coaches and mentors come from other CSSs.
3. Celebration and rewards. CSSs should participate in celebration of goals that require collaboration as well as in achievements within their CSS. Their compensation should include bonus opportunities that are comparable to those of other associates.
The Wel l -Managed Healthcare Organizat ion252
Building an Effective Contractual Relationship The HCO has a number of alternative contractual arrangements that it can tailor to a specific CSS. Alternative structures, generally ordered in terms of increasing HCO control and increasing HCO capital investment, include the following:
• Long-term contract with a separately owned corporation. An independent corporation owns facilities, employs associates, and sells services to the HCO. The contract should specify as clearly as possible the obligations and intentions of both parties. Quality, patient satisfaction, and efficiency standards can be included, with agreement on measures and benchmarks. The HCO can control professional privileges. Hours of coverage, requirements for teaching, and participation on PITs should be specified. It is difficult to incorporate standards for effectiveness or to prevent the contractor from competing as an independent organization.
• Joint venture corporation. The HCO gains partial strategic control and can include explicit reserved powers or supermajority rules that gain control of size, location, clinical privileges, and management appointments. The corporation can purchase services from the HCO. The principal advantages relate to capital. The joint venture allows CSS professionals to have equity and income compensation. It also permits a for-profit corporation to provide some of the equity capital, relieving the HCO of debt or lease financing.
• Joint operations. The HCO owns and operates the facility, including hiring of nonprofessional associates, and can exercise control of privileges, giving it control of size, amenities, and capital investment. Professional guidance is provided by contract with one or several physician corporations.
• Unified operations. The HCO owns and operates the facility and employs all professional and nonprofessional associates. This model gives the HCO maximum control, but it must still attract and retain qualified professionals.
Unified operations are the most common solution, particularly among smaller CSSs, and the trend is clearly toward increased HCO control. Revi- sions to the insurance payment system may encourage even more HCO control. Given the great importance of fixed costs in efficiency, the sizing function is crucial. Services that are missing or too small pose a threat of lost market share to competitors. Those that are too large draw insufficient demand to meet quality and cost standards.
Chapter 8: Cl in ical Suppor t Ser vices 253
Maintaining Regulatory Compliance In addition to general standards set by the Centers for Medicare & Medicaid Services (CMS) and The Joint Commission, CSSs may have additional and more specific regulatory requirements that may be government mandated or voluntary. CSS management must be knowledgeable about regulatory requirements and design and should implement policies and procedures accordingly. In addition, ongoing education and training for changing stan- dards is expected.
For example, clinical laboratories must comply with the Clinical Labo- ratory Improvement Amendments regulated by CMS.1 Moreover, clinical laboratories may elect to participate in accreditation by the College of Ameri- can Pathologists (CAP), the gold standard for clinical laboratory quality and performance improvement,2 or receive accreditation from the American Association of Blood Banks for blood banking and transfusion services.3
Radiation oncology must comply with the federal Nuclear Regulatory Commission; pharmacy must comply with federal regulations of the Drug Enforcement Administration and the Food and Drug Administration; and dietary services must comply with state and local health department regula- tions that govern the proper and safe handling of food and sanitation, to name a few examples. Each CSS also has continuing education requirements for the many professionals who are represented in specialty areas.
The HCO leadership is responsible for providing resources to support regulatory compliance and also to report compliance to the governing board and other appropriate organizations. Many large HCOs have individual regu- latory compliance officers for CSSs.
Improve Continuously The evidence-based model of measures, benchmarks, opportunities for improvement (OFIs), improved goals, and rewards fits well within each CSS. The model, with annual goal setting, should be routine in all CSSs, whether the HCO operates the CSS or contracts with a separate corporation. Setting annual operating goals and identifying and justifying new capital investment should be interrelated. Capital is required for improving and expanding facili- ties, replacing outmoded equipment, and starting new programs. CSSs are a major user of capital. Where capital is supplied by the contractor, the HCO should have the right to approve investments.
Setting Annual Goals A unit that has been diligent in the preceding year will be able to formulate next year’s operating plan quickly, drawing in large part on work that has already been done in continuous improvement. Quality, costs, patient satis- faction, and associate satisfaction goals must be related to benchmarks. They
The Wel l -Managed Healthcare Organizat ion254
should incorporate changes developed by PITs. Not every measure need be improved; those close to benchmark or requiring extensive study to change will remain at or near past performance. Support staff will analyze trends and possibilities. The CSS and HCO leaders will do the following:
• Review the demand forecasts, extending them to the specific levels required in the department and suggesting modifications based on their knowledge of the local situation.
• Identify realistic improvement opportunities. Minor changes are incorporated in the operating goals. Major ones are addressed in capital and new program requests (discussed later in the chapter).
• Propose goals for all the measures on the operational scorecard. • Identify OFIs and initiatives that should be developed during the
coming year.
The support staff (see chapters 13 and 14) does the following:
• Promulgate the HCO-wide goals established by the governing board. • Assemble historical data on achievement of last year’s budget. • Prepare forecasts of major CSS demand measures. • Assemble benchmark and competitor data. • Circulate wage-increase guidelines from human resources and supplies-
price guidelines from materials management. • Assist in calculations and prepare trial solutions until a satisfactory
HCO-wide proposal has been reached.
The HCO leader for the CSS is expected to do the following:
• Ensure that the proposed goals do not impair quality or satisfaction in other units.
• Assist the CSS and encourage steady but realistic improvement. • Coordinate interdepartmental issues that arise from the budgeting
process. • Resolve conflicting needs between CSSs. • Evaluate the progress of the CSS to assist in the distribution of
incentives. • Assist the CSS in pursuing OFIs and implementing them during the
coming year.
As shown in exhibit 3.7, the planning activity is virtually ongoing. The plan implemented in the first month of the HCO’s fiscal year stimulates
Chapter 8: Cl in ical Suppor t Ser vices 255
planning for the next year. New forecasts are prepared. PITs are formed and encouraged. As data come in, the CSS teams consider next year, offer improvements, and negotiate with senior leadership to reach a mutually acceptable set of goals that fulfill board expectations.
Implementing Improvements An important part of the senior leaders’ job is facilitating PITs and imple- menting improvements that often involve several different CSSs and patient care teams. These improvements are likely to be the most rewarding oppor- tunities. For example, costs of pharmaceuticals have been rising rapidly. A pharmacy might pursue a number of internal initiatives to keep departmental cost increases at a minimum, but control of demand—and much control of drug safety—rests with the medical and nursing staffs. The pharmacy sec- tion of exhibit 8.4 shows some initiatives a pharmacy might support. The strategy for pharmacy addresses four areas: price and inventory, formulary, protocols, and prescribing habits. Three of the four require collaboration with the interprofessional care teams. Initiatives in each area might continue for several years.
The diagnostic imaging section of exhibit 8.4 also shows a set of initia- tives. Only the first is wholly in the CSS’s control. As the exhibit suggests, improvement initiatives take a number of different forms, leading to PITs with different charges, memberships, and timetables.
Negotiating Goals The goal negotiation process has several important characteristics:
• The goal of the negotiations is the optimization of patient needs as a whole, as reflected in patient outcomes and satisfaction and external benchmarks.
• Costs must be kept consistent with revenue and comparable to competitors. HCOs or CSSs that cannot meet those goals must be restructured by consolidation or revision of the mission.
• Each CSS must maximize its own opportunities across the balanced scorecard dimensions: quality, patient satisfaction, care provider satisfaction, and associate satisfaction.
• The negotiating teams should include clinical professionals and associates. Their deliberations should be widely shared, so that obstacles are identified and removed, and all associates understand the path toward goal achievement.
• Many excellent HCOs reward goal achievement with financial bonuses. The path to the bonus should be clear, support should be available when difficulty is encountered, and virtually all the bonuses should be paid.
The Wel l -Managed Healthcare Organizat ion256
Issue Initiative Measures Approach
Pharmacy
Price and inventory manage- ment
Purchasing agree- ment vs. internal manufacture
Inventory management system
Unit cost vs. wholesale
Inventory turns per year
PITs within pharmacy
Formulary manage- ment
Generic drug program Automatic stop orders
on common drugs Extra controls for very
expensive drugs
Ratio of generic to proprietary
Drug cost per case
Average costs per dose for specific drugs
PITs working with service lines
Patient man- agement guidelines
Alternative therapies and prevention
Avoidance of unneces- sary drug use and cost
Drug cost per specific treat- ment episodes
Guideline review committees
Prescribing habits
Guideline compliance LIP education and
counseling
Drug costs per capita
Drug cost per specific treat- ment groups
Counseling with service lines
Diagnostic Imaging
Reduce retakes and improve results reporting
Improve functional pro- tocols and associate training
Count of retakes Time from exam
to radiologist’s report
PIT within imaging
Improve patient scheduling
Evaluate and install patient scheduling system
Patient service delays
PIT with service lines and other CSSs
Inappropriate exams
Final product protocols, physician education
Disease-specific exams per patient
Protocol review committees and service line counseling
Note: CSS = clinical support service; LIP = licensed independent practitioner; PIT = process
improvement team.
EXHIBIT 8.4 Improvement
Initiatives in Two
Clinical Support
Services
Chapter 8: Cl in ical Suppor t Ser vices 257
A strong strategic plan is essential. The improvement goals tend to support larger operating units. As the performance level is raised, both capi- tal and leadership skills are required. Thus, independent CSSs merge with HCOs; small HCOs merge into larger ones.
Preparing New Program and Capital Budget Requests CSS managers are responsible for identifying opportunities and developing programmatic proposals—specific proposals for new or replacement capital equipment or major revisions to service—as well as for the annual budget. Technological improvements, aging equipment, changing demand, and revisions in the scope of service can require capital investment and result in major shifts in performance. These must be justified in terms of the HCO’s mission. The best investments are those that contribute most to the HCO’s mission and stakeholders’ expectations. All capital requests are subject to a competitive review process that ranks them and to board action on the basis of the rank order. The review process and board actions are discussed further in chapter 14.
For example, an imaging department may encounter declining demand for inpatient radiographs, increasing demand for convenient ambu- latory radiographs and ultrasound, and increasing demand for magnetic and emission tomography. Substantial capital is required to remove equipment no longer needed, purchase new equipment, and recruit and train staff for the expanded operations. The imaging department and the HCO manager prepare detailed business plans for these changes, documenting both the capital and operating cost changes, as well as changes in other performance measures, such as quality of care, patient satisfaction, and referring physician satisfaction. Internal consulting helps develop the factual basis for the pro- posal; marketing provides advice on location, hours, and other issues; human resources assists with the training; and finance assists with calculations of cost and return on investment. The benefits—contributions to mission—are iden- tified by imaging, with assistance from the performance improvement council (PIC), clinical customers, internal consulting, and marketing.
The proposal, which might suggest changes that cost several million dollars, advances to competitive review when the imaging department is ready. Competitive review compares the proposal against similar requests from other units, ending with a rank-ordered list submitted to the governing board. The criterion for ranking is long-run mission achievement: What is best for the HCO’s stakeholders? The benefits the CSS claims in the pro- posal are related to its operational performance measures. If the proposal is accepted, imaging is expected to adopt and achieve those goals. Many ben- efits occur outside the CSS, making the collaborative approach to proposal development essential. The proposal is both strengthened and validated in the process, reducing challenges during competitive review.
Programmatic proposals Proposals for new or replacement capital equipment or major revisions of service.
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Quality-Related Benefits All benefits to the HCO, including improved quality, must be compared to the treatment alternative that would prevail if the proposal were not adopted.4 Although many technological advances are described as improve- ments in outcomes quality or contribution to patients’ health and well-being, the reality is that most proposals involve only convenience and competitive advantage. A service that supplements another one that is available ten min- utes away has a quality value equal to ten minutes of travel, even if the service is lifesaving. (It may have a much higher patient satisfaction value.)
If, in fact, the proposal changes the number of people in the com- munity who will achieve a more favorable outcome, its contribution can be analyzed using the epidemiologic planning model.
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ ×
⎧ ⎨ ⎪
⎩⎪
⎫ ⎬ ⎪
⎭⎪ × { }Contribution =
Demand for a
service
Probability that service will
improve outcome
Value of improvement
The demand term is estimated by the epidemiologic planning model. The probability of improved outcome comes from clinical literature and is a foundation of evidence-based medicine. Quality benefits can theoretically be scaled by a variety of survey techniques and instruments. Most situations will not be difficult to rank. If a new clinical approach substantially prolongs life, and many competitors are adopting it, it will score well and be adopted. Scales exist for the quality of human life, ability to work, ability to care for the self, added years of healthy life, and similar major contributions.5 Review committees should use a consistent scale for valuing clinical contribution and recognize the limitations of the scale.
Cost-Related Benefits If a process improvement reduces the need for care, dollar estimates are not challenging. For example, if a new diagnostic process with a demand of 1,000 tests per year will reduce length of stay by one day for one-third of those on whom it is used, and a day of stay is worth a marginal cost of $400, the contribution of the process is about $133,000 per year:
Contribution = 1,000 × .333 × $400 = $133,200
A case can be made for higher values. From an insurer’s perspective, the cost per day is the paid price, probably twice the marginal cost. Patients and society might place an even higher price on it, adding earnings from earlier return to work.
Because of fixed costs and marketing implications, cost and demand are interrelated. First, CSS costs after adoption of the proposal must be
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competitive with other sources of equivalent services. If they are not, the proposal is inadequate to ensuring long-run survival. The CSS must find a way to deliver services competitively. If they are, a benefit is return on invest- ment—the savings a proposal generates expressed as a return on its capital investment over the years of the life of the project or the capital equipment.
Return-on-investment calculations are usually prepared with the assis- tance of internal consulting and finance. The focus is on changes in cash flows. The contribution can be expressed as return on investment:
= ÷Return on investment Contribution Invested capital
The value of cash in future years is less than the value of immediate cash. Return on investment can be calculated for multiyear cash flow streams, allowing comparison of diverse projects. It is also possible to discount cash flow in future years with an assumed rate of interest, creating a net present value of cash flows. Care must be taken to estimate all costs and demands accurately, including hidden ones, and to be sure the claims for savings can truly be met. The proposed costs will be incorporated as an operating budget reduction if the project is implemented. Some cost improvements occur out- side the CSS, in which case another unit must agree to them. For example, an improved diagnostic test may reduce drug costs or length of stay. In this case, the cost savings must be traced to the unit where they will occur, and that unit must agree to actual goal changes.
Market Share Improvements Many proposals improve market share or forestall a loss of market share. A claim that a specific capability will attract or protect market share is a justifica- tion for capital investment. The value depends on the magnitude of the shift and the fixed cost involved. Replacing equipment that is critical to continued operations is an obvious, high-priority example. If a modern laboratory must have an automated, multichannel blood chemistry analyzer, and the existing one is no longer reliable, the proposal to replace it will not generate much debate. In less obvious cases, the justification is based on the return on investment. Applications are often complicated. Under global and capitation payments, change in cash flow must be calculated at the level of payment involved. The proposal may be a service that has become generally accepted as part of the protocol for a specific disease or procedure.
The justification must be based on service for the care episode, rather than the operation of the CSS. The budget for the patient management protocol or the service line becomes the critical document, rather than that of the CSS. If it reflects competitive cost and quality, the proposal is worth
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further consideration. For example, a special laboratory for in vitro fertiliza- tion is a CSS for a women’s health service line. It can be justified only as a complete service, including evidence of sufficient actual demand, clinical staff recruitment, all costs for couples seeking the service, payments allowed by various insurers, and evidence of competitive rates of successful fertilization. As a result, these kinds of proposals are usually considered strategic, and ad hoc teams are established to evaluate them.
Defending Capital Proposals The HCO manager of the CSS and the internal consulting representative are proper advocates of the proposal in the evaluation process. Their job is to prepare the analysis and the justification in the most favorable light. As advo- cates, they should be prepared to answer questions and make modifications as the proposal progresses. They must also be prepared to accept rejection. By the same token, it is senior management’s obligation to see that they do not overstep the bounds of honesty, that others accept their role as advocate, that all projects get a fair and judicious hearing, and that the benefits claimed are translated to actual performance when the project is complete.
The feedback to the CSS comes in two ways—through evaluation of its proposals and through participation in the evaluation of others’ proposals. Over time, the CSS learns to identify winning proposals earlier, making the process less onerous.
People
Team Members Many CSS professionals have extensive formal education, licensure, and requirements for continuing education. The education includes mastery of relevant theory and supervised practice so that the student learns the processes, patient indications and contraindications for them, expected out- comes, and the rules governing process design. Although they are in various stages of implementation, the professions of pharmacy,6 physical therapy,7 occupational therapy,8 and nurse anesthesia9 have adopted practice doctor- ate degrees as the first professional “entry to practice” credential. To reduce costs, unlicensed aides or technicians perform many of the actual CSS pro- cedures under supervision. The staffing of most CSS units consists of one or two levels of formally educated professionals and one or more levels of technical personnel, allowing each professional to serve a larger volume of patients. Three managerial issues arise:
1. Maintenance of clinical competence and skill for qualified professionals 2. Education and supervision of nonprofessional personnel
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3. Resolution of work assignments between professional and nonprofessional personnel
The first is met by a credentialing process that verifies entry and con- tinuing formal education and a continued record of effective practice, as for medicine and nursing. The process is usually assigned to human resources management. The second is addressed in the HCO’s educational programs. The training is usually designed and conducted by the CSS professionals and human resources. The third, resolution of interprofessional and intraprofes- sional work assignments, must bring in advice from customer stakeholders. It is the responsibility of the HCO leadership and is discussed in the Managerial Leadership section later in the chapter.
CSS Leadership The leader of each support service is usually an experienced professional in the appropriate field. Many larger CSSs also have designated medical direc- tors. Some services—operating rooms and delivery rooms—use specialized nurse leaders, collaborating closely with their physician counterparts. Phar- macists, respiratory therapists, and medical social workers have less direct medical involvement, probably because they serve a broad array of specialties.
Beyond their professional training, CSS managers need supervisory skills, including skills in personnel selection, management of committees, continuous improvement concepts, knowledge management, and servant leadership. Managers of the larger CSSs often have master’s degrees in healthcare management. Learning effective leadership styles requires more than coursework. Well-managed organizations reinforce formal education with ongoing training, exposure to best practices, coaching, and assistance from internal consulting.
The HCO Manager Each CSS must be accountable to the HCO governing board. That account- ability is through a member of the senior leadership team or someone who reports to a senior leader. The HCO leader has several duties, many of which are described in the earlier CSS functions section:
1. Responsive listening—rounding frequently, talking with associates in the CSS at all levels and addressing their needs, talking with care providers who use the CSS
2. Communicating—explaining strategic guidelines, other relevant board decisions, OFIs and matters of interest that arise from various monitoring activities, PIC actions, and the work of PITs that potentially affect the CSS
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3. Supporting PITs that need to understand and interact with the CSS processes and ensuring representation on all PITs that directly affect the CSS
4. Negotiating the annual operational goals—relating the CSS’s improvement possibilities to the needs of other units and identifying and resolving issues of coordinating services and improvement activities
5. Supporting and coordinating capital and new program requests with clinical units and other CSSs
6. Maintaining the succession plan for the CSS 7. Arranging the resolution of interprofessional and intraprofessional work
requirements 8. Maintaining the agenda for contract renewal or restructuring of the
relationship between the CSS and the HCO
The agenda for contract renewal recognizes that there are alternative opportunities to provide many CSSs. Even fully employed CSSs should be reviewed periodically, and contractual relationships should have explicit revi- sion or renewal dates. The HCO manager should monitor both the array of alternatives and the improvement opportunities offered. Although the nor- mal expectation is to continue the relationship, the HCO’s stakeholders are entitled to the best available arrangement. Review of alternatives may lead to a new supplier for the CSS; more commonly it identifies OFIs that can and should be addressed under the existing relationship.
Organization The organization shown in exhibit 8.5 is built around CSS teams of profes- sional and nonprofessional associates focused by location or function. As the exhibit shows, each CSS team is accountable to multiple stakeholders— patients, customers (i.e., the care teams depending on its services), and the HCO. Both CSS and service line associates have operational goals. Frequent and open interchange occurs among the CSS team, the patient, and the physician and also between the CSS managers and the service line managers. HCO managers and senior management are accountable for both goal sets. They work to achieve the goals and improvements by responsive listening, monitoring performance, and using PITs to address all issues of integration and coordination.
CSSs vary widely in size and activity. Most CSSs provide care in both outpatient and inpatient settings. The smallest have only one or two profes- sionals. In some situations, the CSS may be a single person or a single team. The larger CSSs, such as clinical laboratory, imaging, and pharmacy, can have more than 100 associates working in a dozen or more teams with several
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subspecialties at several sites. This volume and diversity provide the HCO with a competitive advantage: the ability to meet a superior set of operational goals.
HCO–CSS Relationships Most small CSSs are employed by the HCO. The larger CSSs with physi- cian leadership often form local medical groups and contract or form a joint venture with the HCO. Several moderately sized companies provide imaging and pathology services, contracting with several HCOs in a geo- graphic region. At least one company provides extensive pharmacy support. Contracts generally identify the scope of services to be offered and whether those services are exclusive, commitments for space and equipment, and the management of patient-related information. In addition, they should address the operational scorecard measures to be used, the sources of benchmarks, the goal-setting process, the duties for education and continuous improve- ment, and the incentive arrangements.
Measures
Exhibit 8.6 summarizes the measures for each of the six operational dimen- sions: demand, cost, human resources, productivity, quality, and customer satisfaction. With rare exceptions, these measures are appropriate for any CSS.
HCO manager
Ordering physician
Patient
Service line
Governing board CEO
Senior management team
CMO
Indicates ongoing, frequent interaction
CSS service manager
CSS professional manager
CSS team
CMO and senior management team coordinate and work with PITs.
Service line management ensures patient care excellence.
HCO manager negotiates operational goals and responds to CSS concerns.
CSS management ensures CSS excellence.
Teams can be organized by process, location, or shift.
EXHIBIT 8.5 Core
Organization of
the CSS
Note: CMO = chief medical officer; CSS = clinical support service; HCO = healthcare organization; PIT = process improvement team.
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Many of the measures are retrievable from ongoing data collection efforts, such as patient and associate surveys, accounting, and electronic medical records. Very small CSSs have sample size problems. Monthly reporting may not be reliable, but even the smallest CSS should have measures, benchmarks, OFIs, and annual improvement goals. Qualitative data—impressions, exam- ples, and evidence from competitors or best practices—are also important.
Dimension Measures Applications
Demand Requests for service Used to forecast staff and other resource needs
Specified by time, location, kind of service, and urgency of demand
Market share Used to track competitive success Specify by competitor and service, if
available
Costs Fixed/variable, direct, and indirect costs
Physical units of resources
Equipment age and repair records
Used to analyze and improve work processes
Resource use is specified by time, location, and kind of service
Equipment records trigger mainte- nance and replacement
Human resources
Retention, absenteeism, injuries, satisfaction, recruitment, and training statistics
Used to ensure “a great place to give care”
Specified by worker group
Output and productivity
Units of demand met and not met
Cost per unit of output Physical units consumed
per unit of output
Used to identify service failures Used to benchmark efficiency Specified by time, location, and kind
of service
Quality Process compliance scores
Unexpected event counts
Used to ensure compliance with functional protocols
Specified by time, location, and kind of service
All unexpected events are fully investigated
Patient satisfaction
Overall satisfaction and specifics of service
Used to ensure favorable patient reaction
Specified by time, location, and kind of service
Physician satisfaction
Overall satisfaction and specifics of service
Used to ensure favorable referring physician satisfaction
Physician and patient group categories
EXHIBIT 8.6 Performance
Measures for the
Clinical Support
Service
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Large, complex CSSs have a substantial measurement set, befitting their status as multimillion-dollar enterprises. The HCO leader’s focus should be on the aggregate performance, which should be routinely com- pared with benchmark and competitor values. CSS leaders normally oper- ate an internal performance improvement program, and they are rewarded financially for their success. Part of the HCO’s support can include educa- tional programs, PITs to address problems of coordination, and the knowl- edge management system.
Demand and output measures are increasingly available from elec- tronic order systems and patient records. Cost accounting is supported by the transaction accounting system, which is described in chapter 13. Equipment records are useful for major items; they typically record uses, load factors (time operated divided by time available), service times, and failures. These records are useful in managing maintenance and determining replacement.
Patient, physician, and associate satisfaction data are determined from HCO-wide surveys. Care must be taken to avoid incorrect inferences from small samples. Internal consulting provides statistical analysis (see chapter 14).
Patient outcomes quality measures are important but limited. Most CSSs contribute to outcomes successes but cannot be accountable for them because too many other activities are required. For the patient to thrive, all the care activities must be correct. CSS failures can often be tracked and systematically reduced. Anesthesia, for example, can cause fatalities. Over decades, the anesthesiology profession has studied its failures, improved its processes, and reduced its mortality by several orders of magnitude. It contributes to all successful surgeries but cannot make the surgery a success. Most CSS quality measures are intermediate outcome or process compli- ance measures. In intermediate outcomes, follow-up inspection or a similar assessment reveals the CSS activity was or was not correctly performed and did or did not yield the right information for further treatment. In process compliance, the inspection shows that the functional protocol was or was not followed. The two approaches provide in-depth understanding that identifies root causes of OFIs and facilitates their correction. Pathology laboratories have pursued these measures successfully, allowing them to ensure the accu- racy of their diagnostic reports. CAP maintains libraries of measures, values, and education programs and insists on statistically controlled intermediate outcomes for accreditation.10
Managerial Leadership
Clinical excellence depends on the interprofessional team of physicians, nurses, and their associates and on the information and treatment provided
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by the CSS. The several dozen CSSs reflect the breadth of patient need. The annual goal setting and the continuous improvement program ensure that each CSS is operating effectively. The HCO leader and the senior leadership team should also periodically evaluate six questions for each CSS:
1. Should our HCO offer the service, or refer patients who need it? 2. How big should our service be? 3. What are the continuous improvement goals the CSS should meet? 4. What is the best contractual form for the HCO–CSS relationship? 5. Does the CSS have the coordination it needs with other HCO units? 6. What are the longer-term trends and implications for the CSS?
These questions support excellence in an array of CSS relationships from wholly owned to strategic partnership.
Should the HCO Offer the Service? An HCO should offer every CSS that its patients need and that can be provided safely and economically. Safety and economy depend on patient volume. When volume is too low, associates cannot maintain their skills and unit costs mount; the proper solution is to refer patients needing the CSS to a larger facility. Shared CSS arrangements, even with competing HCOs, may be appropriate. Networks within healthcare systems also help meet the safety and cost thresholds.
The HCO leader’s role is to ask the question periodically, both about services currently offered and those that are not. If patient demand is stable, change is unlikely. When it is growing or shrinking, a planning team should review the opportunities to change sources.
How Big Should the CSS Be? The epidemiologic planning model forecast indicates the necessary size of the CSS. That forecast must be monitored annually for each CSS that the HCO offers. Shifts in technology, health insurance coverage, and population demographics change the forecast. The review normally occurs as part of the annual planning cycle. When major changes in demand are forecast, a given CSS must be expanded, repositioned, downsized, or closed.
The HCO’s commitment to excellence in care mandates that the governing board, not the CSS, determine the size and affiliation. The plan- ning team, like PITs, should hear all interested stakeholders, including the CSS associates. The decision must reflect the needs of the whole. The team’s report should be carefully based on evidence. The final decision, to expand or reduce the service, or change the source or contract, must be left to the governing board.
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What Are the Continuous Improvement Goals the CSS Should Meet? The standards of performance are determined by benchmarks for the mea- sures on the operational scorecard. CSS professional societies often define specific measures and establish benchmarks. Some CSS have accreditation standards, either within The Joint Commission standards or through an inde- pendent organization. These are minimum standards that should, in general, be fully met. While exceptions may be appropriate, they should receive detailed review and in most cases a plan for correction. (Some accreditation standards may be for the benefit of the service provider, rather than the patient. The clearest challenge to these standards is convincing evidence that patient safety and satisfaction can be met without them.)
A multiyear plan to reach benchmark may be appropriate. Continued operation below benchmark raises a serious question: If an alternative pro- vider offers service at benchmark, why should the alternative be denied the HCO’s customer and care team stakeholders? In other words, if this CSS team cannot make benchmark but another supplier can, the HCO is obli- gated to transfer to the successful supplier.
The excellence guidelines “safe” and “effective” create a strong obli- gation to change. The commitment to transformational culture suggests the current supplier deserves a chance to correct the situation. Among other considerations, changing suppliers has a cost in itself. Abruptly terminating a relationship may erode associate trust, a critical component of the transfor- mational culture. Thus, the HCO leader’s first step is to identify and rank- order OFIs, and establish PITs to address the most promising priorities.
What Is the Best Contractual Form for the HCO–CSS Relationship? The major possibilities for formal CSS affiliation are described in “Building an Effective Contractual Relationship.” The best possibility is the one that offers long-term performance closest to benchmark. The criterion is easy to identify but difficult to apply. The preferred solution is probably ownership, which gives the HCO control of employment, privileging, capital, protocol selection, training, location, and operating performance measures. Alterna- tives might be selected to facilitate associate incentives, to reduce capital costs, or to take advantage of skills developed through horizontal integration.
A growing option for extending the CSS function to distant affiliates is telemedicine, or telehealth. This affiliation may best meet the needs of patients and communities at a distance from tertiary or quaternary care. The diagnostic service or remote monitoring function is conducted at the affiliate location and transmitted to the HCO to be inter- preted by a specialist, thus improving timeliness, access to specialty care, and clinical outcomes.
Telemedicine The use of medical information exchanged from one site to another via electronic com- munications to improve a patient’s clinical health status.
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A small number of commercial companies have offered CSS manage- ment services. Unlike the record in environmental services, where outsourc- ing is the rule (see chapter 12), it appears that few have captured substantial market share. Successful models include pharmacy services, some imaging services, and long-term acute care provision. As CSS grow in complexity and sub-specialization, and as telemedicine expands web communication, these companies may develop a substantial technical advantage.
Does the CSS Have the Coordination It Needs? CSSs are, by definition, part of excellent care. Integrating their services into an excellent whole is sometimes a challenge. Patients’ needs and various CSSs interact. Certain drugs affect laboratory values; certain procedures require fasting; patient allergies and sensitivities require procedure modification. Changes in patient care plans can require changes in CSS procedures. CSS professionals should have access to the electronic health record. Beyond that, multidiscipline PITs can address recurring issues of coordination and integration. The HCO’s training, communications, information access, and environmental services can be made available to contracted CSS as they are to employees.
The leadership role is clear and independent of the contractual model. The HCO leader is expected to round frequently, be available for issues that arise, and provide a constructive response to all requests. The CSS can rely on its HCO leader to understand and represent its interests. It can expect to be invited to any committee or PIT that is addressing an issue of concern. These integrating and coordinating activities are essential for the CSS to achieve its goals and thus must be completed regardless of structure.
CSS associates work side by side with other HCO associates. The HCO’s culture of empowerment should extend to the CSS associates. Thus, part of an affiliated CSS’s operating scorecard is its associate satisfaction. The HCO leader should be alert and responsive to potential tensions. CSS lead- ers should be trained in supervision, provided with coaches, and included in multi-rater or 360-degree evaluations to assist them in implementing a transformational culture.
Are CSS Activities Correctly Assigned to Professional and Nonprofessional Associates? Medical technology tends to begin with specialized professionals; as it ages, it moves to less specialized and nonprofessional caregivers. Images, once solely interpreted by radiologists; electrocardiograms, once solely under cardiologists’ purview; and “conscious sedation,” once undertaken solely by anesthesiologists, are examples where a specific CSS has moved to much broader use. The transition to broader use is not always smooth, and the payment structure, which tends to lag the technology, complicates the tran- sition. The criterion for the level of skill and training necessary to provide a
Chapter 8: Cl in ical Suppor t Ser vices 269
given test or treatment is straightforward: It should normally be assigned to the lowest-cost associate who is capable of maintaining quality and patient satisfaction standards.
Applying the criteria is sometimes challenging. Should the treating specialists be allowed to read images in their specialty, or must the interpreta- tions be validated by a radiologist? With new forms of anesthesia such as con- scious sedation, must an anesthesiologist be present? Can a nurse interpret an EKG (electrocardiogram)? Definitive studies are rare.11 Standards of practice, a less rigorous level of evidence, are acceptable. If orthopedists and cardiolo- gists elsewhere are privileged to act on their own interpretation of images, they should be allowed to do that in our HCO. Transfers to nonprofessionals must be interpreted with care.
The process to resolve these issues should be assigned to clinical staff protocol committees and PITs that can assemble evidence and recommend the safe but cost-effective solution. The committees and PITs must be guided to work from evidence rather than authority. Often, the solution is to permit lower-skilled associates to proceed in uncomplicated cases, review the evidence emerging, and broaden their assignment as their record of success grows.
What Are the Longer-Term Trends and Implications for the CSS? The HCO is in control of much of the potential demand for any CSS and is charged with identifying long-term trends. It has the obligation to pursue promptly the implications of these trends. Most problems are easier to solve with advance warning; surprises in the business world are rarely good news.
Many of the most valuable goals require collaboration among several CSSs and service lines. The OFIs are likely to appear in the annual strategic review process or in the deliberations of the PIC, where multiple perspec- tives can be integrated and overall performance benchmarked. Identifying and pursuing these goals is an important part of the jobs of senior leadership and the HCO leader. Pursuit usually means extensive discussion with the units likely to be involved, seeking the most effective, least disruptive path to change. In some cases, it can mean extensive revision or termination of relationships with a CSS. The rule for managing those events returns to the ethical balance between rights of patients and rights of associates. Patients must come first, but contractual rights should be upheld. Thus, any contract needs termination clauses, and they set the stage for effective negotiation. Termination should be rare; negotiation should be continual.
Most CSSs become more complex as new science emerges and drives the expansion of technology. The complexity drives both capital needs for specialized equipment and training needs, creating subspecialties within many CSSs. It is likely that HCO systems will prevail. They will offer CSS specialists practice opportunities that are both professionally and financially rewarding. They will sustain near-benchmark performance on multiple mea- sures, including excellence in patient care.
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Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. Consider a pharmacy that serves a large HCO and is measured by the seven dimensions in exhibit 8.6.
• How will goals be established for next year? • Should some measures have higher priorities? • What support should pharmacy expect from senior HCO leadership? • Would the HCO offer a bonus for goal achievement? • Are the answers to these questions different if the pharmacy associates
are employed by the hospital or serve on a contract with a national pharmacy vendor?
2. The emergence of service lines has substantially changed the accountability of CSS personnel. Many professionals have dual reporting—to the service line and to the CSS (e.g., respiratory therapists assigned to a cardiovascular service line). How should the organization resolve the following issues?
• How the HCO establishes functional protocols for the CSS services • When the CSS associate feels a specific patient’s order is inappropriate • When care team members are concerned about the CSS service to a
specific patient • When care team members are concerned about the CSS service in general
3. Under the dual reporting described in question 2, how should the orga- nization resolve the following issues?
• Who reviews the credentials of new CSS associates • How a CSS associate assigned to a service line can get promoted • Care team members’ concern about the service of a specific CSS associate • CSS associates’ concern that care teams are ordering services
inappropriately (i.e., the wrong services, too many, or too few) • How the CSS associate’s bonus is determined (based on the service
line team alone vs. on the goals achieved by the CSS as well)
4. A small HCO in a well-managed healthcare system can consider three ways to obtain a CSS. It can stand alone, hiring its own professionals. It can outsource, buying service from a local provider. It can affiliate, arranging for training, procedures, and supervision through its system. What’s the best solution? How should the HCO decide what to do? Who should be involved
Chapter 8: Cl in ical Suppor t Ser vices 271
in the decision? What should the system senior leadership do to support the best solutions for all the system HCOs?
5. Technology advances rapidly in many CSSs. To keep up, investments must be made in learning, training, and equipment. How does an HCO keep all its CSSs up-to-date? What are the mechanisms that identify investment opportu- nities? What is the mechanism to evaluate those opportunities?
Additional Resources
Papp, J. 2018. Quality Management in the Imaging Sciences, 6th ed. St. Louis, MO: Mosby. Rheuban, K. S., and E. A. Krupinski. 2017. Understanding Telehealth. Chicago: McGraw-
Hill Education/Medical.
Notes
1. Centers for Medicare & Medicaid Services. 2018. “Clinical Laboratory Improve- ment Amendments (CLIA).” Modified April 11. www.cms.gov/Regulations -and - Guidance/Legislation/CLIA/index.html?redirect=/clia/03_ interpretive_guide- lines_for_ laboratories.asp.
2. College of American Pathologists. 2018. “Accreditation.” Accessed March 18. www. cap.org/web/home/lab/accreditation?_afrLoop=10876906244427#%40%3F _afrLoop%3D10876906244427%26_adf.ctrl-state%3D12xqyccfne_4.
3. American Association of Blood Banks. 2018. “Standards and Accreditation.” Accessed March 18. www.aabb.org/sa/Pages/default.aspx.
4. Iezzoni, L. 2012. Risk Adjustment for Measuring Health Care Outcomes, 4th ed. Chicago: Health Administration Press.
5. Arnold, D., A. Girling, A. Stevens, and R. Lilford. 2009. “Comparison of Direct and Indirect Methods of Estimating Health State Utilities for Resource Allocation: Review and Empirical Analysis.” British Medical Journal 339 (7717): 385–88.
6. American Association of Colleges of Pharmacy. 2018. “About AACP.” Accessed March 18. www.aacp.org/about/Pages/default.aspx.
7. American Physical Therapy Association. 2018. “ATPA: American Physical Therapy Association.” Accessed March 18. www.apta.org.
8. American Occupational Therapy Association. 2018. “FAQ on OT Education and Career Planning.” Accessed March 18. www.aota.org/Education-Careers/ Considering -OT-Career/FAQs/Planning.aspx.
9. American Association of Nurse Anesthetists. 2017. “Certified Nurse Anesthetists Fact Sheet.” Updated October 10. www.aana.com/membership/become-a-crna/ crna-fact-sheet.
10. College of American Pathologists, Commission on Laboratory Accreditation. 2018. “Accreditation Checklists.” Accessed March 18. www.cap.org/web/home/lab/ accreditation /accreditation-checklists.
11. Schilling, D., A. Rosenbaum, S. Schweizer, H. Richter, and B. Rumstadt. 2009. “Sedation with Propofol for Interventional Endoscopy by Trained Nurses in High- Risk Octogenarians: A Prospective, Randomized, Controlled Study.” Endoscopy 41 (4): 295–98.
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CRITICAL ACTIONS
9 POPULATION HEALTH
1. Maintain the healthcare organization’s (HCO) core contribution to population health:
• Deliver clinical excellence in preventive, curative, and rehabilitative services.
• Provide or support excellence in long-term nursing care.
2. Improve primary care and management of chronic diseases:
• Support comprehensive ongoing ambulatory care of patients at all stages of health and disease.
• Integrate prevention, acute, and post-acute care, and chronic disease management into care across the continuum.
3. Deliver palliative and end-of-life care:
• Educate communities about the importance of advance care planning and executing advance directives.
• Educate care providers to provide patient-centered primary palliative care and offer specialty palliative care for more difficult situations.
• Provide opportunities for education and transition to hospice, when appropriate.
4. Understand the commitment to population health:
• Forecast specific needs in population health.
• Conduct strategic planning to integrate the HCO into population health activities.
• Respond to the financial implications of population health on curative and rehabilitative care.
5. Support a community-wide platform for healthy populations:
• Establish population health measures and goals.
• Identify community health risks.
• Promote community-wide prevention strategies.
• Collaborate with other agencies to reach population health goals.
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Purpose
Population health envisions sustaining all members of the community at their highest possible level of functioning, both for their individual happiness and for the collective community benefit. Achieving the vision helps individu- als aspire to the best possible quality of life. Success in population health is measured by life expectancy, the incidence of preventable disease, avoidable hospitalization, premature death, the prevalence of impairment from chronic disease, and process indicators such as immunization rates, substance abuse, safety, and housing deficiencies.1 It helps the community as a whole with lower healthcare costs and a larger, stronger workforce. Achieving the vision involves changes in many sectors of the community, at the least education, the workplace, safety, environment, and healthcare.
The purpose of HCO participation in population health management is to
use the HCO as a vehicle to improve the health status of its community.
The conceptual model for population health is shown in exhibit 9.1. It assumes that prevention of disease and disability is cheaper than care and that costs mount as patients move to lower elements of the figure. Implementing it requires a community commitment, including many agencies in addition to the HCO.2
HCOs’ traditional contribution to population health was excel- lence in acute patient care. Many HCOs have moved to add excellence in primary care and rehabilitation. The move to population health requires a shift from an HCO focus to a community focus, and from individual patient focus to collective needs. The Affordable Care Act (ACA) embodies a strong commitment to population health. It rewards eliminating unnec- essary hospital admissions. It requires a community benefit review to retain tax exemption.3
As Medicare, Medicaid, and private health insurers work to restrain the cost of care, they are likely to increase incentives for HCOs to strengthen ambulatory care and population health. The concept has solid empirical sup- port. Several countries maintain health status superior to that in the United States, with substantially less healthcare expenditure.4 Many healthcare experts believe that more attention to health promotion, prevention, and chronic disease management will result in a healthier population with lower healthcare expenditures per capita and a higher earning capacity. 5 Many governmental, employer, and patient-oriented stakeholders see population health as the solution to mounting health insurance costs. Market and politi- cal pressure for population health is strong and likely to remain so.
An HCO commitment to population health is a major strategic shift. HCO revenue is principally for care rather than prevention. Lower healthcare
Chapter 9: Populat ion Health 275
costs for the community mean lower revenue to HCOs. Inherent conflicts of interest exist between the historic commitment to intervention and the new emphasis on prevention, most seriously in areas such as oncology, car- diovascular care, and neonatal intensive care. HCOs have many resources committed to specialized treatment, including facilities and highly trained care providers who cannot easily convert to other activities. Specialist care providers in fee-for-service practice face similar challenges. Their revenue may diminish as population health reduces patient need.
Most HCOs will balance the competing needs for many years to come. This chapter assumes that population health will eventually dominate,
Preventive, health maintenance, and reassurance needs
Primary care (ambulatory management of preventive,
acute, and chronic services)
Acute and specialty inpatient and outpatient care
Rehabilitation in hospital, home, or long-term care setting
Continuing care in home or long-term care setting
Hospice and end-of-life care
Population Health
Premise of population health:
Costs tend to rise and benefits to decline as care moves away from the healthy state. Therefore, optimal care maximizes the use of preventive, ambulatory, and palliative care.
EXHIBIT 9.1 A Conceptual
Model of
Personal
Services for
Population
Health
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reducing much acute care. It develops commitment to population health as a strategic response.
Functions
The functions that allow a traditional HCO to move stepwise into population health are shown in exhibit 9.2. The functions are applicable to each of the levels in exhibit 9.1, as well as to all those levels. The needs assessment func- tion—gaining a quantitative understanding of population health—identifies
Function Examples
Quantify population health needs Forecast need and demand for
services at all levels of exhibit 9.1 Identify intervention opportunities Identify stakeholder positions Promote healthy behavior
Developing comprehensive ambulatory care
Working with health department and others to identify important local health issues
Meeting with community groups to discuss needs and roles
Promoting smoking cessation, exercise programs, and reproductive health
Establish a population health strategy
Identify supportive stakeholders and collaborative opportunities
Form advocacy groups Establish population health perfor-
mance measures and benchmarks Arrange financing
Building stakeholder consensus around implications of expanded mission
Developing expected outcomes, financial forecasts, and revised physician-need forecasts
Publicizing population health measures, benchmarks, and best practices
Operationalize a population health strategy
Extend HCO service lines to expand non-acute services
Build collaboration with other social agencies to develop population health opportunities
Implementing specific services such as a hospice or a home care program
Analyzing alternative ownerships and business models
Promoting consensus around realistic population health goals
Improve population health continuously
Identify population health OFIs Develop collaborative approaches Build local understanding. commit-
ment, and contribution
Conducting ongoing review of population health performance
Celebrating goals attained Promoting achievements and lobbying
for change
Note: OFI = opportunity for improvement.
EXHIBIT 9.2 Functions That
Implement
a Population
Health Mission
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an agenda of prevention-oriented response opportunities and specific fore- casts that guide planning for acute care services at risk.
Quantify Population Health Needs This function develops a quantitative understanding of community health needs. It has three subfunctions:
1. Forecast demand for specific services at each level of exhibit 9.1, using the epidemiologic planning model (see chapter 3)
2. Identify current providers in the community 3. Identify benchmarks and best practices to prioritize opportunities for
improvement (OFIs)
The three components collectively create a community needs assessment. They are essential to managing a community-wide collaboration and to man- aging the impact of improved prevention on existing acute care services.
Mercyhealth, serving Janesville, Wisconsin, has prepared a 60-slide community needs assessment and a multipage action plan for each of the three counties it serves. It has supplemented public sources with county popula- tion surveys and focus groups, allowing it to identify perceived needs as well as actual use of services. The assessments are designed for public consump- tion. They address purpose, data collection methods, demographics, gen- eral health status, behavioral risk factors, maternal and child health, mental health, and health resource availability. The action plans identify objective, strategies, measure of success, timeline, and partners. The plan for Janes- ville and Walworth County is particularly thoroughly developed, following the Community Health Improvement Plan and Process required of county health departments in Wisconsin. A countywide steering committee uses multiple work groups to establish the action plan.6
Forecasting Need and Demand The epidemiologic planning model forecasts demand for specific services based on population characteristics. The initial ceteris paribus (“all other things being equal”) forecasts are independent for each service. In reality, the services are interrelated. The incidence of diseases and conditions, including many relating to mental illnesses, can be reduced or managed by community health programs. Components of the model also forecast numbers and char- acteristics of disease-free people by preventable risk factors, such as obesity or child safety. Services that prevent or reduce disease and disability are available for many different conditions.
Community needs assessment A process for identifying and quantifying op- portunities for improvement in a community.
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Conditions can be grouped in various ways to facilitate planning deci- sions. The Centers for Disease Control and Prevention (CDC) Community Preventive Services Task Force has identified 17 major prevention and health maintenance topics and has listed and evaluated more than 200 interven- tions.7 Exhibit 9.3 shows groupings according to the level of prevention, the populations served, and the service provided. These groupings are important in building community support, adjusting forecasts, and designing responses.
Prevention Level Examples of Risks
Examples of Prevention Activity
Primary: Maintenance of health
Obesity Diet and exercise management
Environmental hazards Lead and asbestos removal Childproofing Community control of
environmental hazards
Smoking and substance abuse
Alcohol use laws Smoking cessation
Primary: Prevention of specific disease
Infectious diseases Immunization, infection control
Trauma Seatbelts, helmets, alcohol man- agement, domestic violence prevention
Prematurity and birth defects
Prenatal care
Ischemic heart disease and stroke
Antiplatelets, anticoagulants
Secondary: Early-stage identification and control of disease
Cancer Screening and early treatment
Diabetes Screening and diet management
Developmental defects Drug and lifestyle management, remedial childcare
Hypertension Screening and blood pressure management
Tertiary: Reduction of disability and disease impact
Post-acute cardiovas- cular or stroke care, arthritis, trauma
Drug and lifestyle management Rehabilitation Home care and telemedicine
EXHIBIT 9.3 Disease and
Prevention
Factors, by
Prevention Level,
Population at
Risk, and Service
Program
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Population at Risk Examples of Risks
Examples of Prevention Activity
High school students
Safe driving Driver training
Substance abuse Alcohol law enforcement
Sexual and reproductive activity
Classroom education, counseling services
Young families Family planning, child safety, domestic abuse prevention, health maintenance, disease screening
Maternal and reproductive health services, counseling, exercise programs, well-baby services
Elderly Functional losses, chronic diseases, terminal illness
Home safety, rehabilitation pro- grams, disease management, palliative care
Service Program Examples of Risks Examples of Prevention Site
Primary care Acute disease, chronic disease, early detection, maternal and child health
Primary care office, industrial clinic, school clinic, retail store
Post-acute recovery
Postoperative rehabilitation
Hospital, rehabilitation center, nursing home
Continuing care
Diminished functional status, advanced disease
Home care program, nursing home, palliative care, hospice
EXHIBIT 9.3 Disease and
Prevention
Factors, by
Prevention Level,
Population
at Risk, and
Service Program
(continued)
Prevention is a major factor in prioritizing opportunities. Primary pre- vention is usually the most cost-effective, not only because the interventions (primarily vaccines and behavioral education) are relatively low cost but also because the diseases prevented are often high cost and curtail life. Second- ary prevention is more problematic. Screening for existing disease has been a popular hospital activity, but its cost-effectiveness depends on keeping the cost low, including the cost of all corrective care. All positive results must be pursued, but many of these are false, wasting expensive resources. The key to cost-effectiveness usually lies in targeting high-risk groups, where false positives are less frequent.8 Tertiary prevention—the management of chronic illness and disability—must focus on a specific disease group, but it can be cost-effective when the risks of death and disability are high.9
Population served is useful in program design—programs can be tai- lored by age and interest group and promoted through appropriate vehicles, as in high school–based programs for adolescents and primary care office
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programs for chronic disease populations or women in childbearing years. The ability to focus both the marketing and care delivery is a major factor in program design. Advertising and care delivered to people who do not need it are a waste.
The service provided, or kind of intervention, identifies existing sources of care and potential collaborators. Existing provider organiza- tions can contribute important specialized knowledge and market contacts. Both are useful, making collaboration the strategy of choice in designing responses.
In addition to their role in planning interventions, quantitative fore- casts are used to set goals and evaluate results. Success of many primary prevention programs is measured by reduction in incidence. Prevalence and stage of detection are used to evaluate secondary prevention. Prevalence of patients by functional status is used to evaluate tertiary prevention. The forecasts are useful in promoting community awareness and understanding. The Center for Health Care Strategies, a group dedicated to improving the health of chronically ill and otherwise disadvantaged people, offers a web- based return-on-investment model that allows comparison of alternative strategies.10
Identifying Intervention Opportunities The second step in developing the needs assessment is to identify the cur- rent providers. Few community health needs are totally ignored. Much more commonly, an existing organization offers some service. Preventive services are offered by HCOs, schools, public health departments, and faith organizations. Primary care is offered by schools, workplaces, retailers, phy- sicians’ offices, and community clinics. Community clinics, many of which are federally qualified health centers, now serve nearly 20 million Ameri- cans. Most of the clinic’s clientele are disadvantaged, or as the National Association of Community Health Centers (NACHC) puts it, “medically disenfranchised.” The 1,400 NACHC clinics have documented improved quality and effectiveness of care.11 Rehabilitation is offered through hos- pitals, rehabilitation centers, home care programs, and nursing homes. Continuing and palliative care are offered through home care, hospice, and nursing home programs. As the examples in exhibit 9.3 suggest, these ser- vices vary greatly by ownership, audience, approach, and resources. Often, they vary as well in quality and effectiveness. Comparing current services to prevalence and demand identifies unmet needs and opportunities for improved service. The forecasts of need and an inventory of current services generate a list of OFIs that can be publicized, prioritized, and discussed by various stakeholders.
The inventory must go beyond a simple tally of available services, care- fully addressing the issues itemized below. Deliberate efforts must be made
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to ensure that programs are meeting community demand and standards for quality, effectiveness, patient satisfaction, and efficiency. Special attention is often necessary for disadvantaged populations. Inventories will have the most high-quality results when HCOs attend to the following details.
1. The need for services can be identified from balance of available supply and forecast demand. Surveys of patient volume and waiting times are useful. Best practices from similar communities can be used to identify OFIs. Best practice is the overall structure contributing most to a comprehensive measure such as disability or cost per capita. Careful, comprehensive analysis is necessary. Current demand is often distorted by the array of available sources.
2. The criteria for excellence—safe, effective, patient-centered, timely, efficient, and equitable care—apply to all levels. The Centers for Medicare & Medicaid Services (CMS) offers quality assessment systems and data for nursing homes, home health agencies, hospitals, and kidney dialysis facilities.12 Data are limited to Medicare and Medicaid patients, but these are large proportions of the total patient load. Hospitals can contribute additional measures. Various standards for primary prevention activity are available, and the CDC Community Guide links to them.13 Hospices are also accredited by The Joint Commission, although no set of specific measures are in place. In those areas where measurement systems exist, the goal should be to make them public and use them for continuous improvement. In other areas, evidence of commitment to quality, such as maintenance of accreditation standards, should be recognized.
3. Economy and efficiency are critical. The non-acute programs in exhibit 9.1 are generally underfunded. An economy-oriented business approach—careful program design, selective location, and continuous improvement of cost per case—is essential. This approach goes beyond efficiency. It continuously tests customer satisfaction against economy, seeking to eliminate all costs not essential to sustaining market share. It is substantially different from approaches to acute care, which has much richer financial support.
4. Effectiveness criteria are also essential. The community health concept is cost-effective only if less costly levels of care substitute for higher- cost interventions. Cost-effectiveness is lost when services are provided to persons who did not need them. For example, a home care program can be used to avoid costly days of acute hospital use, but it can also be used to substitute for less costly self-care and family support.14 To meet cost-effectiveness criteria, the program must encourage the former and strongly discourage the latter. This problem is universal in community care.
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A substantial consensus on how to implement cost-effective programs is now available on many elements of community health. Prevention criteria are provided by the CDC Community Guide. The CDC’s Task Force on Community Preventive Services categorizes more than 200 preventive inter- ventions as “Recommended,” “Insufficient Evidence,” and “Not Recom- mended.” The two categories of recommendation are further divided into “Strong Evidence” and “Sufficient Evidence.”15 The National Guideline Clearinghouse contains criteria for many of the remaining levels of exhibit 9.1. Primary care guidelines are available for specific risks and age catego- ries. Acute and rehabilitation criteria are offered by disease and condition. Disease-specific guidelines are also offered for home and palliative care (see www.guideline.gov). The CMS Program for All-Inclusive Care of the Elderly program OASIS-B measures issues of effectiveness of continuing care that can be a sign of opportunities to manage continuing care.16
Identifying Stakeholder Positions Most customer stakeholders have highly focused needs, seeking a solution to a specific problem that afflicts them or their families. Employers are seek- ing healthier workers and lower health insurance costs. Many providers offer similarly focused service that contributes to a single level of exhibit 9.1. Building collaboration between these groups is frequently the key to com- munity health success. Collaboration can open contacts to important target markets, pool valuable knowledge and experience in specialized procedures, and share resources for a larger total and more efficient scale of operations. The list of potential collaborators is long. In most communities it includes the following:
• Government agencies in public health, welfare, education, environment, and justice. These agencies are frequently in touch with high-risk and disadvantaged populations.
• Employers. Many have a financial stake in success through reduced insurance premiums.
• Faith-based organizations. These organizations are a source of volunteers and can be effective at marketing community health programs.
• Civic and cultural organizations. These include United Way, homeless shelters, and the YMCA.
• Other HCOs. These include competitors in acute care and potential competitors in other levels of care, at both for-profit and not-for-profit organizations.
Extensive listening is the foundation of collaborative activity. High- performing HCOs pursue an ongoing listening and relationship-building
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strategy that supports collaborative community health. Their listening pro- grams have at least six elements:
1. Routine surveillance of public information and reports from interested groups and organizations. Virtually all government information is public. Many nongovernmental organizations involved in health promotion maintain extensive public information in print and on the web.
2. Personal contacts. Leaders of important organizations often confer informally to forward the population health goals.
3. Monitoring of consumer interests. HCOs can keep track through focus groups and surveys.
4. Creation or support of community-wide groups sharing health goals. These range from groups recognized and financially supported by corporations or government agencies to ad hoc and informal groups addressing specific topics of interest. HCOs often subsidize these efforts with in-kind support, such as meeting space and information sharing. They participate in funding recognized entities.
5. Establishment and maintenance of contractual relationships. Hospitals have ongoing contractual relationships with primary care physicians, nursing homes, rehabilitation services, home care agencies, and hospices. The HCO’s acute services are frequently essential to the success of these programs. These relationships can be the foundation for expanded and improved activities and can include substantial HCO capital and operating investment.
6. Service on other boards and committees by HCO managers and trustees and recognition in HCO board membership or on planning committees and PITs with relevant charges. HCO associates are often willing to volunteer similar services to other community health organizations.
Advocacy and Promotion An HCO with a population health mission should join and encourage the voices promoting health, assisting in publicizing needs, promoting individual and collective response, and devising solutions. A communications plan for a community includes the following four main elements:17
1. Clear definitions of services and terminology 2. A summary of the needs assessment, available on the web and
promoted through a collaborative network, including local media 3. Efforts to reach specialized customer stakeholder interests segmented
by age, gender, disease risk, and expressed interest through the following:
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• Reports, factual summaries, and reference materials • Speaker bureaus and planned communication to customer
stakeholder segments • Advertising and other promotion to increase customer awareness of
individual services
4. Efforts to reach provider stakeholders with reliable information about demand, need, existing programs, and proposed programs
The sites that provide community health activities are all valuable avenues for communication. People who enter them often have specific needs and typically have a receptive bias toward community health concepts. The contact opens an opportunity to expand their understanding. Thus, the pro- motion strategy, like the implementation strategy, emphasizes collaboration.
The actions of HCOs are important reinforcement for population health concepts. For example, HCOs do not allow smoking on-site. They focus on safety for patients, associates, and guests. They provide and pro- mote cost-effective prevention for patients and families. They provide exer- cise opportunities, healthy meals, and counseling to their associates. They explicitly recognize patient autonomy, and they encourage the use of advance directives and designated patient advocates. They tailor their benefit pro- grams to promote prevention and meet important health needs.
Establish a Population Health Strategy As indicated in chapters 2 and 3, any HCO activity must have a leadership structure, an explicit contribution to the larger mission, performance mea- sures, financing, and a set of quantified goals. Activities collaborating with other agencies are no exception. The necessary elements are established in a negotiated contract. Examples exist in acute care—for example, in joint venture service lines. HCOs in a variety of settings have applied the concept in collaborations for population health.18
Community Advocacy Groups Potential partners exist for most specific community health activities. One could envision a network of two-party contracts, but the list of potential collaborators is long, and effective solutions for many targets require several parties. Successful comprehensive community health strategies use a general community advocacy group to create a leadership structure. They begin early to develop an advocacy group broadly representative of the various stakeholders. The group is designed to hear diverse interests, build a shared consensus, and create a network of communication and engagement. Col- laboration usually begins with informal visits between individuals, expands to discussion sessions, and in many communities evolves to a formally appointed commission or board with a regular agenda and established relationships with
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major stakeholders. The initial discussions of stakeholder positions under- taken as part of the needs assessment provide the starting point. The needs assessment provides the focus.
Many communities already have advocacy groups. Several states have established programs to encourage such groups. The federally sponsored Healthy People Consortium has 511 participating members, including state and local governments, HCOs, specialized treatment organizations, and environmental agencies.19 Health equity is one of the goals of the National Civic League. It provides publications, definitions of measures, and other resources to support the development of advocacy groups (see www.national civicleague.org). The Kansas University Work Group for Community Health and Development offers the multipart Community Tool Box, a “free, online resource for those working to build healthier communities and bring about social change.” It has also “developed a training curriculum . . . that outlines 16 competencies for promoting community health.”20
Once formed, the advocacy group operates as a governing board would to build consensus on strategy. It assumes independent authority and elects its leadership.21 It facilitates contracts between various stakeholders to implement the strategy.22 An HCO that provides high-quality acute care can add materially to an existing community group. Its role in acute care makes it central to many customer markets. New mothers, patients with chronic diseases, patients recovering from acute care, and terminal patients are important examples. The HCO also has substantial resources—including strategic planning and needs assessment, facilities, and expertise—that can be contributed to a collective effort.
Exhibit 9.4 describes the goals of a comprehensive community health program located in Kearney, Nebraska, with more than 20 years of history. Initiated by the local HCO, a CHI Health member, Buffalo County Com- munity Partners has developed a 23-member governing board, many active committees, and coalitions focusing on various goals. Five annual reports track measured progress toward each of the strategic directions. Over its 20-year history, Community Partners has had a substantial impact on the health of Buffalo County.
The most effective advocacy groups become community resources that are independent of the HCO or any other specific member. The intent of the collaboration is generally stated as a purpose in two-party relation- ships and as a mission in more comprehensive ones. The terminology helps illustrate the independence of the community advocacy group. The purposes they adopt can go well beyond personal health services to more fundamental needs in environment, employment, or education. Health may be important on the list of needs, but far from first.
An HCO’s participation in an advocacy group recognizes a con- cordance between its mission and the group’s. Important, sensitive issues are involved in the decision to participate, including priorities between
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competing elements of a comprehensive community health program and commitments in acute care. The HCO’s mission statement must go beyond excellence in acute care. Wording of mission, such as that of North Missis- sippi Medical Center—“to continuously improve the health of the people of our region”—is an unequivocal commitment that does not interfere with the HCO’s ability to deliver quality acute care. Mercyhealth’s “provide excep- tional healthcare services resulting in healing in the broadest sense” balances traditional with expanded commitment.24
The Buffalo County 2020 Vision is a comprehensive plan to build a healthier Buffalo County. Each of the five strategic directions includes measurable well-being indicators from the community that help guide the 2020 Vision and measure its success.
Elevate
Health Issues in
Buffalo County
Engage
Buffalo County
Residents in Accountability
to Health
Empower
Residents in Creating Positive Change in Their
Communities
Evaluate
Progress Toward
Building A Healthier
Buffalo County
High Impact Prevention Services
Well-Being Indicators
➤ Underage and Binge Drinking
➤ Tobacco and Marijuana Use
➤ Teen Sexual Activity
➤ Alzheimer’s Disease and Dementia
Eliminate Health Disparities
Well-Being Indicators
➤ Health Insurance
➤ Barriers to Health Care
➤ Healthy Days
Active Living and Healthy Eating
Well-Being Indicators
➤ Physical Activity
➤ Balanced Nutrition
➤ BMI Reported by Adults and Youth
Injury-Free Living
Well-Being Indicators
➤ Seat Belt Use
➤ Child Abuse
➤ Domestic Violence
➤ Youth Suicide and Thoughts of Suicide
Healthy Homes and Sustainable
Communities
Well-Being Indicators
➤ Financial Responsibility
➤ Home Ownership
➤ Quality Rent- als Available
By implementing policies in the following areas, everyone from all corners of Buffalo County, can work together to improve the quality of life of those who
live and work in these communities.
5 Strategic Directions for the 2020 Vision:
Elevate. Engage. Empower. Evaluate.
EXHIBIT 9.4 Buffalo County
Community
Partners, 2020
Vision
Source: Buffalo County Community Partners (2018).23
Note: BMI = body mass index.
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The goal is to gain understanding and acceptance of the broader mis- sion from all stakeholders and commitment from as many as possible. Sup- port for a community health mission is obtained through the usual visioning exercise, which deliberately asks hundreds of stakeholders to focus on the group’s most basic purposes. The stakeholders are gathered in groups and the case for community health presented. The case is not complex. It sounds something like this: “A healthy community is happier and more productive because the individuals in it are healthier and more productive. There is a lot more to health than simply acute, hospital-oriented care. In general, our community needs to be sure we prevent disease whenever possible, treat peo- ple with disease as effectively and economically as possible, and help people approaching the end of life do so in comfort, with grace, and, if possible, in the presence of their loved ones.”
This case has broad appeal. It reflects the professional commitment of most healing professions, the values of most faiths, and what most of us instinctively feel. As stakeholders contemplate the mission, several specific and practical questions are likely to arise, and the HCO leaders should be prepared to discuss them:
• Will investments in population health be at the expense of acute care needs? – Capital decisions for the HCO will continue to be made by
its governing board in the overall interests of the community, recognizing both the importance of existing relationships and the HCO’s unique role in acute care.
– The HCO’s capital review process is designed to give all stakeholders an opportunity to comment and to identify the most valuable investments in light of the mission.
– The board intends to keep our community competitive with others in all levels of care. The board will support acute care investments that are scientifically sound, efficient in settings like ours, and generally accepted by health insurers.
– Our sound financial position allows us to do this, and the board is committed to maintaining that soundness.
The answer places the question in context, clarifies both the authority and the process of decision-making, and states the philosophic position of the board. It ensures that, despite the importance of community health, acute care will not be neglected.
This question often comes from practitioners of high-tech specialties, whose practice income is supported by substantial free capital, and from trained personnel in the HCO. The answer should point out relevant recent investments in acute care and note that the community has, in fact, remained competitive with other communities.
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It should also reaffirm the HCO’s commitment to using its clinical staff planning function so that every physician has an opportunity to earn a competitive income.
• Should our HCO serve the needy or the insured, paying customer? Although it is rarely so boldly phrased, the issue is the extent
to which the HCO is appropriately a vehicle for overcoming society’s more general problems of poverty and disadvantaged populations. The HCO’s not-for-profit status is justified in part by its contribution to the solution to these problems. The answer for most HCOs is that (1) the HCO already serves the needy, providing uninsured patients with acute care; (2) the governing board will continue to invest only to the extent funding will not endanger its acute care operations; and (3) investment in non-acute services will have a favorable impact on health insurance premiums.
To be convincing, the HCO’s answers to these questions must be backed by a record of trust and success. The record of the leading hospitals shows that the stakeholder reservations reflected in the questions can be overcome.
The population health activity should have its own strategic scorecard, with benchmarks, OFIs, and negotiated goals. The recommended measures are outlined in exhibit 9.5. The community partners will discuss and possibly modify them. Developing an initial list helps clarify the purpose of the col- laborative effort. It also establishes the concepts of continuous improvement that produce excellence. While the details are negotiable, the concepts may not be. The strategic measures provide central focus to sustain a new and possibly challenging collective. Similarly, each subunit of the collaborative activities should have measures and negotiate improvement goals. Com- monly used measures are shown in exhibit 9.5.
Financing Even the largest HCOs cannot ignore the market realities of medical care, including the emphasis on high-tech acute intervention built into both pri- vate and government insurance programs. On the other hand, many believe that the high-tech emphasis is unstable; the cost cannot be allowed to grow as it has in the past. Population health is a major vehicle for controlling long- term costs. The HCO’s balance between these competing visions must be maintained by governing board policies. The policies that have proven effec- tive are as follows:
• Every service line must be planned and operated in a way that pursues continuous improvement to minimize cost and maximize all revenue consistent with its mission, vision, and values. This means that each
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service line must justify its contribution and that no individual receives care beyond what is effective.
• Capital investments and deficit coverage can be viewed as community dividends or benefits and funded at the discretion of the HCO board using three broad criteria:
1. All funded investments should have a potential benefit that reasonably exceeds the investment required, even though the benefit may be difficult to measure.
2. The HCO’s total investment cannot exceed prudent levels indicated in the long-range financial plan.
EXHIBIT 9.5 Examples of Operational Measures for Population Health Programs
Program Need/Demand Productivity Quality and Effectiveness
Well-baby care
Incidence rates from birth data and forecasts
Demand from existing programs
Cost per service (e.g., cost of standard vaccine packages)
Cost per visit Cost per infant
Percentage immunized Incidence of preventable condition
reported (e.g., infectious disease, trauma, violence)
Incidence of manageable condition reported (e.g., hearing, visual, or functional limitation)
Asthma management
Incidence or prevalence from epidemiologic model or survey
Demand from existing programs
Cost per visit Cost per
patient-year Cost per capita
Incidence of asthma-related disability from surveys
Clinical data on asthmatic pulmonary function (outcomes)
Clinical data on asthmatic treatment (process)
Home care Waiting lists or unmet demand
Comparison with similar communities
Demand from existing programs
Cost per visit Cost per
patient-month Cost per capita
Patient, family, and physician satisfaction
Adverse events CMS OASIS C measures
Hospice Waiting lists or unmet demand
Comparison to similar communities
Demand from existing programs
Cost per visit Cost per
patient-month Cost per capita
Patient, family, and physician satisfaction
Hospice referrals as percentage of total mortality or disease-specific mortality
Hospice-specific quality measures The Dartmouth Atlas of Health Care
End of Life Care
Sources: Centers for Medicare & Medicaid Services (2018);25 Kirby, Keeffe, and Nicols (2007);26 and The Dartmouth Atlas
of Health Care (2018).27
Note: All programs will measure associate satisfaction and client satisfaction by survey. Program accounting records will
measure resource consumption and counts of volumes, scheduling delays, and percentage of capacity used.
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3. Acute care needs that keep the community competitive with others must take priority because they are the HCO’s core mission. (Note that the investment is justified at the community level; investment to compete with other HCOs does not fulfill a population health mission.)
These criteria encourage comparative consideration of all needs, including population health. They provide a cost–benefit criterion for prioritizing opportunities and protect long-term stability.
Promoting Population Health Opportunities The final step in a community health strategy is the systematic use of the existing marketplace to expand the maximal use of appropriate services. This step includes assisting the improvement of existing organizations and using collaborative opportunities to increase market penetration. Deliberate promotion—social marketing—is essential for many community health activi- ties.28 Many groups with targeted missions have attracted the people most interested in their mission—the core ready-to-buy market. These customers form an invaluable nucleus for promotion. Acute care services should support these groups, using protocols that limit unnecessary services and encourage appropriate referral.
While people immediately relate “doctor” and “hospital” to “health,” none of the other personal health services has the same level of recall. Some of them, particularly palliative care and some preventive activities, carry nega- tive impressions that education and marketing must overcome. Coalitions with specific interest groups are valuable and completely consistent with social marketing concepts.
Competing organizations can also be influenced by a well-designed strategy. They can be drawn into joint ventures or encouraged by market pressures to expand or improve services. A large HCO controls a substantial market share that it can direct to selected providers on the basis of quality and cooperation. (Potential antitrust implications exist in any action taken directly toward competitors. Although enforcement in comprehensive community care would be unusual, consultation with legal counsel is appropriate.)
Operationalize a Population Health Strategy Once established, the strategy must be implemented. Teams must be estab- lished, trained, supported, and held accountable, a process no different from acute healthcare. Stakeholder support must be maintained and, if pos- sible, increased. Finally, coalitions—whether with individual organizations or through an advocacy group—must be maintained and encouraged to be effective.
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Supporting Care-Providing Teams The support functions that community health units must perform are essen- tially the same as those required of acute service lines and nursing units. The differences between a hospice, a primary care clinic, a health promotion program for teenagers, and an intensive care unit (ICU) lie in the clinical details, not the organization. Clinical, logistic, and strategic support must be provided for community health teams as it is for more traditional ones. The organizational foundations for excellence—transformational management, performance measurement, evidence-based management, and evidence- based care—are the same. They must be put in place and supported by edu- cation, repetition, and reward. High-performing HCOs are well equipped to fill these needs, using the same approaches that support acute care teams.
Building Stakeholder Support Identifying collective opportunities and building networks of civic engage- ment are ongoing challenges. Communities include multiple diverse groups that are, by nature, advocatory and protectionist, and frequently confronta- tional. The path to building networks lies in mechanisms of civic engagement and social connectedness that facilitate coordination and cooperation for mutual benefit.29 The elements used successfully in many communities are similar to those used in high-performing healthcare: extensive communica- tion and honest listening, respect for all participants, evidence of need and opportunity, continuous improvement with achievable goals and progress toward benchmarks. Success is achieved not only by personal leadership but also by identifying and supporting like-thinking partners. Stakeholders become advocates when they are assured that their concerns are met and that the predicted benefits are realistic.
For an HCO that is pursuing community health at any level, mainte- nance of the network of collaborators is an important activity. The advocacy group and individual contracts are the mechanism for identifying, ranking, and pursuing OFIs and for dispute resolution. Each contract should be assigned to an individual manager to monitor, including listening to and negotiating issues that arise. This process is no different from monitoring other contracts, such as supplies or joint ventures.
Supporting the Advocacy Group A successful community advocacy group formalizes the stakeholder participa- tion. It pursues five functions that resemble those of the governing board:
1. Establishing the community’s health mission, including the scope and roles of contributing groups
2. Maintaining a supportive relationship that allows contributing organizations to identify and achieve specific community health goals
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3. Creating an overall strategy and maintaining financial support 4. Establishing performance measures supporting quality of care,
responding to individual patient needs, and monitoring general measures of the community health
5. Supporting continuous improvement of population health
Community coalitions lack the authority of governing boards, but they can bring stakeholders together, identify collaborative opportunities, encourage contracts between agencies, and draw attention to global mea- sures of community health. The Centers for Disease Control and Preven- tion has a number of informational documents for community health (www .cdc .gov/nccdphp/dch/resources/index.htm) and may have some funding (www.cdc.gov/nccdphp/dch/community-health-funding/index.htm).30
The advocacy group will have an HCO representative who assumes a leadership role with regard to community health. A high-performing HCO has several resources to contribute toward these functions. In addition to a cash contribution, it can offer seasoned governing board members and provide staff support to prepare agendas and manage meetings. It can share the rules and culture that make its own board successful. It can offer its training programs for coalition staff, and it can contribute the time of its senior executives.
Improve Continuously The goals of population health are important, but the paths to success are not well developed. Starting with modest expectations, celebrating their achieve- ment, and moving to improve using benchmarks and best practice is wise. The cycle of measurement, OFI identification, negotiated goal setting, pro- cess improvement, and celebration of achievement should be built into the population health strategy. All the operating units should conduct quarterly assessments of progress, identifying and addressing OFIs and preparing for enhanced goals in the coming year. If a community-wide population health group exists, the group engages in annual self-assessment and improvement just as the governing board does. The individuals responsible for maintaining the HCO’s relationship and the continued success of collaborative ventures also review achievement quarterly, make sure goals are set realistically and achieved, and work with community partners to identify OFIs, best practices, and achievable improvements.
People
Population health teams may be made up of direct care providers, such as home health, hospice, or long-term care associates. They may also be
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community health advocates, school nurses, occupational health providers, or personal health aides. Population health care–providing teams must be recruited, trained, and supported like acute care teams. Because of limited financing that population health has received, non-acute services of all kinds have operated at lower wage levels than acute care has. Volunteers and family members play an important role.
Providing care that uses less-skilled individuals requires systematic and careful organizational support. High-performing community health sites implement the following five elements:31
1. Clear, frequently communicated mission and vision 2. Carefully designed work processes and protocols, providing specific
advice on when assistance should be sought and how it can be obtained
3. Training for specific duties in a limited situation, such as a dialysis unit or a nursing home, including indicators of complications and resources to assist when complications occur
4. Measured performance, negotiated goals, celebration, and rewards 5. Frequent leadership contact, with emphasis on encouragement
This approach is little different from that used in high-performing acute care organizations. Applied with care and diligence, it allows patients, lower-wage employees, volunteers, and family members to support effective care and reduce costs. It has been applied in a variety of community health settings. The following are examples:
• Schoolteachers can be trained to provide guidance on healthy lifestyles, including classroom instruction, individual counseling, and personal modeling of good health habits.32
• Volunteers in the faith community can make important contributions. Parish nurses promote healthy behavior and undertake screenings.33 Stephen Ministries, which use lay volunteers to supplement pastoral care, and similar activities can support individuals and families in times of stress.34
• Volunteers deliver meals-on-wheels,35 provide transportation, and assist in all levels of care delivery through palliative care and bereavement support.36
• Low-wage workers can be trained to undertake important clinical responsibilities in primary and continuing care settings.37
• Family members can be trained to manage patients with severe disabilities.38
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Measures
Operational Each community health activity should have an operational scorecard, with measures of outcomes, customer and associate satisfaction, and inputs. Exhibit 9.5 shows examples for typical specific activities. Cost per case and per capita should be monitored and benchmarked as a check on program effectiveness. As in both the Buffalo County and Mercyhealth examples, the teams use history, competition, benchmarks, and values to identify OFIs, set goals, and improve performance.
Many of these measures are obtained from standard accounting prac- tices, but with multiple agencies involved, data collection becomes complex. Careful definitions and specific agreements are necessary. Year-over-year comparisons are more reliable than benchmarking and comparisons across multiple sites, because hidden differences may distort the cross-sectional comparisons. The CDC has a program, Developing an Evidence-Based Guide to Community Preventive Services, that reports comparative data.39
The scorecard for preventive and chronic care teams is the same as acute care teams in measures of output, cost, patient satisfaction, and asso- ciate needs. Patient need and demand should be measured by population subgroup. For example, grouping patients by categories such as age, geo- graphic area, and cultural characteristics not only identifies unmet need but also indicates a starting point for correction through schools, workplaces, and culturally targeted media and organizations. Statistics for incidence or prevalence of specific conditions such as overweight, arrests for driving while intoxicated, pregnancy, and asthma can be drawn from national or regional surveys and databases.
Estimates of home care, hospice, and nursing home care need present unusual problems. The need for these services is influenced not only by dis- ease incidence but also by income, cultural attitudes, and availability of family support. It is also affected by preventive programs. Models for estimating need are available in the literature, but they require household or acute care patient surveys that are expensive to implement.40 Occupancy levels, waiting times, and comparisons to similar communities are used as substitutes.
Waiting times are accepted as indicators of unmet demand for all healthcare services. Specific definitions, such as “the third available routine visit date,” are used to standardize the measures. Waiting list counts are gen- erally less reliable. They frequently accumulate patients who are not actually demanding service because their condition has changed or their initial entry was opportunistic.41
Strategic Strategic measures should monitor the overall contribution of population health programs. A healthy community is one where people lead long,
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productive lives with minimal illness. The concept is commonly implemented by measuring the opposites—death, disease, and activity limitation. The model for the strategic evaluation is provided by Healthy People 2030.42 Population need data must be constructed from CDC health statistics, CMS Medicare hospitalization statistics, data from local sources, and ad hoc surveys.
Some states augment the federal data with all hospital admissions and various other health indicators, such as school vaccination records. A uniform crime-reporting system provides data on domestic violence, drug usage, and alcohol-related accidents. Epidemiologic planning models use the public data, often supplementing it with private sources, such as insurance claims, to infer community-level values. The Dartmouth Atlas provides data on hospi- talizations and per capita expenditures based on Medicare reports for hospital service areas and referral areas. It is updated annually, with a three-year lag.43 Its measure of Medicare expenditures in the last two years of life is particu- larly useful as an indicator of chronic disease care effectiveness. Exhibit 9.6 provides a template for available strategic measures. The strategic measures of population health can all be calculated for small civil divisions, such as census tract, postal code area, or township, and aggregated to typical HCO market communities. They can all be benchmarked and trended over time, providing a foundation for a community health needs assessment and an annual review.
In addition to these data, strategic measures of community health should summarize the effort of all the various agencies and organizations involved. If these organizations use continuous improvement, they will have operational measures, benchmarks, and OFIs. They will also have conven- tional financial reports and stakeholder satisfaction data that can support summary statements and OFIs. This data set provides community leaders, including the advocacy group, with a platform of information to set strategy.
Managerial Leadership
While community action on population health goes well beyond the care activities in exhibit 9.1, HCO managers’ professional training gives them a knowledge foundation in the scope and value of community health and a set of managerial skills that have led to high performance in acute care. HCO managers know how to implement transformational evidence-based manage- ment. That approach is the documented best practice for acute care, and it appears to be equally powerful across the spectrum of community care. HCO managers should address five recurring issues: (1) promote the issues and opportunities of population health, (2) expand and improve primary care and the management of chronic diseases, (3) extend the transformational culture and evidence-based management to population health activities, (4) maintain the network of civic engagement, and (5) manage the impact of population health on acute care services.
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Promote and Teach Population Health Four core issues reflected in exhibit 9.1 are not well understood by Ameri- cans at large:
1. Prevention is in itself a multicomponent activity. Primary prevention involves environmental management, immunization, and behavioral elements. It has the highest payoff. Even though environmental management (i.e., air, water, and food supply; contaminants such as
Dimension Population Health Examples
Strategic measures of population health
Measures from government health statistics Mortality, by cause, with emphasis on preventable
death Natality, with emphasis on neonatal mortality,
prematurity, and congenital disorder Infectious disease rates Measures from Medicare and Medicaid Per capita hospitalizations by diagnostic group Incidence of chronic disease Cost of hospitalization Cost of medical care in last two years of life Measures from government agencies Domestic violence Alcohol-related events Health and immunization of schoolchildren Measures from community surveys Health insurance premiums Health insurance coverage Preventable emergency care Premorbid and treatable conditions: obesity,
hypertension, depression Unfilled demand for health services
Financial performance
Financial structure of advocacy group Grants and gifts for population health received by
advocacy group and member organizations Financial performance of independent, affiliated, and
wholly owned organizations supporting population health
Operations of caregiving units
Summary of OFIs from operations at each level of popu- lation health, drawn from their operational measures
Market performance and stakeholder satisfaction
Measures of access for disadvantaged groups Measures of acute care readmission rates Measures of cultural competence in healthcare Customer and provider stakeholder satisfaction
Note: OFI = opportunity for improvement.
EXHIBIT 9.6 Population
Health Strategic
Scorecard
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lead and mold) requires expensive collaborative action, it eliminates disease for many people. Thus, primary prevention generally gives the best return on investment.
2. Many Americans suffer from chronic diseases such as diabetes, high blood pressure, asthma, and mental illness. While these diseases cannot be cured, they can be managed. Primary care provides ongoing support to minimize the costs of chronic disease. The support, which can be carried out in large part by nonphysicians, is a major contribution to community health.
3. Preventable and chronic disease is an important avenue to reducing the cost of healthcare. Although acute care HCOs provide substantial benefits to the community—health to individuals and income to HCO associates—the cost of health insurance must ultimately be weighed against other social opportunities. The keys to controlling unnecessary use of acute care are evidence-based medicine, evidence-based management, and population health.
4. The proper goal of the healthcare system at or near the end of life is to maximize quality of life and comfort for both patient and family. This goal is different from that of prolonging life, although it is not automatically inconsistent. Americans generally need to understand the difference. Population health programs should include attention to educating communities about advance care planning and the importance of advance directives. Community-based hospice and palliative care options need to be provided.
The first task of HCO managers is to understand these issues. They are not simple. They are not self-evident, and they are not widely demonstrated in the United States today. Once grasped, they force a change in perspective about population health and a new vision of what HCOs can do. As more Americans understand them, major gains can be made. The spread of these ideas will be from professionals—the concepts are entirely consistent with the ethical goals of the healing professions—to other influential people in Ameri- can communities. Employers, trustees, public officials, elected representa- tives, religious leaders, and teachers can and should master these concepts. HCO managers must teach them. They will do it by keeping the population health agenda in view as they complete their other duties, by collaborating with services other than healthcare in their communities, and by opportuni- ties for public comment.
Extend Management Concepts to Population Health Care Teams The activities of care teams in prevention, primary care, rehabilitation, con- tinuing care, and palliative care are all different, and so are the activities of labor and delivery teams, emergency teams, surgery teams, and ICU teams.
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These differences in clinical content do not support any fundamental differ- ences in organization and management.
The keys to high performance are the same across all of healthcare. Transformational management approaches that actively support worker needs are one key. Continuous improvement, with its requisite measurement, benchmarking, OFI identification, and goal setting, is the second. Both are built around evidence. The science that identifies and develops high technol- ogy also provides the facts to support its appropriate use. As a growing num- ber of successful programs indicate, the two concepts promote excellence in population health.
The HCO can create primary care, home care, palliative and hospice care, and continuing care service lines by service contracts, joint ventures, or acquisition. It can offer training services to affiliated organizations. It can encourage its leadership to serve on boards of these organizations.
Expand and Integrate Primary Care Primary care is a diverse set of clinical events, including comprehensive pre- ventive care, as well as support for minor illness and trauma. It is the most frequent contact that people have with healthcare by an order of magnitude. (Four out of five Americans visit a doctor, a clinic, or an emergency depart- ment each year; only one in sixteen stays overnight in a hospital.)44 It has many OFIs. Too many patients fail to get the treatment they need when they need it, leading to more serious illness, work loss, and more expensive care. Part of the problem is patient oriented. Lack of financial resources, lack of transportation, housing and nutritional difficulties, cultural and language differences, and the barriers imposed by disease itself make it difficult for some patients to get the care they need. Part of the problem is the diversity and independence of providers. Primary care is provided by a wide variety of practitioners in a wide variety of settings.
Adopting the patient-centered medical home concept is an important step toward rationalizing primary care. The concept, which has been around for several decades and has had different labels, is that every patient has a single care team that coordinates his ongoing care. Under the leadership of the Commonwealth Fund and the National Committee for Quality Assurance, the professional organizations for family practice, internal medicine, pediatrics, and osteopathy adopted standards and guidelines for the patient-centered medical home in 2008. The standards identify the following key characteristics:45
• Ongoing relationship with a personal physician trained in comprehensive care
• Physician-led care team • “Whole person orientation” emphasizing “care for all stages of life”
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• Coordination of care “across all elements of the complex health system”
• Emphasis on quality, safety, and evidence-based medicine • Use of the electronic medical record and knowledge management
systems for care, performance improvement, patient education, and enhanced communication
The community health centers are also committed to the patient-centered medical home. The concept is central to the accountable care organiza- tions supported by the ACA. It does not solve all problems. It is a complex vision to implement.46 Any HCO committed to the population health mis- sion should work to implement the patient-centered medical home concept. Community health centers for persons who face difficulties finding care are a proven success.
Maintain the Infrastructure for Population Health The critical organizational issue is bringing together, coordinating, and expanding a community-wide effort. The United States has not solved this problem well. A theoretical case can be made that local government should address population health; convene the advocacy group; compile strategic measures; and lead in identifying, prioritizing, and achieving OFIs. The real- ity is that local government is understaffed to meet the challenges in its more central responsibilities. Similarly, the market, although deeply invested in health, deals poorly with prevention.
When the traditional HCO steps into a role to manage population health, it is usually the largest and best-funded organization in the coalition. That gives it substantial leverage. When it has achieved high performance in its traditional areas, it has built an organizational mechanism that increases its leverage and that can be copied successfully by other service organizations. The core problem that it faces is expanding the community’s collective effort to identify and address health problems. The first need is comprehensive personal healthcare. Many HCOs are acquiring or building primary care, rehabilitation, and continuing and palliative care organizations. An alternate approach is to build coalitions for these services, strengthening other orga- nizations as providers by supporting contracts or developing joint ventures. The best combination probably depends on local factors. Beyond personal healthcare, HCOs must form multiple-agency systems like those in Buffalo County, Nebraska, and Janesville, Wisconsin. These systems will require continuing management, but as these (and other) communities have shown, they can be effective.
HCO leaders contribute by completing the four functions shown in exhibit 9.2.
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Manage the Impact of Population Health on Acute Care Services As noted, the economic forces for population health are based on substitut- ing lower-cost preventive and sustaining care for emergency visits, hospital- ization, and expensive acute care. Some providers and some HCOs will face declining incomes if population health is extensively implemented. HCO leaders are obligated to (1) identify and quantify specific risks and (2) develop solutions to important reductions. Given the complexity of the shift to popu- lation health and the resistance to change built into the national economy, the transition is not likely to be rapid. Most HCOs will have several years to deal with the problems.
Leaders must give priority to the HCO’s needs, but it is important also to assist associates at risk. Allowing some associates to suffer unneces- sarily will raise concerns among others and may reduce overall associate sat- isfaction and retention. The HCO’s policies to avoid layoffs apply. Leaders can propose additional assistance, allowing the governing board to make the decision. Early detection and discussion is critical. If demand for a service is at risk of declining, learning that in advance avoids overinvestment and allows current providers time to consider alternatives, such as retraining or early retirement. Identifying and discussing the risks is the first step.
In the declining market, excellent care is an important asset. Com- bined with high patient satisfaction, it allows the best HCOs to gain market share to offset the decline. Opportunities to acquire less successful HCOs will also arise. The long-term trend to fewer HCOs and fewer care providers in private practice will continue. Excellent HCOs should seek acquisitions; the knowledge and skills that lead to excellence should be shared with as many patients and associates as possible.
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. The local library holds a monthly town hall meeting attended by more than 100 residents, recorded for the internet, and covered in several local news media outlets. You are asked to present a program identifying ways to improve your community’s health. What are the key points your audience should take away?
2. The president of the local not-for-profit hospice wants to have lunch. She is concerned that your HCO is not referring as many patients as it should. Should you invite her to lunch? If so, what should you do to prepare? If not, does her interest require any other action?
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3. Your HCO is integrating several primary care physician groups into a primary care service line. Several of the physician leaders approach you, say- ing that they would like to move toward implementing the patient-centered medical home concept, working toward reduced hospital and emergency care. Make a checklist of questions you need to think about before you respond.
4. Pursuing excellence in care, your large, not-for-profit HCO has moved many outcomes measures to the best quartile. Associate turnover is down, patient satisfaction and market share are increasing. Senior leadership con- cludes that long-run success requires a shift to a population health mission. What arguments would you prepare to address the governing board? What counterarguments would you expect, and how would you respond? Should you explicitly propose developing a community coalition?
5. A large, not-for-profit HCO begins its move from providing excellence in care to supporting population health with a comprehensive review of popu- lation health needs. It forecasts current and benchmark demand for specific exhibit 9.1 services. The near term shows high emergency and inpatient use and shortages of support for mental illness and several diseases associated with aging. How should it organize a systematic response? What task forces, what tasks are they charged with, and who are their members? What consul- tant assistance would be helpful?
Additional Resources
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Center for Community Health and Development. “Community Tool Box.” University of Kansas. Accessed September 11. http://ctb.ku.edu/en.
Duberman, T., and R. Sachs. 2018. From Competition to Collaboration: How Leaders Cultivate Partnerships to Drive Value and Transform Health. Chicago: Health Administration Press.
Health Research & Educational Trust. 2014. The Second Curve of Population Health. Published March. www.hpoe.org/pophealthsecondcurve.
Kern, L. M., A. Edwards, and R. Kaushal. 2014. “The Patient-Centered Medical Home, Electronic Health Records, and Quality of Care.” Annals of Internal Medicine 160 (11): 741–49.
Prybil, L., F. D. Scutchfield, R. Killian, A. Kelly, G. Mays, A. Carman, S. Levey, A. McGeorge, and D. W. Fardo. 2014. Improving Community Health Through Hospital Public Health Collaboration. Lexington, KY: Commonwealth Center for Governance Studies.
US Department of Health and Human Services. 2018. “Development of the National Health Promotion and Disease Prevention Objectives for 2030.”Accessed April 5. www.healthypeople.gov/2020/About-Healthy-People/Development -Healthy -People-2030.
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Notes
1. Kindig, D. A. 2007. “Understanding Population Health Terminology.” Milbank Quarterly 85 (1): 139–61.
2. Hester, J. 2018. “A Balanced Portfolio Model for Improving Health: Concept and Vermont’s Experience.” Health Affairs 37 (4): 570–78. doi: 10.1377/ hlthaff.2017.1237.
3. US Internal Revenue Service. 2018. Schedule H, Form 990. Accessed April 5. www. irs.gov/forms-pubs/about-schedule-h-form-990.
4. Commonwealth Fund. 2009. “The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way.” Published Feb- ruary 19. www.commonwealthfund.org/publications/fund-reports/2009/feb/ the-path-to-a-high-performance-us-health-system.
5. Examining Community–Institutional Partnerships for Prevention Research Group. 2006. “Building and Sustaining Community–Institutional Partnerships for Preven- tion Research: Findings from a National Collaborative.” Journal of Urban Health 83 (6): 989–1003. See also Kindig, D. A., Y. Asada, and B. Booske. 2008. “A Population Health Framework for Setting National and State Health Goals.” Jour- nal of the American Medical Association 299 (17): 2081–83. See also Schroeder, S. A. 2007. “Shattuck Lecture: We Can Do Better—Improving the Health of the American People.” New England Journal of Medicine 357 (12): 1221–28.
6. Mercy Health System. 2018. “Community Needs.” Accessed April 6. http:// mercy healthsystem.org/community-needs/.
7. Community Preventive Services Task Force. 2018. “About the Community Guide.” Centers for Disease Control and Prevention. Accessed April 6. www.thecommunity guide.org/about/about-community-guide.
8. Rabin, R. C. 2009. “Benefits of Mammogram Under Debate in Britain.” New York Times. Published March 30. www.nytimes.com/2009/03/31/health/31mamm .html.
9. Raikou, M., and A. McGuire. 2003. “The Economics of Screening and Treatment in Type 2 Diabetes Mellitus.” Pharmacoeconomics 21 (8): 543–64.
10. Center for Health Care Strategies, Inc. 2018. “Welcome to the ROI Forecasting Calculator.” Accessed April 6. www.chcsroi.org/Welcome.aspx.
11. National Association of Community Health Centers. 2018. “How Health Centers Make a Difference.” Accessed April 6. www.nachc.org/about-our-health-centers/ how-health-centers-make-a-difference/.
12. Centers for Medicare & Medicaid Services. 2018. “Quality Initiatives—General Information.” Modified April 19. www.cms.hhs.gov/QualityInitiativesGenInfo /01_ Overview.asp#TopOfPage.
13. Community Preventive Services Task Force 2018. 14. Weissert, W., M. Chernew, and R. Hirth. 2003. “Titrating Versus Targeting Home
Care Services to Frail Elderly Clients: An Application of Agency Theory and Cost-Benefit Analysis to Home Care Policy.” Journal of Aging and Health 15 (1): 99–123.
15. Community Preventive Services Task Force 2018. 16. Centers for Medicare & Medicaid Services. 2017. “Nursing Home Quality Initia-
tive.” Modified September 27. www.cms.hhs.gov/NursingHomeQualityInits/25 _NHQIMDS30.asp.
17. Butterfoss, F. D. 2007. Coalitions and Partnerships in Community Health, 259–61. San Francisco: Jossey-Bass.
18. Ibid.
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19. US Department of Health and Human Services (HHS). 2018. “Develop- ment of the National Health Promotion and Disease Prevention Objectives for 2030.” Accessed April 6. www.healthypeople.gov/2020/About-Healthy-People/ Development-Healthy-People-2030.
20. Center for Community Health and Development. 2018. “About the Center for Community Health and Development.” Accessed April 6. http://community health.ku.edu/about/overview.
21. Griffith, J. R., and K. R. White. 2003. Thinking Forward: Six Strategies for Highly Successful Organizations, chapter 4. Chicago: Health Administration Press.
22. Butterfoss 2007. 23. Buffalo County Community Partners. 2018. “2020 Vision.” Accessed April 13.
www.bcchp.org/2020vision/. 24. Quoted in Griffith, J. R. 2009. “Finding the Frontier of Hospital Management.”
Journal of Healthcare Management 54 (1): 57–73, 64. 25. Centers for Medicare & Medicaid Services. 2018. “Home Health Quality Report-
ing Program.” Modified August 15. www.cms.hhs.gov/HomeHealthQuality Inits/06_OASISC.asp.
26. Information from Kirby, E. G., M. J. Keeffe, and K. M. Nicols. 2007. “A Study of the Effects of Innovative and Efficient Practices on the Performance of Hospice Care Organizations.” Health Care Management Review 32 (4): 352–59.
27. The Dartmouth Atlas of Healthcare. 2018. “End of Life Care.” Accessed September 14. www.dartmouthatlas.org/atlases/atlas_series.shtm.
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29. Putnam, R. D. 1995. “Bowling Alone: America’s Declining Social Capital.” Journal of Democracy 6 (1): 65–78.
30. Centers for Disease Control and Prevention. 2018. “National Implementation and Dissemination for Chronic Disease Prevention.” Updated March 15. www.cdc.gov/ nccdphp/dch/programs/nationalimplementationanddissemination/index.html.
31. Pfeffer, J. 2006. Kent Thiry and DaVita: Leadership Challenges in Building and Growing a Great Company. Cambridge, MA: Harvard Business Review.
32. Nicklas, T. A., C. C. Johnson, L. S. Webber, and G. S. Berenson. 1997. “School- Based Programs for Health-Risk Reduction.” Annals of the New York Academy of Sciences 817: 208–24.
33. McGinnis, S. L., and F. M. Zoske. 2008. “The Emerging Role of Faith Community Nurses in Prevention and Management of Chronic Disease.” Policy, Politics, and Nursing Practice 9 (3): 173–80.
34. Stephen Ministries. 2018. “How to Begin Stephen Ministry in Your Church.” Accessed April 4. www.stephenministries.org/stephenministry/default.cfm/928.
35. Meals on Wheels America. 2018. “America, Let’s Do Lunch.” Accessed September 11. www.mealsonwheelsamerica.org.
36. Hospice Foundation of America. 2018. “Home page.” Accessed April 6. http:// hospicefoundation.org/.
37. Proser, M. 2005. “Deserving the Spotlight: Health Centers Provide High-Quality and Cost-Effective Care.” Journal of Ambulatory Care Management 28 (4): 321–30.
38. Munck, B., B. Fridlund, and J. Martensson. 2008. “Next-of-Kin Caregivers in Pal- liative Home Care—from Control to Loss of Control.” Journal of Advanced Nurs- ing 64 (6): 578–86.
39. Centers for Disease Control and Prevention. 2018. “National Implementation and Dissemination for Chronic Disease Prevention.” Accessed April 12. www.cdc.gov/ nccdphp/dch/programs/nationalimplementationanddissemination/index.html.
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40. Lafortune, L., F. Beland, H. Bergman, and J. Ankri. 2009. “Health State Profiles and Service Utilization in Community-Living Elderly.” Medical Care 47 (3): 286– 94. See also Kadushin, G. 2004. “Home Health Care Utilization: A Review of the Research for Social Work.” Health and Social Work 29 (3): 219–44. See also Mara, C. M., and L. K. Olson (eds.). 2008. Handbook of Long-Term Care Administration and Policy. Boca Raton, FL: CRC Press.
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ciency and Effectiveness of Healthcare.” Accessed April 6. www.dartmouthatlas.org. 44. Centers for Disease Control and Prevention. 2017. “Ambulatory Care Use and
Physician Office Visits.” Updated May 3. www.cdc.gov/nchs/fastats/physician -visits .htm.
45. National Center for Quality Assurance. 2018. “Patient-Centered Medical Home (PCMH).” Accessed April 6. www.ncqa.org/programs/recognition/practices/ patient-centered-medical-home-pcmh.
46. Carrier, E., M. N. Gourevitch, and N. R. Shah. 2009. “Medical Homes: Challenges in Translating Theory into Practice.” Medical Care 47 (7): 714–22.
SECTION
III LOGISTIC AND STRATEGIC SUPPORT
CHAPTER
307
CRITICAL ACTIONS
10 KNOWLEDGE MANAGEMENT
1. Translate knowledge to strategic performance improvement:
• Support an evidence-based culture.
• Relate knowledge improvement to clinical service improvement.
• Use centralized and contract knowledge management services.
2. Maintain the reliability of information:
• Define, standardize, and generate accurate performance measures.
• Reduce causes of variation in performance.
3. Promote effective use of data:
• Universalize the electronic health record.
• Expand meaningful use.
• Ensure prompt access to reports and records.
• Provide statistical analysis and forecasting.
4. Protect individual privacy, the archive, and the information systems:
• Protect patient and associate privacy rights.
• Guard against failure, misuse, theft, or destruction.
5. Plan improvement and growth:
• Systematically expand the use of knowledge to achieve the healthcare organization’s mission.
• Continuously improve knowledge management services.
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Purpose
The purpose of knowledge management (KM) is to
translate the healthcare organization’s (HCO) complete knowledge resource into improvement of its strategic performance.
The complete knowledge resource has four essential parts:
1. The learning, from many sources, that each associate possesses. 2. The current communications that drive each associate’s agenda of tasks
and documentation of their completion. For clinical associates, this is principally the electronic health record (EHR). For all units, it includes team performance data supporting the unit scorecard and reports of relevant external events.
3. The data warehouse of guidelines, protocols, processes, performance information, proposals, and forecasts that guides the completion of tasks and the continuous improvement processes.
4. Assistance to all associates, helping them find, evaluate, and apply knowledge from the data warehouse, publications, and the internet.
The improvement of strategic performance is a matter of integrating these components in ways that deliver to each associate everything she needs to know, on time, every time, and without error. Like teammates, supplies, and equipment, knowledge becomes a foundation of the associate’s success. In the continuous improvement world, knowledge means both how to do the job and how to improve the job. Knowledge must be supplied subject to two constraints:
1. The privacy rights of individuals must be protected at all times. 2. The knowledge resource and the KM system must be protected against
failure, loss, or misuse and the security of information ensured.
The purpose is inescapably tied to the EHR. The vision for EHRs is of an interconnected, automated system of information delivery that supports excellent care across the stages of patient need and across multiple healthcare providers. KM supports the EHR, but also the full scope of evidence-based management—measurement, benchmarking, process improvement, goal set- ting, and rewards—for all HCO units.
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Functions
The purpose is implemented through the six functions shown in exhibit 10.1. KM can be considered in two parts: the up-to-the-minute flow of specific data—such as orders, conditions, and performance—that guides the job to conclusion, and refined and aggregated information that supports con- tinuous improvement. The two parts support two major sets of KM activity: management information and clinical information. Automation has revolu- tionized the scope, manner, frequency, and speed of both.
Function Content
Provide prompt and useful access to management infor- mation (the data warehouse)
Captures, stores, and retrieves operational data to support management and clinical decisions
Provides training in the use of electronic systems and consulting service in interpretation and information availability
Provides protocols, processes, training videos, and other materials supporting training programs
Conducts and interprets statistical analysis of performance and other data
Maintains a historical record Supports ongoing audits to ensure data quality
Provide prompt and useful access to clinical information (the EHR)
Records and communicates each patient’s integrated care plan in the EHR—including medical condition, needs assessments, medical and nursing diagnoses, treatments, medication, and unexpected events
Ensure reliability and validity of data
Defines measures and terminology Supports accurate, complete data input Applies appropriate specification and adjustment Estimates reliability of data
Maintain communica- tions and software support
Operates an around-the-clock electronic and voice communication utility with web access
Supports software used in clinical and business functions
Integrates information for multiple applications
Ensure the appropriate use and security of data
Guards against loss, theft, and inappropriate application
Improve continuously Establishes a prioritized agenda for progress Incorporates user view Commits a block of capital funds for several years Supports an annual review of specific projects
Note: EHR = electronic health record.
EXHIBIT 10.1 Functions of
Knowledge
Management
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Provide Prompt and Useful Access to Management Information KM captures, aggregates, and refines data from all parts of the HCO, stores it in the data warehouse, and provides it constantly to support current opera- tions and the continuous improvement processes. Many, but not all, data sources for the warehouse are shown in exhibit 10.2.
Data Warehouse Data linked across multiple sources by patient, associate,
accountability center, or other key stakeholders
Electronic Health Record Patient counts Patient demographics Diagnoses Treatment Outcomes and process quality
Human Resources Recruitment and vacancy Retention and turnover Absenteeism and safety Associate satisfaction
Planning and Marketing Epidemiologic planning data Patient satisfaction Market survey data
Other Information Systems Medline literature Management literature Patient guidelines Benchmarks
Clinical Support Services Demand Output Process quality Scheduling Patient satisfaction Physician satisfaction
Environment of Care Supply use Inventories Customer satisfaction Disaster preparation Hazardous materials management
Accounting and Payroll Hours worked Indirect costs Financial management Financial accounting Budget goals Long-range �nancial plan
Information for routine performance reports, budgeting, and special analysis used by accountability
centers and performance improvement teams
EXHIBIT 10.2 Examples of
Internal Data
Feeding the Data
Warehouse
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Using the Data Warehouse The data warehouse and web access facilitate extensive information retrieval and analysis. Examples of important uses of information are shown in exhibit 10.3. Use of the warehouse is supported by data management systems. Data management allows access to individual fields of data in a record so that different sets of records can be accessed, combined, and analyzed quickly. For example, discharges are routinely disaggregated by age, sex, and diagnosis to create specific outcomes statistics. The patient management protocol can be attached to each diagnosis, allowing counts of process statistics such as the number of patients receiving a recommended treatment. Both outcomes and process statistics can be aggregated into rigorously adjusted measures that permit comparison across varying patient populations. This ability to create apples-to-apples comparison is a critical element of the quality reporting, making benchmarks possible.
Data management system A system for aggregating and disaggregating electronic data designed to facilitate recovery and use.
Application Data Warehouse Information Internet Information
Managing individual patients
Patient management guidelines
Functional protocols (standard work)
Journal articles, guidelines, and diagnostic software
Reporting performance
Recent data relative to goals Graphs and statistical pro-
cess control
—
Identifying OFIs Drill down to identify potential causes
Local benchmarks and com- parative performance
External benchmarks and best practices
Journal articles, collab- oratives, and comparative information
Setting goals Local trends, benchmarks, and forecasts
PITs, benchmarks, and best practices
Supporting PITs
Analytic models, simulations, and forecasts
Books and journal articles, regulatory standards, and recommended practices
Reviewing protocols
Reported variances from protocol
Drill-down of outcomes to show patient-specific groups
Analytic models and simulations
National clearinghouses, commission reports, journal articles, websites, and books
Note: OFI = opportunity for improvement; PIT = process improvement team.
EXHIBIT 10.3 Common Uses
of Information in
High-Performing
Healthcare
Organizations
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Internal data are often integrated with information from external sources. The web is used to verify the latest published work and consensus positions on complex issues. The National Library of Medicine’s PubMed has more than 28 million articles from more than 5,000 journals indexed in its Medline section. Most have abstracts. University library and commercial search engines index nonclinical literature. Commercial vendors provide direct access to the journals themselves.1 Alliances and not-for-profit groups, such as the Institute for Healthcare Improvement, The Joint Commission, and Hospitals in Pursuit of Excellence, maintain websites of training materials, benchmarks, and user commentary. Commercial vendors sell data sets for benchmarking and analysis. All of these external sources become important when processes are studied for improvement, providing guides to identify new alternatives.
The data warehouse is in constant use. KM associates map the data sources and the calculations to automate quality statistics, costs, and other elements of the unit and strategic performance reports. Process improve- ment teams (PITs) use the warehouse routinely to forecast trends, identify root causes and best practices, analyze relationships, and model alternative approaches. Automated drill-down allows leaders to track the sources of sta- tistics to the individual patient level.
Memorial Hermann Sugar Land (MHSL), a 2016 Baldrige Award winner, summarizes its data management as follows: “As a Family, we believe that everyone—each [associate], patient, and stakeholder—has knowledge that individually and collectively can contribute to the potential of MHSL. As such, we have developed segmented sources . . . to collect, share, implement, blend, correlate and integrate this knowledge.”
Internally, MHSL exchanges information using daily huddles, round- ing, virtually every committee and team, its volunteers, and the Memorial Hermann Health System intranet. “Externally, we gather knowledge through patient rounding, the Patient and Family Advisory Council, social media, frequent discussions with our suppliers and partners, community events, and conferences.”2
Training and Supporting Users Success for KM means that the HCO effectively uses information, a more demanding standard than simply providing and explaining the information. Effective use requires a strong user training and support program. Training and support are generally provided in segments, beginning with use of the hardware and software, progressing through common applications, and con- tinuing to analysis and interpretation. A help desk, statistical consultants, and other experts are available for ongoing support.
KM often works with other units to provide a comprehensive training experience. Much of the training is delivered just in time. For example, a new
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associate involved in patient registration (where the identifying information for the medical and billing records is captured) needs training in approach- ing patients and families, understanding confidentiality and elementary rules about guardianship, using the input screens, and learning the appropriate definitions. Most important, the associate has to know when she needs help and where to get it. (Simple questions become complicated quite easily. What is the correct address for a minor with divorced parents? Who signs the admission form? What do you do if the parents disagree or if one is missing?) Human resources and the associate’s manager provide most of this training, but KM is involved at several steps:
1. A video describes the HCO’s mission, vision, and values. Additional videos explain the HCO’s policies regarding relations with patients and associates, dress, compensation, and benefits. Mastery of these policies can be tested. Learning can be repeated as necessary.
2. A training module teaches completion of electronic forms for data entry. The module can include multiple scenarios that test the associate’s understanding.
3. Explanation and support materials for issues such as HIPAA (the Health Insurance Portability and Accountability Act), guardianship, and advance directives can be automated. Mastery of access and key content can be tested.
4. A set of appropriate answers to frequently asked questions can be provided for specific areas. Associates can supplement these with files of their own notes.
The automated training resources provide a relatively inexpensive foundation that supports uniformity, documents mastery, and builds the associate’s confidence. It can be accessed repetitively and complemented by more advanced training, such as proxy patients, role-playing, supervised trial, and mentoring. The combination prepares associates who delight the cus- tomer, are loyal to the organization, enter the data completely and correctly, and ensure privacy and security.
Training for more complex tasks is accomplished similarly, by break- ing the process down into components. Thus, sophisticated systems can be built. For example, patient diagnosis is made by physicians, captured in stan- dardized words, translated to International Classification of Diseases (ICD) codes by clerical employees, and coded to diagnosis-related groups (DRGs) or ambulatory patient classifications (APCs) by programmed algorithms. Most cases are not difficult to code, but the handling of multiple diagnoses is challenging, important, and commonplace among older patients. The ICD coders have access to code lists with definitions and examples, interpretation
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of terminology, and training in reviewing the record to catch diagnoses omit- ted by the physician (a review that can be automated in the EHR). They can specialize in a limited set of diseases. They also have the option of returning electronically to the physician for further clarification. Finally, blind test cases can check coder consistency and reliability. Correction can be focused on the codes where errors are more likely.
Providing Prompt and Useful Access to Clinical Information—The EHR Most large HCOs have made substantial progress in implementing the EHR. Commercial vendors supply the software, maintain it, and often provide consultation to support operations. Even incomplete applications have made substantial contributions. Using patient management guidelines, automating order entry, accurately tracking medications and other repeated treatments, summarizing patient progress, and identifying unmet needs are all substan- tially simpler with an EHR. Reporting and analysis of outcomes and process quality measures, a central feature of the unit and strategic scorecards, is only practical because of automation.
The EHR can be used by multiple providers in many settings and geographic areas to coordinate the patient’s care. Acute episodes and con- tinuing care of chronic disease now involve dozens or even hundreds of care providers. Many care providers never see each other, and they frequently work for different HCOs. They still need to know the following information promptly:
• What is wrong with this patient? • What are we doing for this patient? What has been done in the past? • What must we not do for this patient (in terms of allergies, advance
directives, other important contraindications)?
A huge fraction of the difficulties and delays in patient care occur because a care provider or care team did not have the answers to these three questions. The traditional paper records were notoriously difficult resources; the EHR is the likely answer.
The EHR and “Meaningful Use” The Office of the National Coordinator for Health Information Technology (ONC), in the US Department of Health and Human Services, is charged “to support the adoption of health information technology and the promo- tion of nationwide health information exchange to improve health care” and support “nationwide efforts to implement and use the most advanced health information technology and the electronic exchange of health information.”3
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The ONC
• sets the standards and certification criteria that EHRs must meet to assure healthcare professionals and hospitals of what the systems they adopt are able to do;
• specifies minimum functions of EHRs; • directs the State Health Information Exchange Cooperative Agreement
Program, which funds states’ efforts to rapidly build capacity for exchanging health information across systems within and across states; and
• provides challenge grants to states to encourage innovations for health information exchange.4
Under ONC guidance, Medicare provides incentive payments through the EHR Incentive Program, commonly referred to as meaningful use. Meaningful use is one of the four components of the Merit-based Incentive Payment System (MIPS), a part of the Medicare Access and CHIP Reauthori- zation Act (MACRA). MIPS has established mea- surement thresholds that range from recording patient information as structured data to exchanging summary care records.5
The current MACRA incentive program includes a Quality Payment Program (QPP) with multiple clinician payment tracks. Participation in QPP rewards clinicians’ use of certified health IT. The Medicare EHR Incentive Program is one of the four components of MIPS, which itself is part of MACRA.
Meaningful use refers to the ability to dem- onstrate implementation of the EHR (stage 1 of the incentive program), integration of the record (stage 2), and ability to derive value (stage 3) by improving the patient care experience. The topic is complex, and success is not assured: Strong evidence supports the use of clinical decision support and computerized provider order entry. However, insufficient reporting of implementation and context of use makes it impossible to determine why some health IT implementations are successful and others are not.6
Intermountain Healthcare (Salt Lake City, Utah) reported a concerted effort to meet meaningful use, with guarded conclusions:
1. For the 22 hospitals and 170 ambulatory clinics, “For Stage 1, . . . received and pending incentives totaled $46.3M. Total costs for
Meaningful use Measurement thresholds that range from recording patient information as structured data in the EHR to integrating the informa- tion across care providers and demonstrating value in exchange for incentive payments from the Centers for Medicare & Medicaid Services (CMS).
Medicare Access and CHIP Reauthorization Act (MACRA) A CMS incentive program that rewards clini- cians’ use of certified health information technology.
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EHR certification and meaningful use implementation and attestation were $17.3M.”
2. “[Medical group] leadership felt that patient engagement was likely improved after meaningful use, and was neutral on patient safety and patient satisfaction. Hospital leadership was neutral on the question of patient engagement, patient safety, and patient satisfaction. Both hospital and [medical group] leadership had feedback that physician and nurse productivity was negatively impacted. The [medical group] and hospital leadership also felt that clinic and emergency department (ED) physician, ED and clinic nurse, and clinic ancillary staff satisfaction was negatively impacted, due to the extra work necessary to meet meaningful use.”7
Intermountain has a multidecade record of designing and applying the EHR and of seeking clinical improvement. While meaningful use is an important long-term goal, many HCOs will find other opportunities for improvement (OFIs) more important in the short term. Strong foundations in continuous improvement and transformational culture are essential to success.
Engaging patients in shared healthcare decision-making is encouraged by meaningful use stages 2 and 3. Patient-generated health data as a concept
is promising, although challenges remain in identify- ing what and how to integrate big data into the patient’s EHR and how to maintain privacy,8 beyond the limited requirements of HIPAA.9
Any HCO’s EHR should be designed to meet the meaningful use standards and be compatible with the state’s information exchange. The commercial vendors that supply the software for the EHR are committed to the national goal and offer support for installation, mainte- nance, training, and necessary modifications.
Ensure the Reliability and Validity of Data Effective use of data requires both maximizing accuracy and understanding the level of accuracy achieved. For example, most applications involve com- paring two data sets—this record versus this patient’s identification, drug ordered versus drug in hand, actual versus goal, this year versus last year, Team A versus Team B. Two errors are always possible—deciding that the two are different when they are the same, or accepting the two as the same when they are different.
In modern HCOs, with thousands of associates making tens of thou- sands of decisions every day, minimizing both types of error is essential. Four steps are necessary for doing so: (1) Standard definitions must be established, (2) the definitions must be consistently applied as data are captured, (3)
Big data Large and complex data sets that may be analyzed for patterns.
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statistical specification and adjustment must be included when necessary, and (4) random variation and confidence limits must be estimated. Part of KM is a structure of expert committees, rules, and software to fulfill these steps. The goal is to produce data that are fully understood and accepted by their users so that the debate can be about the OFIs, not the data. Like much of evidence-based management, this is an ongoing, heuristic process; measures acceptable last year may need redesign.
Defining Measures and Terminology A standing committee of the HCO oversees the definitions of measures to ensure appropriate standardization. Nationally accepted definitions are used wherever possible because they facilitate benchmarking and all forms of out- side communication. If additional measures are necessary, they are tested in a single or small set of pilot applications and locally standardized to expand their use. The definition includes statistical specification and adjustment. The committee’s decisions are incorporated into educational programs and software to ensure consistent application. The committee can audit use of definitions on its own or through internal audit mechanisms.
Sharp HealthCare (San Diego, California), a Baldrige Award recipient, identifies the following criteria for accepting a measure:
• Reference in evidence-based literature • Use by regulatory and public reports • Availability of competitor data • Use by other Baldrige Award recipients • Availability of benchmarks in healthcare and beyond
Sharp evaluates potential benchmarks for comparability and statistical validity, reliability, and specification.10
Many technical terms are used on a national or international basis and must be standardized accordingly. Clinical diagnoses, accounting defi- nitions, and hospital statistics are examples. Diagnoses are standardized by ICD, maintained by the World Health Organization.11 CMS requires ICD coding for payment of claims, and the latest version is ICD-10-CM (Clini- cal Modification).12 Similarly, accounting and financial terms are standard- ized by a national panel—the Financial Accounting Standards Board. The American Hospital Association maintains a set of common definitions and statistics for national reporting.13 The Joint Commission and CMS have agreed on a set of commonly defined quality measures.14 HIPAA mandates the use of standard definitions for common patient transactions.15 HCOs are legally required to use these standardized measures. It is necessary to standardize not only definitions but also interfacing hardware, software, and data specifications.
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Much standardization is accomplished through voluntary trade asso- ciations, such as the American National Standards Institute. The National Quality Forum is a nonprofit association dedicated to creating “consensus standards for performance measurement,” an essential step toward any exter- nal benchmarking.16 The National Quality Measures Clearinghouse is “a public resource for evidence-based quality measures and measure sets” that “also hosts the HHS Measure Inventory.”17 The Health IT Standards Com- mittee is charged with making recommendations to the ONC on standards, implementation specifications, and certification criteria for the electronic exchange and use of health information.18
Consistent Data Capture Standard definitions must be rigorously applied to each transaction. Both completeness and accuracy are needed. Missing information can be as destructive as errors. The following steps ensure that the information entered into the database is as accurate as possible:
1. All important information is electronically edited and audited at entry. Edits are based on a single field of information; the field must contain a particular kind of data, such as certain numbers or letters, or selection from a certain list; these eliminate omissions and keystroke errors. Audits compare two or more fields and flag inconsistency; cross-checks of age, gender, and diagnosis are common examples. Manual audits— reentries by different personnel—can be conducted periodically to assess and maintain the desired accuracy level.
2. Automated entry is preferable to human entry. Scanners and devices to retrieve information from electronic archives are superior to their human counterparts. Entry forms, with selections from drop-down lists, are superior to free text.
3. Retrieval is preferable to reentry. Information should be captured for electronic processing only once. Subsequent references require reentry of a few fields of identifying information before the complete entry can be recovered.
4. Training and consultation are used to improve accuracy. Judgment is often required for entries such as account or ICD codes. Users must be trained to achieve consistency. Managers, accountants, and internal auditors provide advice on difficult questions.
Commercial software is now available for most clinical information- capture operations. It is designed for accurate entry and user convenience, includes extensive edits and audits, and facilitates prompt retrieval and link- age across multiple data sources.
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Specification and Adjustment Accurate definitions and careful data capture substantially reduce error in data sets. But with human patients being treated by human care providers, cases are never truly identical; some random variation always remains. As the data are aggregated over time and work sites, questions of comparability arise: How can Population A be made more comparable to Population B? Such questions are answered by speci- fication, identifying subsets of the data that show less variation, and adjustment, using specification subsets to estimate comparable total populations. Specification and adjustment allow apples-to-apples comparison; they are important in many clinical measures.
Diagnosis is an important basis for specifica- tion and adjustment. DRGs and APCs group patients with similar ICD-10 diseases into homogeneous populations. They are used for the Medicare prospective payment system. CMS calculates a severity index for each DRG patient group from its entire database and a severity- weighted cost or length of stay (LOS) for each DRG.
Outcomes other than cost or LOS, such as mortality or recovery rates, are similarly adjusted. The adjustments are usually part of the measure definition. They are also often adjusted for age, gender, and race. Sever- ity adjustment allows at least a crude comparison of costs between HCOs, service lines, or other groupings. There are other possible adjustments for variables beyond the care-providing teams’ control. The possibility of an omitted variable should be raised as part of a root cause analysis: “Are there other characteristics, or any other factors outside the unit’s control, that we should consider?” Care providers’ response to unprovable quality results is often “these patients are sicker.” Thorough adjustment addresses the factors that make patients “sicker.” The omitted variable question becomes “we’ve adjusted for the common patient differences. Can you identify a factor out- side our control that we should investigate?”
Reporting Variability and Reliability of Estimates Few performance measures are exact. In healthcare, the list is limited to simple counts and some accounting information. Commonly used mea- sures, such as laboratory test values, cost per case, LOS, percentage of loyal patients, number of safety incidents, mortality rates, and complication rates are all subject to random variation that can mislead users. Specification and adjustment reduce, but never remove, random variation. Statistical analysis assigns confidence limits around reported values and estimates of the prob- ability that a specific difference is worth investigating.
Specification A statistical analysis that identifies values for a measure by defined subsets of a popula- tion, to allow accurate comparisons for each specified group.
Adjustment A statistical technique to aggregate values from specified population subsets, allowing comparison of samples from populations with differences in the relative size of subset populations.
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The variability of a measure is as important as the value, and both should be reported. The usual variability indicators are standard deviation
(used to compare two individual values) and standard error (used to compare two samples with several indi- vidual values in each). Modern statistical process control software calculates both measures, shows trends and significance graphically, and automatically
flags significant differences. “Significant at 99 percent” (3 standard devia- tions, or 3 sigma) is a forecast that 99 times out of 100 a diligent team will find a potentially correctable cause. It is commonly used as a guide. All 3-sigma variations are OFIs. Smaller ones can usually be ignored.
Maintain Communications and Software Support KM maintains the communications and software for all ongoing HCO activi- ties. Many individual communications, such as a patient admission, a supplies order, an invoice, a paycheck, an email, or a voice conversation, occur each day. Smartphones, tablet computers, and laptop devices have changed work patterns on hospital floors. With the growth of telemedicine—to support home and office care at distant sites and to provide instant support in inten- sive care units—the communications network now includes streaming video and live two-way communication.19
These communications use various hardware and software platforms. Many require integration across platforms. KM must support all of these transactions, and record many of them. The systems must be convenient and prompt; be available around the clock, every day of the year; and have reliability near 100 percent. Communications hardware and software have reached very high standards. The major KM activity is integrating the systems and managing the contracts.
HCOs need a large number of applications to support specific activi- ties. The needs range from general-purpose software, such as word process- ing and spreadsheets, to advanced statistical analysis and modeling, such as the epidemiologic planning model and the long-range financial plan, to specific clinical applications such as analytic programs for imaging. Training is necessary for most of these applications, which is commonly supplied by the vendor.
KM must ensure that these software packages are supported by the HCO information system, that they are consistent with the definitions and standards, that their data can be integrated, and that they offer appropriate security. The software is licensed, and KM manages the licenses, including negotiating prices. KM associates work with ad hoc task forces or committees to ensure that the apps, the training, and other work processes are aligned. The flowing multistep process is required:
Statistical process control A method of identifying significant changes in measures subject to random variation.
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1. Stakeholders identify needs via ongoing assessments. Hardware, software, and project requirements are specified.
2. Information technology (IT) develops solution alternatives in collaboration with stakeholders. Technology partners offer upgrades or innovative approaches.
3. IT steering committees and subcommittees serve as investment review boards. Priorities are set and funding approved during annual budget planning.
4. IT updates three-year rolling strategic plans. Project plans include necessary resources.
5. Stakeholders evaluate project outcomes. IT steering committees assess effectiveness.
Step 2 suggests substantial efforts to optimize the software and its use. KM negotiates with both the users and the suppliers to get the best results. The software review process itself is subject to continuous improvement, as indicated in step 5.
Integrating the wide range of hardware and software platforms has historically been a substantial challenge. Most of the special-purpose soft- ware must draw data from several different sources. For example, a care provider’s drug-ordering decision requires data from the patient’s record; from a protocol suggesting alternatives; from a pharmacy system that main- tains inventory; and from a drug administration system that will audit dos- age, contraindications, and drug interactions. The administration system will trigger nurse alerts, enforce patient identification, and record administration. Beyond these communication activities, the data will be integrated to support a variety of analytic applications, such as drug error rates, studies of pharmacy workloads, and audits of diagnostic coding.
The modern solution is standardized definitions and software. Histori- cally, much HCO software was developed independently. These systems— called legacy systems—were not designed to integrate with others. Over time, the problem of legacy systems will diminish, but the core issue of meeting the needs of both the in-system user and the external user will remain.
Ensure the Appropriate Use and Security of Data The integrated software systems and data warehouse are resources of incal- culable value. They and the hardware supporting them are subject to several perils. Physical destruction or loss can result from mislabeling, theft, fire, elec- trical power disturbances, floods, magnetic interference, and deterioration.20 Communications can be interrupted by power or equipment failure. Data,
Legacy system Outdated computer software that lacks the features found in more current versions.
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software, and hardware can be stolen or sabotaged by outsiders or associates. Clinical, financial, and personal information owned by the individual patient or associate can be stolen or inadvertently exposed. KM is responsible for manag- ing cybersecurity.21 MHSL summarizes its approach to security in exhibit 10.4.
Protecting Against Loss, Destruction, or System Failure The normal protections against loss, destruction, or system failure are physical protection of sites, duplication of both data and hardware, separate
Properties of Data, Information, and Knowledge Quality Assurance Mechanisms Measurement
Accuracy Integration between electronic systems. Data capture, database design, entry and reporting. Clinical documentation templates with edit capability, check boxes, standardization
Dashboard/ scorecards
Integrity System integration, automation and error detection/avoidance, discern alerts–drugs
Advisor reports
Reliability Mainframe database back-up sys- tems at multiple sites, redundan- cies built into system, downtime recovery plans & processes, workstation replacement 5 years
Downtime tracking/ reports
Unscheduled
Timeliness Real time data transfer, monthly data review & reporting
Unscheduled downtime and recovery
Security Log on by position with password, en cryption of all electronic data, network fire walls, identity theft protection, auto-sign off, remote data removal on lost devices, 8-digit password protection & mobile requirements
Security reports (AOS)
Confidentiality Patient and employee record access reports, access rights provided during NEO, HIPAA privacy compliance, auto com- puter access & removal for non- compliance to mandatory annual computer privacy training
Privacy officer reports (AOS)
Source: Memorial Hermann Sugar Land (2016).22
EXHIBIT 10.4 Data Security
Processes
at Memorial
Hermann Sugar
Land
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geographic locations of originals and duplicates, selection of personnel, and antivirus software. Thus, central hardware sites are safely located and physically protected. Processing hardware is deliberately redundant. Shadow systems maintain duplicate records available within a few seconds. Routine backups are kept in separate, ultrasecure sites. Personnel working in KM are subject to careful selection, bonding, surveillance, and auditing. Outsiders are kept out by passwords and security devices.
The entire KM operation depends on an electricity supply, and some types of hardware have narrow tolerances for voltage and frequency variation. HCOs normally have two separate feeds from the national electric power grid, plus local generators and specially designed “uninterruptible” power supplies.
A well-managed HCO has a formal plan for maintaining security and a recovery plan for each of the perils. KM is responsible for maintaining this plan, including monitoring effectiveness and conducting periodic drills for specific threats.
Maintaining Confidentiality of Information KM is responsible for designing and maintaining systems to protect infor- mation against unauthorized use. Most data about individual patients and employees are confidential and protected, and the organization is liable for misuse. HIPAA mandates rigorous privacy and confidentiality protocols that protect patient data from unauthorized use.23 KM must identify the confidentiality requirements for each type of data and incorporate controls in operations to ensure that they are met.24 These usually take the form of verifying patient authorization, requiring user identification, and restricting specific kinds of access to qualified users. Identification cards, passwords, and voice readers are currently used to protect access; biometric identification is expected to grow in the future.
Confidentiality is also important in archiving and retrieval. The data warehouse must be protected from inappropriate use, and reporting must be constructed in ways that prevent inferences about individuals from aggregate data. Centralized archiving and monitoring of data uses and users protect against these dangers. Restrictions on access to identifiable sets of data or certain combinations of data can be built into the archive or the data retrieval system.
The issue of confidentiality is important, but relative. Many health- care confidentiality problems are similar to other information sources that are now automated, such as driving records, credit records, and income tax files. The manual systems were far from foolproof. The real question is one of benefits of convenient access versus risk of damage.25 Reasonable steps to reduce the risk are required, backed by ongoing programs to ensure compli- ance. Properly designed, electronic systems can reduce the chance of misuse or inappropriate access and can also improve appropriate use.
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Improve Continuously KM is a rapidly changing activity. It identifies OFIs from its own measure- ment and benchmarking system; from regulation; from new technology in the marketplace; and from user requests for expanded service, such as “mHealth,” mobile integration of KM activities for hospitals and health systems.26
It requires a steady stream of funds for new capital equipment, expanded services, and expanded training and support. Demand for improvement will exceed supply, creating a waiting list that tends to be longer in better-managed organizations. KM improvements are complex. They must be integrated with changes in work processes in other units to yield benefits. Important projects can require several years to complete. As a result, KM requires a sophisticated planning process for continuous improvement, such as the one shown in exhibit 10.5, managed by a KM planning committee (KMPC). The process generates a KM plan, part of the long-term HCO plan. Successful planning processes have several important characteristics:
• They are built around explicit collaboration with application units, because KM cannot itself control the results. Most proposals have four parts:
1. A KM change (new hardware, software, or information capability) will be installed in some HCO activity other than KM.
2. The installation will support improved work processes. 3. The improved work processes will improve operational measures. 4. Improved operations will create improvements in HCO strategic
measures.
For example, software to improve patient scheduling in outpatient offices will increase the number of patients who can be seen. If marketing and other parts of the primary care service line are effective, the number of outpatients seen and correctly treated will increase. As outpatient visits increase, HCO revenue and profit will increase.
• They establish project teams with detailed goals, analogous to facility construction projects. Any KM PIT must include all the care-providing, support, and strategic units using or supplying the data, and any contractors supporting relevant software. A major software selection project is likely to work through a battery of subteams establishing the software vendor, pilot tests, an installation timetable, revised patient management protocols, and an associate training plan. The recommendation will have explicit endorsement by HCO associates or contractors accountable for progress and operational improvement.
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• The project teams are monitored by the KMPC. Larger HCOs will have several project teams operating at once and will need the KMPC as a managing body.
• Funding is established on a multiyear basis, usually by allocating a portion of the total funds available for new programs and capital to KM projects. For the foreseeable future, most HCOs will spend a significant fraction of their capital funds on KM improvement. The amounts, the
OFI from trends and benchmarking
within IS
OFI identi�ed by strategic plan and
IS clients
Development of preliminary plans and justi�cation
Review and ranking by KM planning
committee
Implementation and documentation
of justi�cation
Review and modi�cation of dedicated KM
funding
The best OFIs are those that ful�ll the organization’s strategic plan or IS client needs.
Plan development requires extensive work with IS users to identify bene�ts justifying the proposal.
KM planning committee is user dominated. It assists in identifying projects, ranks and selects projects, and monitors installation and bene�t recovery.
KM planning committee both ranks (on perceived merit) and selects (subject to available funds) projects. Those rejected can be revised and resubmitted, usually on an annual basis.
Funded projects must be further planned in detail, with speci�c actions by IS and participating clients and a timetable both for project completion and bene�t recovery.
Implementation is expected to be on time, on budget, and on track for bene�t recovery.
KM planning committee reports to governing board on record of success and need for additional funding. The request for additional dedicated funds is evaluated as part of the long-range �nancial plan.
Deferred projects return to OFI pool
Inclusion in KM plan and dedicated
KM funding
Development of speci�c plans and
timetable
Acceptance or deferral by KM planning
committee
EXHIBIT 10.5 Knowledge
Management
Planning Process
Note: IS = information systems; KM = knowledge management; OFI = opportunity for improvement.
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benefits, and the timetables will be built into the long-range financial plan and other planning activities.
• The governing board’s review focuses on two questions: “What are the strategic improvements that justify the investment?” and “How closely do the documented successes from installed projects track the benefits expected?” These questions put a premium on KM performance and enforce continuous improvement of internal operations.
The process makes KM a supplier to the other units of the organiza- tion. It demands that the KM staff both listen to and work closely with their internal customers. An opportunity that arises internally must be thoroughly studied to develop justifications; that study requires review of its implications for customer work processes. Review by a customer-dominated KMPC keeps the department plan and the KM plan focused appropriately on service.
People
KM staff includes numerous professionals in programming, hardware main- tenance, statistics, user support, and training. They are led by the chief infor- mation officer (CIO) and the KMPC and are organized by function.
Chief Information Officer The role of CIO has emerged with the growth of KM and has grown with the centrality of KM itself. CIOs report to either the CEO or the chief operating officer and are part of the senior leadership team. The CIO role requires mas- tery of information technology in healthcare. First and foremost, the CIO must see that the KM unit effectively supports the organization. The role also requires leadership and negotiating skills. In many situations, the CIO’s role is to convince others of the power of information and encourage them to use it effectively. Like other senior management, the CIO should have a succes- sion plan for the critical personnel in KM and individual development plans for all managers to help them achieve their potential. Many high-performing HCOs are increasing clinical skills in KM units. The chief medical informa- tion officer has assumed a prominent role on the KM team.
Education for the CIO can follow several routes. Training in computer operations, management engineering, or medical records administration provides a useful beginning, but an advanced degree in management engi- neering, business, or health administration is valuable. Many CIOs in larger facilities have doctoral-level preparation. Experience in healthcare informa- tion systems is clearly essential. Consulting experience is also common in CIO backgrounds. A professional organization—the Healthcare Information and Management Systems Society (HIMSS)—provides continuing education and professional certification (see www.himss.org).
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KM Planning Committee KM planning and oversight transcend all HCO functional boundaries. The KMPC must deal with issues similar to those faced by the governing board.27 The charge to the committee includes the following:
• Participating in the development of the KM plan, resolving the strategic priorities, and recommending the plan to the governing board
• Ranking KM investment opportunities and recommending a rank- ordered list of proposals to the governing board
• Assisting KM clients in identifying and meeting KM opportunities • Supporting the definitions and standards committee • Monitoring performance of the division and suggesting possible
improvements
The KMPC routinely comprises key personnel from major depart- ments, particularly finance, internal consulting, medicine, nursing, and clinical support services. The CIO is always a member and may chair the committee. Members of the governing board may serve on the committee. The team uses a variety of task forces and subcommittees, expanding partici- pation in component activities but using its authority to coordinate.
Organization KM organization must establish accountability for each of its five functions. Glandon, Smaltz, and Slovensky suggest that KM be divided into subsections for Strategy, including systems design, standard definitions, and operating policies; Design and Transition, which emphasizes technical operations; and Operations, which emphasizes associate support.28 In exhibit 10.6, we have expanded their perspective to emphasize the importance of customer service. Many of the operations are highly technical; specialists in operations for vari- ous support services and service lines are common. A highly flexible, inte- grated, and empowered culture is essential, but the KM team members must understand their scorecard goals and collaborate to meet them.
Measures
Performance measures for KM should cover the full set of six dimensions shown in exhibit 10.7. Benchmarks, customer needs, competitive out- sourcing alternatives, and the experience of consultants are used to guide negotiations over annual goals. Most of the measures in exhibit 10.7 are derived from standard cost accounts, automated operating logs, activities of the KM units, and the details of the improvement portfolio. Many can be automated and obtained at low cost. Some require special surveys of HCO
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managers. Consultant evaluations can be used to identify goals. A large number of specific activity measures can be devised to supplement the list in exhibit 10.7.
Managerial Leadership
The functions of exhibit 10.1—the data warehouse, EHR, valid measures and reliable reports, universally available communication, data security, and continuous improvement—have become routine in leading HCOs. KM has become a central component of strategy and an essential foundation expected by every clinical or support team. The measures in exhibit 10.7 are of KM’s process. Excellence is achievable and expected; HCO success is threatened if it is not achieved. The measures fall short of the critical outcome, using KM to move mission achievement to excellence. The frontier is in using KM to achieve high reliability and excellence in care. The two mission-critical issues, for which hands-on monitoring and support by the senior leadership team and the KM leadership are essential, are (1) achieving an effective KMPC and (2) expanding meaningful use of the EHR.29
Achieving an Effective Knowledge Management Planning Committee Change is a watchword of the 21st century. The excellent HCO’s defense against change is its continuous improvement program. KM is central to the
Data preparation Data warehouse
access Customer support
Service Operations
System Design
Standard de�nitions
Operating policies and security
System analysis and improvement
Service management Communications and
software support Access to EHR
software management
Strategy and Development
Knowledge Management Operations
EXHIBIT 10.6 Accountability
Structure for the
Communications
Function
Note: EHR = electronic health record.
Chapter 10: Knowledge Management 329
Dimension KM Function Measure
Demand Reliability and valid- ity of data
New measure requests, response time “Hits” on data warehouse materials Counts of measures in place
Data communications
System users System peak users
Information retrieval Counts of measures and benchmarks in use
Counts of service requests Counts of trainees
Appropriate use and security
Passwords issued Protection systems enabled
KM planning and improvement
Projects managed
Costs and resources
All Units and costs of resources Capital expenditure Machine capacity
Human resources
All Associate satisfaction, retention, absen- teeism, and work-loss days
Output and productivity
All Counts of services completed Productivity measures divide cost
incurred by counts of service completed
Quality Reliability and validity of data
Counts of measures benchmarked Statistical tests of reliability and
sensitivity Audit scores
Data communications
User satisfaction Response delay Systems uptime Audit scores Unexpected events
Information retrieval Trainee mastery scores
Appropriate use and security
Audit scores System attacks Consultant ratings
KM planning and improvement
Projects on time Projects on budget Projects meeting original performance
goals
Customer satisfaction
All Customer surveys, interviews, com- plaints, and unexpected events
Note: KM = knowledge management.
EXHIBIT 10.7 Measures of
Knowledge
Management
Performance
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defense; it ensures that the measures are valid and reliable, supplies the cur- rent guidelines and protocols, and is critical in identifying benchmarks and best practice. KM itself changes constantly. As the technology changes, its applications and utility must be adapted. The KMPC, as indicated in exhibit 10.4, is the key. Its task is to ensure KM support of both current performance and continuous improvement. The KMPC should report to senior leader- ship. Its report should be summarized for governing board review. Senior leadership has several tasks to make the committee effective.
Appointing Membership Senior leadership should appoint KMPC members. Every senior leader has a direct interest, so one approach would be to allow each senior leader to nominate a member. This leaves several important voices—the performance improvement council, the service lines, and the KM staff—without direct representation. A superior approach would solicit nominees from those groups, select from among them, and select five to ten additional members nominated by senior leaders and approved by them collectively. Membership on the KMPC is valuable education and HCO-wide exposure; ambitious managers should gladly accept nomination.
The committee’s task includes monitoring KM performance, partici- pating in goal negotiations, identifying new applications, and reviewing capi- tal investment opportunities. It should make liberal use of subcommittees and task forces, with a goal of identifying and resolving many issues close to their point of origin. The CIO is the obvious candidate for chair, but that removes a critical external perspective. A user chair, the COO or CEO, may be stronger, but external benchmarks and routine use of external consultants can support excellence with a CIO chair.
In HCO systems, KM is increasingly centralized. The system-level KMPC should focus on uniform achievement of local HCOs. Local KMPCs should identify and pursue local opportunities. With the KM architecture determined centrally, the local KMPC focuses on two issues: assisting local users to benchmark performance and identifying and communicating any technical problems that arise. The central committee should maximize local excellence, both by maintaining effective technical support and by guiding local associates to best practice.
Making the Committee Effective Any KMPC faces three critical tasks.30 First, the KM plan must be coordi- nated with the HCO’s strategic plan. The strategic plan (see chapter 15) is developed as a stakeholder consensus on the direction of improvement. It will identify and prioritize the organization’s needs. The KMPC must align the KM plan with the strategic plan. The path to that is through extensive dialogue with customer units, helping them develop evidence-based requests, and using subcommittees and task forces to resolve concerns.
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Second, KM should provide sufficient staff to ensure that no project is incorrectly diverted or unnecessarily delayed by KM. KM must meet its goals with customer-responsive services and staff. Its reports must not only be accurate, they must be accepted as accurate by users.
Third is a focus on final implementation. Expenditures on KM are only justified by improved mission achievement. The record of high-performing HCOs supports a multipart answer:
• Deliberate search for easy gains or “low-hanging fruit” • Systematic pursuit of service excellence, empowerment, and continuous
improvement • Careful integration of KM with associate training and rewards • Willingness to apply KM and continuous improvement to clinical issues
The central questions for KMPC are “What are we getting for the money?” and “How could we get more?” The focus should be whether an additional investment would gain important returns. One way to approach this is through a periodic audit. The audit, by either an internal or external team, can evaluate all the KM activities in light of other HCOs’ achieve- ments, such as the Baldrige Award applications and the HIMSS Value Suite,31 which captures vignettes of value from use of KM using the STEPS (satisfac- tion, treatment/clinical, electronic information/data, prevention/patient education, savings) methodology.32
Expanding the Use of the EHR and Clinical Data The electronic health record is justified by reduced errors, faster transmission of information, a more comprehensive understanding of each patient’s needs, and an accessible base of information on causes and treatments of all patients’ needs. Pioneering work by Intermountain demonstrates both the basic valid- ity of the justification and the complexity of achieving it.33
The EHR is the future; every HCO needs a strategy to implement it and recover the costs. At the same time, the EHR is substantially disruptive to patient care. It is a substantial contributor to burnout.34 Excellent HCOs systematically support their care providers in making the transition. The cost recovery must come initially patient by patient; the opportunities for improving care through collective changes are more remote and often more appropriate for research than individual HCO operations.
Although little is published on effective solutions, the promising avenues appear to include the following:
• Care provider empowerment. Baldrige winners consistently report high care provider satisfaction and low turnover. Those metrics are not the same as “burnout” per se, but they are clearly associated.
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The hallmarks of the Baldrige model—consistent rounding, pursuit of OFIs that directly affect care, negotiated goals, rewards, and documented reliance on values—do not make the EHR interface any less demanding, but they do remove other concerns. They also support the other avenues, rewards, and collective efforts to reduce the difficulties.35
• Strenuous efforts to reduce difficulties. Care providers experience much frustration over extensive requirements for data entry. Many of the items can be entered by clerks and patients, freeing time for care providers to focus on patients.36
• Care provider rewards with clinical results. If an effort is made to find and implement guidelines that support better outcomes, the improvements are themselves a reward for the extra effort. The financial rewards are probably less important than the satisfaction of goal achievement. MHSL notes that it and the larger Memorial Hermann Health System “collaboratively make data and information available to each stakeholder through a combination of electronic, written, or face-to-face vehicles depending on the type of information and its intended use. This includes interacting with the end-user to understand how they need the information formatted so they can effectively use it to make decisions and perform work.” One major reward for care providers is rapid access to specific clinical data. “The majority of data is available electronically so our health care providers can access it in a timely fashion from anywhere in the System.” 37
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. Your HCO is opening a new clinic using the same EHR and informa- tion systems in place at its existing clinics. Clerks, nurses, and physicians will all input information to the EHR and several management systems. What should the KM training program for new associates include? How would you accomplish that training economically?
2. When you visit the intensive care unit, the nurse manager asks you to explain to the clinical associates what the risk-adjusted mortality report means. A check on the intranet reveals that the measure is adjusted for the patient’s age, sex, diagnosis, and APACHE (Acute Physiologic and Chronic Health Evaluation) score at the time of admission, based on a systemwide database. The monthly mortality rate is reported as adjusted, with a three- standard-deviation confidence limit. What do you say to the associates?
Chapter 10: Knowledge Management 333
3. The HCO’s finance committee has set a limit of $100 million per year on new capital investment. Expansion of the EHR will be expensive—at least $40 million per year for three years. The chief information officer has asked you to help develop a case for the investment. What are the next steps?
4. The KM planning committee would like to evaluate performance mea- sures. They ask, “Does our system have all the right measures in place?” Your large, multi-site HCO generates about 2,000 different measures each month, supporting several hundred operational scorecards and strategic scorecards for each service line or geographic site. “Are we missing measures that would improve mission achievement?” was the theme of the committee’s discussion. You’ll be forming a PIT. You want to explain to the PIT what constitutes a “right measure” and how we identify measures that will improve mission achievement.
5. Your HCO is moving from an excellence-in-care mission to a population health mission. How will the KM planning committee systematically add population health measures to service line and unit scorecards?
Additional Resources
Green, M. A., and M. J. Bowie. 2015. Essentials of Health Information Management: Principles and Practices, 3rd ed. Clifton Park, NY: Delmar.
McWay, D. C. 2014. Legal and Ethical Aspects of Health Information Management, 4th ed. Clifton Park, NY: Delmar.
Wager, K. A., F. W. Lee, and J. P. Glaser. 2017. Health Care Information Systems: A Prac- tical Approach for Health Care Management, 4th ed. San Francisco: Jossey-Bass.
Weaver, C. A., and M. J. Ball. 2015. Healthcare Information Management Systems: Cases, Strategies, and Solutions, 4th ed. New York: Springer.
Balgrosky, J. A., J. W. Brady, and R. Speaker. 2015. Essentials of Health Information Sys- tems and Technology. Burlington, MA: Jones & Bartlett Learning.
Notes
1. US National Center for Biotechnology Information. 2018. “PubMed.” National Library of Medicine. Accessed April 7. www.ncbi.nlm.nih.gov/pubmed.
2. Memorial Hermann Sugar Land (MHSL). 2016. “2016 Malcolm Baldrige Qual- ity Award Application.” Accessed September 13. www.nist.gov/sites/default/ files/documents/2018/05/10/2016-memorial-hermann-sugar-land-application - summary .pdf.
3. US Department of Health and Human Services (HHS). 2018. “About ONC.” Reviewed May 22. www.healthit.gov/newsroom/about-onc.
4. Ibid. 5. HHS. 2018. “Meaningful Use and MACRA.” Reviewed March 16. www.healthit
.gov/topic/meaningful-use-and-macra/meaningful-use-and-macra.
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6. Jones, S. S., R. S. Rudin, T. Perry, and P. G. Shekelle. 2014. “Health Information Technology: An Updated Systematic Review with a Focus on Meaningful Use.” Annals of Internal Medicine 160 (1): 48–54. doi: 10.7326/M13-1531.
7. Bowes, W. A. 2014. “Impacts of EHR Certification and Meaningful Use Implemen- tation on an Integrated Delivery Network.” AMIA Annual Symposium Proceedings 2014: 325–32. PMCID: PMC4419911. PMID: 25954335.
8. Sarasohn-Kahn, J. 2014. “Here’s Looking at You: How Personal Health Informa- tion Is Being Tracked and Used.” California Healthcare Foundation. Published July 8. www.chcf.org/publication/heres -looking -at-you -how-personal -health -information-is-being-tracked-and-used.
9. Hernandez, S. R. 2014. “What’s Private and What’s Not?” California Healthcare Foundation. Published July 16. www.chcf.org/blog/whats-private-and-whats-not/.
10. Sharp HealthCare. 2007. “Sharp HealthCare: The Best Place to Work, Practice Medicine, and Receive Care.” National Institute of Standards and Quality.” www .nist.gov/sites/default/files/documents/2017/10/11/2007_Sharp_Application _Summary.pdf, p. 17.
11. World Health Organization. 2018. “Classifications.” Accessed April 7. www.who .int/classifications/icd/en/.
12. Ibid. 13. American Hospital Association. 2017. AHA Hospital Statistics 2018 Edition. Chi-
cago: Health Forum. 14. The Joint Commission. 2004. “The Joint Commission and CMS Align to Make
Common Performance Measures Identical.” Joint Commission Perspectives 24 (11): 1. 15. Rode, D. 2001. “Understanding HIPAA Transactions and Code Sets.” Journal of
AHIMA 72 (1): 26–32. See also Roach, M. C. 2001. “HIPAA Compliance Ques- tions for Business Partner Agreements.” Journal of AHIMA 72 (2): 45–51.
16. National Quality Forum. 2018. “About Us.” Accessed April 7. www.qualityforum .org/story/About_Us.aspx.
17. HHS. 2017. “About AHRQ.” Reviewed November. www.ahrq.gov/cpi/about/ index .html.
18. Electronic Healthcare Network Accreditation Commission. 2017. “Glossary of Terms.” Published November 9. www .ehnac.org/wp-content/uploads/2014/01/ EHNAC-Glossary-of-Terms-090618 .pdf.
19. Ries, M. 2009. “Tele-ICU: A New Paradigm in Critical Care.” International Anesthesiology Clinics 47 (1): 153–70. See also Kobb, R., N. R. Chumbler, D. M. Brennan, and T. Rabinowitz. 2008. “Home Telehealth: Mainstreaming What We Do Well.” Telemedicine Journal and E-Health 14 (9): 977–81.
20. Brown, S. M. 2010. “Information Technologies and Risk Management.” In Risk Management Handbook for Health Care Organizations, 6th ed., edited by R. Car- roll. San Francisco: Jossey-Bass.
21. US Food and Drug Administration. 2018. “Cybersecurity.” Updated August 30. www.fda.gov/medicaldevices/digitalhealth/ucm373213.htm.
22. MHSL 2016. 23. Centers for Medicare & Medicaid Services. 2018. “Medical Privacy of Protected
Health Information.” Published June. www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/SE0726Fact- Sheet.pdf. See also Gostin, L. O. 2001. “National Health Information Privacy: Regulations Under the Health Insurance Portability and Accountability Act.” Jour- nal of the American Medical Association 285 (3): 3015–21.
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24. Glitz, R., and C. Stanton. 2010. “The Health Insurance Portability and Account- ability Act (HIPAA) of 1996.” In Risk Management Handbook for Health Care Organizations, 6th ed., edited by R. Carroll. San Francisco: Jossey-Bass.
25. R. P. Solomon, “Information Technologies and Risk Management”; P. J. Para, “Evolving Risk in Cyberspace and Telemedicine”; and K. S. Davis, J. C. McConnell, and E. D. Shaw, “Data Management.” 2010. In Risk Management Handbook for Health Care Organizations, 6th ed., edited by R. Carroll. San Francisco: Jossey-Bass.
26. Health Information and Management Systems Society. 2015. “The HIMSS mHealth Roadmap—An Overview.” Published February 4. www.himss.org/mobile healthit/roadmap.
27. Glandon, G. L., D. H. Smaltz, and D. J. Slovensky. 2013. Information Systems for Healthcare Management, 8th ed. Chicago: Health Administration Press.
28. Ibid., 230–32. 29. Bates, D. W., S. Saria, L. Ohno-Machado, A. Shah, and G. Escobar. 2014. “Big
Data in Health Care: Using Analytics to Identify and Manage High-Risk and High- Cost Patients.” Health Affairs 33 (7): 1123–31.
30. Glandon, Smaltz, and Slovensky 2013, chapter 5. 31. US Department of Commerce. 2018. “Baldrige Award Recipients Listing.”
Accessed April 7. www.nist.gov/baldrige/award-recipients. 32. Health Information and Management Systems Society. 2018. “Value Suite.”
Accessed April 7. www.himss.org/valuesuite. 33. Bowes 2014. 34. Sinsky, C., L. Colligan, L. Li, M. Prgomet, S. Reynolds, L. Goeders, J. Westbrook,
M. Tutty, and G. Blike. 2016. “Allocation of Physician Time in Ambulatory Prac- tice: A Time and Motion Study in 4 Specialties.” Annals of Internal Medicine 165 (11): 753–60. https://dx.doi.org/10.7326/M16-0961.
35. Swensen, S., A. Kabcenell, and T. Shanafelt. 2016. “Physician–Organization Collab- oration Reduces Physician Burnout and Promotes Engagement: The Mayo Clinic Experience.” Journal of Healthcare Management 61 (2): 105–27.
36. DiAngi, Y. T., and C. A. Longhurst. 2016. “Taming the EHR (Electronic Health Record)—There is Hope.” Journal of Family Medicine 3 (6): 1072.
37. MHSL 2016.
CHAPTER
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CRITICAL ACTIONS
11 HUMAN RESOURCES
1. Treating the human resource as an investment:
• Manage the human resource through careful planning and recruitment and with ongoing support.
• Reward the value added by skilled associates.
• Use transformational culture to build engagement and retention.
• Identify and respond to associates’ development needs.
2. Measuring and improving associate loyalty:
• Ensure safety and comfort in the workplace.
• Identify and address opportunities for improvement (OFIs) from surveys and collective assessments.
• Listen and respond to all individual comments.
3. Promoting service excellence:
• Train workers to exceed expectations in meeting customers’ needs.
• Train managers in responding to workers’ needs.
• Provide rewards for exceptional effort in customer service.
4. Building a competent workforce and an attractive workplace environment:
• Train associates for teamwork.
• Maintain a healthy work environment.
• Implement a value of respect.
• Develop rewards and incentives for excellent performance.
5. Building workforce diversity and inclusion:
• Assure every member of a diverse workforce of the healthcare organization’s values.
• Encourage individual leadership development plans.
• Identify and assist high-potential associates for advancement.
• Maintain succession plans for key positions.
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Purpose
The purpose of human resources (HR) is to
sustain and increase the contribution of the associates to the healthcare organization’s (HCO) mission by improving the skills, effectiveness, engage- ment, and commitment of associates.
In fulfilling its purpose, HR becomes a central force that shapes and sustains the culture of empowerment and transformation, a major contributor to improvement goals, and a critical component of strategy development.
An HCO’s associates often include several hundred or thousand people, working in one of dozens of job classifications, many of which are licensed or certified. Most are employed, but others work under long- and short-term service contracts. All physicians are affiliated through a privilege contract (see chapter 6), whether employed or in independent practice. A significant number of associates are volunteers. The HCO is usually one of the community’s largest employers. Its workforce is always diverse in income, gender, ethnicity, and education.
Excellent HCOs rely on the service excellence model shown in exhibit 2.2. The service excellence emphasis on investment—that is, developing, rewarding, and retaining the human resource as an asset rather than viewing it simply as a cost—is a radical departure from the tradition of bureaucratic organizations. The investments add at least 10 percent to payroll costs. They must be recovered by improved efficiency or increased patient volumes. High-performing HCOs such as North Mississippi Health Services (NMHS) and Henry Ford Health System (HFHS) implement this model aggressively.1 They view their associates as their most valuable resource and are willing to invest in them whenever evidence shows the investment will improve capabil- ity, loyalty, and engagement. These characteristics are measured directly by satisfaction and engagement surveys, turnover, and absenteeism rates, and indirectly by quality-of-care, patient satisfaction, cost of care, and workplace safety measures.
NMHS describes its HR strategy, as shown in exhibit 11.1, as a com- prehensive and complex effort to create, recruit, retain, and develop the human resource. When HR is successful, care-providing and other work teams are committed to the mission. They know their jobs and they know each other. They will respond quickly to patient or customer need. Delays, injuries, and accidents to patients or associates are infrequent. Empowered associates identify and correct conditions interfering with mission achieve- ment. Teams find ways to improve efficiency of care that cover the cost of initiatives in exhibit 11.1.
Chapter 11: Human Resources 339
Functions
The functions of HR shown in exhibit 11.2 are essential to implementing the service excellence strategy. HR supports the transformational culture by training virtually all associates in work processes, evaluating each associate’s abilities and supporting his development, training all managers in transforma- tional management, and advising on all human resource issues. In addition, it carries out the traditional HR functions of recruitment, compensation, benefits management, and collective bargaining, adapted to the transforma- tional model.
“Grow Our Own” Recruitment Strategy
Needs analysis: Trends and training
Gap analysis: Turnover and projected increases and decreases
Position analysis – Market-sensitive clinical and non-clinical
Future Workforce Plan
College Agreements
Pre-employment Competency Behavioral testing Cognitive testing and skills-based evaluations Behavioral interviewing/cognitive skill based Assessment References
NMHS Career Development EXCEL Personalized career counsel- ing Aptitude and interest testing Educational workshops Tuition reimbursement Educational leave
Departmental Interview Competency pro�le Behavioral interviewing
aligned with CSFs Peer/Panel interview Knowledge, Skills, Abilities
External Recruitment
(Buy)
Transfer/ Hire
Internal Recruitment
(Make)
Internal and External WF Analysis
EXHIBIT 11.1 North Mississippi
Health Services’
Human
Resources
Strategy
Source: NMHS (2012).2
Note: CSFs = Critical Success Factors; NMHS = North Mississippi Health Services
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EXHIBIT 11.2 Functions of Human Resources
Function Description Example
Plan workforce needs
Development of employment needs by job category
Forecast of RNs required and available by year
Strategic responses in recruit- ment, downsizing, training, and compensation
Strategy for recruitment, retention, and workforce adjustment
Develop workforce contribution
Recruitment, selection, and orientation Advertising, career promotion, assistance to schools and colleges
Credentials review, interviewing
Associate safety Accident reduction programs OSHA reports
Harassment-free environment Review mission, vision, and values and key workplace policies
Diversity and inclusion Special programs for underrepresented groups
Skills training Specific skills training and continuous improvement courses
Leadership development and succes- sion planning
Programs to prepare first-line managers Identification and support of candidates for upper
management
Service recovery Training in identifying service failures and responding
Cultural competence and implicit bias Training in cultural humility and implicit bias
Provide workforce services
Employee services Workforce reduction
Health promotion, child care, social activities offered to associates
Grievance management Counseling, grievance, and collective bargaining management
Regulatory compliance Validation and reporting of employment regulations Response to associate concerns of inappropriate
behavior
Ensure empower- ment, transfor- mation, and ser- vice excellence
Leadership development and education
Programs of human relations skills, continuous improve- ment skills, and meeting management
Service recovery Programs in service standards Training for service recovery
Manage com- pensation and benefits
Position control Central review of number of positions and employees
Wage and salary administration Market surveys of compensation and benefits Issuance of paychecks and transfer of payroll deductions
Incentive compensation Distribution of incentives earned
Benefits administration Disbursements and usage data
Records management Protection and analysis of employment data
Conduct collective bargaining
Response to organizing drives, negotia- tion, and contract administration
Management of union collective bargaining contracts
Improve continuously
Ongoing review of performance of the associate force
Identification of potential shortage situations, recruitment or retention OFIs
Continued improvement of workforce satisfaction, reten- tion, safety
Ongoing review of HR activities Identification of OFIs and establish-
ment of improvement goals
HR department operational scorecard improvements
Note: HR = human resources; OFI = opportunity for improvement; OSHA = Occupational Safety and Health Administration;
RN = registered nurse.
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Plan Workforce Needs Workforce planning allows the organization adequate time to respond to changes in the environment that lead to replacement, increases, or decreases in the numbers of associates. The workforce plan is a subsection of the orga- nization’s strategic plan (discussed in chapter 15). It develops forecasts of the number of persons required in each skill by year for three to five years in the future. It also projects additions and attrition and even specifies the planned retirement of key individuals. It includes a succession plan for mana- gerial positions. The clinical staff plan (see chapter 6) is a component. More specific plans are made for the coming year. NMHS “continually assesses its workforce needs” through four means: “1) the annual budget process that projects volumes . . . ; 2) hospital leaders use external staffing benchmarks and best practice reviews to determine staffing needs and evaluate staffing to volumes; 3) outpatient areas, such as clinics or home health care, pro- ject staffing based on historical appointment data combined with projected demographic and/or population changes; 4) a new computerized schedul- ing system is being deployed systemwide to maximize staffing effectiveness, allowing leadership to monitor staffing to volumes in real time.”3
A task force that includes representatives from HR, planning, finance, nursing, and medicine guides workforce planning. HR works closely with the employing departments to translate the plan to workforce adjustments and plans for individuals, including hires, promotions, training, separations, and compensation changes. HR establishes guidelines for the use of temporary labor such as overtime, part-time, and contract labor. The plan is coordinated with new programs and capital requests. The revised plan is coordinated with the facilities plan because the number and location of employees determine the requirements for many plant and guest services. The final package must be integrated into the long-range financial plan. Finally, it must be approved by the governing board. The approved plan establishes each unit’s workforce for the coming year.
Develop Workforce Contribution High-performing HCOs commit to continued development for every associ- ate. Building and maintaining the best possible workforce require a systematic program of recruitment, maintaining a safe and comfortable environment, managing diversity in both the associate and the patient populations, and supporting both skills training and leadership development. Most of these functions are provided in close collaboration with the associates’ work units.
Recruitment, Selection, and Orientation Retention of proven associates is generally preferable to recruitment because it is cheaper—the cost of recruiting new personnel is usually 20 to 30 percent of the annual compensation4—and the risk of an unsatisfactory outcome is lower for both the organization and the associate. However, expansions,
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changes in services, and associate life cycles result in continuing recruitment needs at all skill levels. Even under the best retention program, about 10 percent of the workforce will depart and be replaced each year.
A uniform protocol for recruitment and selection establishes policies for the following eight activities:
1. Position approval. Recruitment is for a specific vacancy identified through position control (described in a later section).
2. Job description. Each position must be described in enough detail to identify education and training, licensure, and experience requirements to determine compensation and to permit equitable evaluation of applicants. Descriptions are developed by the operating managers and approved and recorded by HR.
3. Classification and compensation. Wage, incentive, and benefit levels must be assigned to each recruited position. These must be kept consistent with the external market, similar job descriptions, collective bargaining contracts, and regulations. HR maintains the classifications. Each class has an associated pay scale, benefit entitlement, and incentive program.
4. Applicant pool promotion. HR develops and administers policies following Equal Employment Opportunity Commission and other compliance requirements.5 It plans the design, placement, and frequency of media advertising, including use of the organization’s website. Both HFHS and NMHS devote substantial effort to promoting healthcare careers in their communities. They partner with local schools and colleges to support formal training and encourage interest. They offer scholarships and other benefits to their employees who want to advance.
5. Initial screening. “Self-screening”—exposing applicants to the mission, vision, and values of the organization and the detailed job description— is used to inform applicants about expectations before they apply. HR screening normally includes verifying professional certifications, verifying data on the application, contacting references, and checking criminal records and listings in the National Practitioner Data Bank.6 Applicants may also undergo background checks for credit and driving records and a brief physical examination, which may include drug testing. Structured interviews are increasingly popular and are believed to be effective.
6. Final selection. Applicants who pass the initial screening are subjected to more intensive review, usually involving the immediate supervisor of the position and future teammates. HR monitors compliance with state and federal equal opportunity and affirmative action regulations and with the job description and requirements.
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7. Orientation. New associates should learn the organization’s mission and values, its policies intended to encourage their contribution, and its associate support services. They need assistance in a variety of areas, ranging from maps that show how to navigate their workplace to counseling on selecting their benefit options. HR offers a basic orientation program. The new associates’ supervisor arranges a unit- and job-specific orientation and assigns more experienced colleagues to be preceptors or coaches.
8. Probationary review. Employees begin work with a probationary period, which concludes with a review of performance and usually an offer to join the organization on a long-term basis.
Often, increased benefits and other incentives are included in the long-term offer. Line supervisors conduct the probationary review, with advice from HR.
For the clinical staff leaders and higher supervisory levels, search committees are frequently formed to establish the job description and requirements, encourage qualified applicants, carry out screening and selec- tion, and assist in convincing desirable candidates to accept employment. HR acts as staff for the search committee and ensures that the intent of organization policies has been met. Internal promotion is often desirable for these positions.
Associate Safety In 2016, hospitals had 5.5 reported work-related injuries and illnesses for every 100 full-time equivalents; the healthcare sector overall had 3.9, and all private industries had 2.8. Although hospitals had improved from 2011 while the all-private-industry rate had increased, healthcare remains, as the Bureau of Labor Statistics says, “a dangerous place to work.”7 Illness and injury from hospital work can be kept at low levels by constant attention to safety. Back injuries, needle sticks, and associate infections are preventable. Hazards such as repeated exposure to low levels of radioactivity or anesthesia gases can be reduced. The Occupational Safety and Health Act identifies standards for safety in the workplace, supports inspections, and levies fines for noncompliance.8
Much of the direct control of hazards is the responsibility of the clini- cal engineering and facilities maintenance departments. Infection prevention is an important collaborative effort of housekeeping, plant engineering, nurs- ing, and medicine to protect the patient and the associate. Employee protec- tion in well-run organizations stems from procedures developed for patient safety. Oversight responsibility for the environment of care is required by The Joint Commission and is useful in coordinating efforts and monitoring overall achievement. HR is usually assigned the following functions:
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• Monitoring and analyzing safety and complaint measures, benchmarks, federal and state regulations, and professional literature for organization-wide opportunities for improvement (OFIs)
• Maintaining and submitting statistics for the Occupational Safety and Health Administration (OSHA), which mandates workers’ compensation for injury, establishes safe practices, and collects worker safety statistics (see www.osha.gov)
• Maintaining or coordinating the completion of material safety data sheets—profiles of hazardous substances with information on safe handling that must be filed with the OSHA and systematically distributed to associates who are exposed to the substance
• Providing or assisting with training in and promotion of safe procedures and practices
• Negotiating contracts for workers’ compensation insurance or managing settlements where the organization self-insures
Harassment-Free Environment A work environment that is comfortable, as well as safe, is an essential requirement for recruiting and retaining associates. HR is responsible for “clearly and regularly” communicating and “effectively” enforcing policies forbidding sexual harassment.9 The regulations in these areas recognize and reward careful efforts to prevent problems. Excellent HCOs strive to exceed legal requirements, making physical and psychological safety a given.
Harassment is both illegal and a serious infraction of the value of respect. In addition to unacceptable activities by individuals, a hostile envi- ronment can be a violation of civil rights law. It is one in which the employee has specifically complained about practices that “unreasonably interfere with an individual’s work performance” or create “an intimidating, hostile, or offensive working environment” and the employer has taken no steps to correct the practices.10 Leading institutions go beyond the law with healthy work environment initiatives. These have enhanced associate satisfaction and retention, patient safety, and the organizations’ financial viability.11
Diversity and Inclusion The more successful HCOs make a deliberate and vigorous effort to repre- sent the racial, ethnic, gender, lesbian, gay, bisexual, and transgender makeup of their community in their clinical staff, management group, and work- force.12 They adapt job requirements to family needs and work to promote women in management.13 While this approach may be driven in part by a belief in social justice, it is also supported by sound marketing theories. Many people seek healthcare from care providers who resemble them in gender, language, sexual orientation, or culture. Increasing attention to the needs of female workers has clearly influenced the structure of employment benefits
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and the rules of the workplace.14 HR monitors workforce diversity, guards against discriminatory activity, and designs programs that assist all associates to reach their full potential.
Leadership diversity is believed to promote associate engagement. It may reduce health disparities.15 Despite its advantages, limited evidence sug- gests that diversity implementation is not widespread.16 Surveys show that women and minorities are still underrepresented in HCO management.17
Training Training is a major component of HR activity, and an important aspect of associates’ work life. At excellent HCOs, it averages about ten days per year for full-time employees.
The array of offerings in a large HCO includes the following:
• Orientation. This is a review of the organization’s mission, history, vision, values, major assets, and marketing claims as well as policies and benefits of employment.
• Technical skills. Modern clinical protocols and work processes require precise completion of highly technical activities. Although appropriate professional education provides a foundation, it cannot ensure proficiency and current competence. HR operates an ongoing educational activity for all associates. Content is developed by the profession or activity involved. HR assists with learning tools and facilities.
• Continuous improvement and performance measurement. This is basic education in continuous improvement and safety practices, including the reason for, meaning of, and application of concepts; how to use several basic tools; and how improvement teams work. Advanced training includes project management skills and more sophisticated analytic tools.
• Guest relations programs. These involve role-playing, scenario planning, and group discussion techniques that demonstrate ways to carry out service standards and that reinforce responses that show caring behaviors to patients and visitors.
• Work policy change rollouts. These review the objectives and implications of major changes in compensation, benefits, and work rules.
• Retirement and financial planning. This is offered to workers for assistance with understanding retirement benefits and planning for retirement transitions.
• Outplacement assistance. This is for persons who are being involuntarily terminated through reductions in workforce.
• Benefits management. This is guidance on options and procedures for using benefits, including efforts to minimize misuse.18
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• Major organizational change rollouts. These explain permanent or temporary actions, such as new facilities and programs that would be of interest to associates.
• Formal continuing education. Opportunities to advance professionally through study in accredited outside programs are supported by flexible hours and scholarships. Both continuing education and degree programs are supported.
• Healthy lifestyle management. Health education and disease prevention classes are provided in order to support a healthy workforce.
HFHS claims, “Our commitment to building a learning and develop- ment infrastructure for our entire workforce supports Learning and Con- tinuous Improvement as a core value. The HFHS University, established in 2004, enables us to deploy a high-quality, consistent, and convenient educa- tion and training platform across HFHS. A web-based learning management system provides employees with easy classroom or online course registra- tion for required and elective courses from work or home. Each employee has a personal learning site that tracks assigned courses, course completion, transcripts, and certificates. Employees completed 217,598 courses in 2008. Average training per leader was 57.2 hours in 2008.”19
Leadership Development and Succession Planning Leadership development begins with identification of promotable associates, who are offered extra learning opportunities through special assignments, advanced training, expanded mentoring or coaching, committee responsibili- ties, and activities outside the organization, often called talent management. Their potential is made clear to them, and their favored position is soon grasped by their peers. In addition, leaders are recruited from outside the HCO.
HFHS describes best practice in developing leaders:
The HFHS Leadership Competency Model . . . defines the leadership attributes that all HFHS leaders are expected to demonstrate. Self- assessments, 360-degree assessments, personality assessments . . . and supervisor evaluations during the performance management process support evaluation against the competency model. Leaders use results in collaboration with their supervisors to create personal develop- ment plans to address gaps in leadership competencies and behaviors. Actions may include course work and development opportunities available through the HFHS University leadership development cur- riculum and/or external opportunities that align with and support expected leadership competencies. Many leaders, including our physi- cians, improve their personal leadership through diverse opportunities
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beyond HFHS, such as professional education, community service, and leadership positions in professional organizations and societies.20
Employees discuss career progression with their supervisors during the performance management process. HFHS supports these discussions by providing defined career paths for various job functions; daily, online, system- wide job postings of all available positions; and the Careers for Life Center, which offers career counseling, professional development programs, remedial courses and workshops, and a library of career planning resources.21
HFHS states: “Results [of engagement surveys] are segmented by business unit, department, and key workforce demographics. Results are compared against internal segments and against a national database of medi- ans and top quartile results for health care organizations. All leaders attend four hours of training prior to receiving their assessment results and develop impact plans with their individual work groups, targeting two Q12® items for improvement and entering improvement plans into the online [com- mercial] engagement tool. Progress is monitored throughout the year at regularly scheduled meetings and through pulse surveys.”22
At more senior levels, the program becomes more intense. Succession planning identifies potential replacements for all senior executive team mem- bers, their direct reports, and other key leadership positions. Steps include the following:
• Each leader completes a competency needs assessment for her position using the HFHS Leadership Competency Model.
• Each leader identifies three to five potential successors in “ready now,” “short-term,” and “long-term” categories against the needs assessment.
• The list of high-potential candidates is reviewed and confirmed by next-level leadership.
• Each leader uses the organization’s Development Guide and Roadmap to help her assess strengths and opportunities for growth, interpret 360-degree assessments, and create specific team member development plans.
• All leaders are required to have a development plan to promote engagement. For employees identified as high potential, additional steps help create a development plan aligned with the position for which they have been identified.
• Senior leaders share succession plans as a team, identifying opportunities to spread talent across units.23
Service Recovery Service recovery is a program that empowers workers to recover from patient service mistakes24 (see chapter 2). It must be taught to associates and
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first-line supervisors so that they are comfortable using it and use it correctly. When an associate feels that a customer has been treated in a substantially substandard manner, he corrects the problem as fully as possible and is autho- rized to compensate the customer appropriately as well. Patients and families may be given flowers, free meals, free parking, and even a waiver for hospital charges, as indicated by the seriousness of the shortfall. All such transactions are reported in depth; these records identify process weaknesses and generate OFIs. A hospital must have sound processes in place and a reasonable record of performance to make service recovery feasible.
Cultural and Linguistic Competence Cultural competence is a set of complementary behaviors, practices, and
policies that enables a system, an agency, or indi- viduals to work and effectively serve pluralistic, multiethnic, and linguistically diverse communities.25 The Joint Commission standards address food pref- erences, translation services, equal-standard-of-care provision, patient assessment and education (geared toward suitable literacy and language levels), appro- priateness of environment, and ongoing staff educa-
tion.26 Language barriers, religious beliefs, unconventional views of illness and alternative remedies, and diseases or conditions that may emanate from the patient’s country of origin reduce patient satisfaction but also impair outcomes.27 Cultural insensitivity and unconscious bias are addressed by training, as well as access to coaches, ethics committees, and counselors. Linguistic services include bilingual and bicultural staff, trained medical interpreters, and qualified translators.
Training for all associates in contact with patients and for the special- ist coaches, counselors, and interpreters is an HR responsibility. Without a deliberate support program, sensitivity to the cultural and linguistic perspec- tives of patients and their families is often inconsistent and ineffective.28 Lead- ing HCOs collect patient population data and use it to plan for and evaluate effectiveness of cultural and language services.29
Provide Workforce Services The retention strategy of excellent HCOs is supported by a battery of employee services, management of workforce reductions, counseling and mediating grievances, and compliance with various federal and state regulations.
Employee Services HR provides a number of personal services to associates. Workplace wellness and employee assistance programs have been shown to reduce absenteeism and health insurance costs. Childcare also reduces absenteeism.
Cultural competence A set of complementary behaviors, prac- tices, and policies that enables a system, an agency, or individuals to work and effectively serve pluralistic, multiethnic, and linguistically diverse communities.
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Specific offerings are often tailored to the employees’ needs. Charges are sometimes imposed to defray the costs, but some subsidization is usual. Commonly found programs include the following:
• Workplace wellness—health-risk screening, smoking cessation, nutritional advice, and exercise programs
• Employee assistance—counseling and therapy sessions to assist with substance abuse, stress management, and mental health–related issues
• Infant and child care • Social events—major corporate events and recognition of employee
contributions • Recreational sports—sponsored teams and events • Credit unions • Voluntary payroll deduction—for various purposes such as retirement,
tax benefits, and charitable donations to organizations such as United Way
Workforce Reduction Changes in population, technology, competition, payment for care, and the economy can force any HCO to make substantial involuntary reductions in its workforce. Because job security is an important recruitment-and-retention incentive, such reductions must be handled well.30 Good practice pursues the following rules:
• Workforce planning is used to foresee reductions as far in advance as possible, allowing natural turnover and retraining to account for much of the reduction.
• Temporary and part-time workers are reduced first. • Personnel in at-risk jobs are offered priority for retraining programs
and positions in needed areas. • Early retirement programs are used to encourage more senior (and
often more highly compensated) employees to leave voluntarily. • Terminations are based on seniority or well-understood rules,
judiciously applied.
Using this approach has allowed many HCOs to limit involuntary termina- tions to a level that does not seriously impair the attractiveness of the orga- nization to others.
Grievance Administration Well-managed HCOs provide an authority independent of the normal accountability for employees who believe, for whatever reason, that a com- plaint or question has not been fully and fairly answered. The intent is
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to resolve these concerns fairly and quickly. HR departments often offer ombudsman-type programs that provide an unbiased counselor for concerns of any kind. Personnel in these units are equipped to handle a variety of prob- lems, from health-related issues, which are referred to employee assistance programs or occupational health services, to complaints about supervision or work conditions to sexual harassment and discrimination. The office’s success depends on its ability to meet worker needs before they develop into confrontations or more serious dissatisfaction.
A few of the matters become formal grievances. The traditional col- lective bargaining contract includes a formal grievance process that often becomes adversarial in nature. The elements of transformational manage- ment—sound, clearly communicated policies, thorough education, servant leadership, and systems that emphasize rewards over sanctions—minimize adversarial situations. Effective management training produces supervisors who respond promptly to associates’ questions and problems and who have substantially fewer grievances.
These processes are appropriate in both union and nonunion environ- ments. They should make the formal review process typically found in union contracts, leading to resolution by an outside arbitrator, unnecessary in the vast majority of cases. Grievances that go to formal review encourage an adversarial environment. “Solving the problem” is implicit in servant leader- ship. It improves both the work and worker engagement.
Regulatory Compliance Federal regulations regarding equal opportunity require that no discrimina- tion occurs on the basis of sex, age, race, creed, national origin, sexual ori- entation, or disabilities that do not incapacitate the individual for the specific job. Laws that cover affirmative action require special recruitment efforts and priority for equally qualified women, African Americans, and Latinos. (Religious organizations may give priority to associates of their faith under certain circumstances.) The regulations include wage and hour laws, the Family and Medical Leave Act of 1993, Title VII of the Civil Rights Act of 1964, and the Americans with Disabilities Act of 1990. HCOs are required to document compliance with these rules and may be subject to civil suits by applicants who are dissatisfied. HR monitors and documents compliance. Many associates are contract workers rather than employees. They work in the HCO for companies that provide services, such as food service and supply management. HR is responsible for verifying that the employing company has followed procedures consistent with the HCO’s values and the law.
Manage Compensation and Benefits Employee compensation includes direct wages and salaries, shift differen- tials and premiums, bonuses, retirement funds, and a substantial number of specific benefits supported by payroll deduction or supplement. Federal law
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defines employment status and requires withholding of Social Security and income taxes from the employee and contributions by the employer. Other employment benefits are automatically purchased on behalf of the employee via the payroll mechanism. Compensation constitutes more than half the expenditures of most HCOs. From the organization’s perspective, such a large sum of money must be protected against both fraud and waste. From the employee’s perspective, accuracy regarding amount, timing, and benefit coverage should be perfect.
The growing complexity of compensation has been supported by highly sophisticated computer software, with each advance in computer capability soon translated to expanded flexibility of the compensation package. The latest developments in payroll have been increased use of bonuses and incentive compensation as well as “cafeteria” benefits, which allow more employee choice. Well-run organizations now use payroll pro- grams that process both pay and benefit data for three purposes: payment, monitoring and reporting, and cost accounting. This software permits HR to manage compensation issues through position control, wage and salary administration, incentive compensation, benefit administration, and records management.
Position Control The HCO must protect itself against accidental or fraudulent violation of employment procedures and standards and must ensure that only duly employed persons or retirees receive compensation. This protection is accomplished through a central review of the number of positions created, called position control. Creation of a position generally requires multiple approvals, often including the chief operating officer. HR monitors the positions created to ensure compliance with recruitment, promotion, and compensation procedures and to ensure that each individual employed is assigned to a unique position.
Position control protects only against paying the wrong person, hiring in violation of established policies, and issuing fraudulent checks. It does not protect against overspending the labor budget. The number of hours worked outside position-control accountability is significant.
Wage and Salary Administration Most HCOs operate at least two payrolls and a retirement plan disburse- ment system. One payroll covers personnel hired on an hourly basis, requir- ing reporting of actual compensable hours for each pay period—usually two weeks. The other covers salaried, usually supervisory and professional, per- sonnel paid a fixed amount per period—often monthly. Contract workers are often compensated through nonpayroll systems. Tracking these payments is important to measure the full cost of the workforce.
Position control A system of payroll control that identifies specific positions created and filled.
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Wage and salary administration covers all of these disbursements for personnel costs and includes the following activities:
• Compensable hours and compensation due. The activity of verifying hours and compensation is applicable only to hourly personnel. The operating unit is accountable for the accuracy of hours reported and for keeping hours within budget agreements. HR verifies authorization, applies the appropriate pay rate, and applies policies establishing differentials. Computerized systems also identify other elements, such as the worker’s location or activity, to support cost- finding activities. The data become an important resource for further analysis.
• Compensation scales. Each position is classified and assigned a compensation grade. HR conducts or purchases periodic salary and wage surveys to establish competitive pay scales for representative grades. At supervisory and professional levels, these surveys cover national and regional markets. For most hourly grades, the local market is surveyed.
• Seniority, merit, and cost-of-living adjustments. Compensation is sometimes adjusted for seniority, merit, or cost of living. Seniority and cost-of-living raises are not directly related either to the market for employment or to the success of the organization. Merit raises— increases in the base pay reflecting the individual employee’s skill improvements—are difficult to administer objectively and tend to become automatic. Leading organizations are moving to replace all three adjustments with improved compensation scaling and performance-oriented incentive payments.
Fair compensation should meet three general criteria:
1. Compensation should equal long-run economic opportunities for similar positions elsewhere. The test of compensation is the market. Compensation consistently below market rates creates difficulty in recruiting and retaining associates. Compensation consistently above market rates impairs the competitive position of the organization.
2. Compensation should reflect actual contribution to the HCO’s strategic goals. This connection is usually implemented through incentive programs that recognize achievement of operational and strategic goals.
3. Compensation should encourage professional growth and fulfillment consistent with organizational needs. Incentives to learn and grow are part of a good compensation program.
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Incentive Compensation The market demand for competitive performance has made tangible reward for individual achievement desirable, and improved information systems have made it possible.31 An organization built on rewards and the search for continued improvement is strengthened by a system of compensation that supplements personal satisfaction and professional recognition. HCOs have advanced significantly toward this goal.
Certain constraints must be recognized in designing an incentive com- pensation system:
• The resources available will depend more on the organization’s overall performance than on any individual’s contribution. They may be severely limited through factors outside the organization’s control. The incentives must recognize this reality, emphasizing overall performance (the strategic scorecard) over unit performance (the operational scorecard).
• Equity and objectivity are expected in the distribution of the rewards. • The individual’s contribution is difficult to measure. • Group rewards attenuate the incentives to individuals. The larger the
group, the more the attenuation. • The incentive program must avoid becoming a routine or expected
part of compensation. These constraints suggest a gain-sharing incentive system, which is based on both strategic and unit performance, has negotiated unit goals, and is applied to the individual’s work team. Gain-sharing approaches suggest that primary worker groups can effectively set expectations consistent with the needs of the larger organization and that the effort to do so leads to measurable improvement in achievement. Under a gain-sharing compensation system, annual longevity salary increases disappear as incentive pay increases, and incentives provide a substantial portion of compensation, particularly for senior management.
Benefit Administration Many of the social programs of Western nations are related directly or indi- rectly to employment, through programs of payroll taxes, deductions, and entitlements. These programs are fixed in place by a combination of market forces, direct legal obligation, and tax-related incentives. HCOs and other employers in the United States support extensive programs of nonwage benefits, which add as much as 30 percent beyond salaries and wages to the costs of employment and are generally exempt from income and Social Security taxes. The exact participation of each employee differs, with major differences depending on full-time or part-time status, grade, seniority, and
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employee selection. In general, five major classes of employee benefits and employer obligations exist beyond wage compensation:
1. Payroll taxes and deductions. The employer is legally obligated to contribute premium taxes to Social Security for pension and Medicare benefits and to collect a portion of the employee’s pay for Social Security and withholding on various income taxes. Certain funds, such as uninsured healthcare expenses and childcare expenses, can be exempt from income taxes by the use of pretax accounts. In unionized companies, dues are usually deducted from hourly workers’ pay. While the deductions represent only a small handling cost to the employer, they are an important convenience to the employee.
2. Mandatory insurance. Employers are obligated to provide workers’ compensation for injuries received at work, including both full healthcare and compensation for lost wages. They are also obligated to provide unemployment insurance, covering a portion of wages for several months following involuntary termination. Employer-sponsored health insurance is not mandated by the Affordable Care Act, but is offered by virtually all large HCOs.
3. Vacations, holidays, and sick leaves. Employers commonly pay full- time and permanent employees for legal holidays, additional holidays, vacations, and sick leave. Some also compensate certain other nonworked time such as educational leave, jury duty, and military reserve duty. They grant unpaid leave for family needs, in accordance with the Family and Medical Leave Act,32 and for other purposes as they see fit. As a result, only about 85 percent of the 2,080 hours per year that nominally constitute full-time employment is actually worked by hourly workers. The nonworked time is an important factor in the cost of full-time versus part-time employees. Part-time positions often share in employment benefits only on a drastically reduced basis.
4. Voluntary insurance programs. Defined contribution retirement programs are offered by most large HCOs. The specified contribution and agreed-on deduction are deposited into a tax-advantaged account. Life insurance and travel and accident insurance are also common. Various tax advantages are available for these protections. The programs are subject to state laws, the federal Employee Retirement Income Security Act, and income tax laws.
5. Other perquisites. A wide variety of other benefits of employment can be offered, particularly for higher professional and supervisory grades. Generally, perquisites are shaped by a combination of tax and job-performance considerations. Educational programs, professional society dues, and journal subscriptions are used. The Internal Revenue Service (IRS) requires Form 990 reporting of community benefit and
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executive compensation and perquisites for tax-exempt organizations (nonprofits). Benefits such as cars, club memberships, and expense accounts have come under increased scrutiny by the IRS. Public reporting has reduced nonwage benefits for executives (see www. guidestar.org). Added retirement benefits—actually income deferred for tax purposes—and termination settlements are used to defray the risks of leadership positions. All of the perquisites must meet tests of reasonableness to avoid inurement concerns.
In managing employment benefits, HR strives to maximize the service excellence objective of mission achievement. Four courses of action are char- acteristic of well-run departments, three relating to program design and one to program administration:
1. Program design for competitive impact. The value of a given benefit is in the eye of the employee, and demographics affect perceived value. A married mother might prefer child care to health insurance because her husband’s employer already provides health insurance. A single person whose children are grown might prefer retirement benefits to life insurance. Employee surveys help predict the most attractive design of the benefit package. Recent trends have emphasized cafeteria-style benefit plans, where each employee can select preset combinations.
2. Program design for cost-effectiveness. Several benefits have an insurance characteristic such that actual cost is determined by exposure to claims. Health insurance, accident insurance, and sick benefits are particularly susceptible to cost reduction by benefit design. Health insurance, by far the largest of these costs, is minimized by the use of defined contribution approaches, including copayments, premium sharing, and selected provider arrangements. It may also be reduced by health promotion activities.33 Accident insurance premiums are reduced by limiting benefits to larger, more catastrophic events. Duplicate coverage—where the employee and the spouse who is employed elsewhere are both covered by insurance—can be eliminated. Costs of sick benefits can be reduced by training first-line managers to discuss illness-related problems with workers and by maintaining a collegial work environment. These methods appear to be more effective than sick leave benefit restrictions.34
3. Program design for tax implications. Income tax advantages are a major factor in program design. Many advantages, such as the exemption of health insurance premiums, are deliberate legislative policy. Details are subject to constant adjustment through both legislation and administrative interpretations. As a result, it is necessary to review the benefit program periodically for changing tax implications, in terms of both current offerings and the desirability of additions or substitutions.
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4. Program administration. Almost all of the benefits can be administered in ways that minimize their costs. Strict interpretation of benefits can be received well by employees if it is fair, courteously administered, and accompanied by documentation in the benefit literature initially given employees. Preventing insured claims is important. Absenteeism and on-the-job injuries are reduced by effective supervision, and health promotion, counseling, and employee risk management can reduce both absenteeism and health insurance costs. Unemployment liability is reduced by better planning and use of attrition for workforce reduction. HR affects all these activities through employee services, supervisory training, workforce planning, and occupational safety programs.
Records Management HR maintains a large and sensitive information base about the workforce. It is computerized, with the content organized around eight core files of information, as shown in exhibit 11.3. These files contain individual records, including specific competency assessments and development plans. They sup- port the workforce measures and many of HR’s operational measures.
HR files, like patient records, must be protected against unauthorized access and misuse. Persons with access to the files must be trained in proper use. More serious questions arise after these basic concerns have been met. Reduction of dissatisfaction, turnover, absenteeism, grievances, accidents, and illness are HR’s goals. It is clearly proper, even desirable, to study varia- tions in measures, such as supervisory effectiveness, that can be improved by systems redesign, counseling, and education. Analyses based on worker characteristics (e.g., age, sex, race) or performance (e.g., illness, grievances) are often ethically questionable and can be illegal. Some facts, such as drug test data, are potentially destructive and libelous if false. Some companies have attempted to deny employment opportunities in situations that present a high risk of occupational injury. For example, female nurses in their child- bearing years have been denied employment in operating rooms because of the known pregnancy risks related to exposure to some anesthetics. When questions involving inferences about such matters arise, a review by the HCO’s ethics committee or institutional review board is wise.
A sound policy must balance the advantages of investigation against its dangers. The following guidelines help:
• Information access must be limited to a necessary minimum group. Those with access are taught the importance of confidentiality and the organization’s expectation that individuals’ rights will be protected.
• Formal approval must be sought for studies of individual characteristics that affect personnel performance. Often a specific committee, including associates of the organization’s ethics committee, is designated to
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review study proposals. Criteria for approval include protection of individual rights, scientific reliability, and evidence of potential benefit.
• Actions should make associate restrictions or sanctions a last resort. Considerable effort should be made to find nonrestrictive solutions. In the operating room example, avoiding potentially harmful gases or implementing special safety practices should be considered before employment is restricted.
• When used, sanctions or restrictions must offer the individual the greatest possible freedom of choice. The right of the individual to take an informed risk should be respected, and it may reduce the organization’s ultimate liability. Material safety data sheets (see chapter 12) are designed to promote rational choices. Such a sheet would be required in the operating room example. Its purpose is to promote safety and informed choice. A nurse may accept employment, weighing the risks in light of her lifestyle.
File Uses
Position control List of approved full- and part-time posi-
tions by location and classification Provides a basic check on number
and kinds of people employed
Personnel record Personal data, past training, develop-
ment plan, employment record, hear- ings record, benefits use
Provides tax and employment data aggregated for descriptions
Workforce plan Record of future positions and expected
personnel Shows changes needed in workforce
Succession plan Specific replacement candidates for
managerial and other critical posts Plans internal promotion possibili-
ties for all key positions
Payroll Current work hours or status, wage, or
salary level Generates paychecks Provides labor-cost accounting
Employee satisfaction Results of surveys by location and job
class Assesses employee satisfaction
Training schedules and participation Record of training programs and
attendance Generates training output statistics
and individual records
Benefits selection and use Record of employee selection and use of
services Benefits management and cost
control
EXHIBIT 11.3 Core Files
of Human
Resources
Records
Management
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Conduct Collective Bargaining HCOs are subject to state and federal legislation that governs the right of workers to organize a union for their collective representation on economic and other work-related matters. Federal legislation generally supports the existence of unions; state laws vary. Collective bargaining is a declining ele- ment in the United States, to the point that, in 2017, only 7.2 percent of all nongovernmental health employees were union members, a number that has been stable for many years.35 Unionization is much higher among govern- ment workers. Nongovernmental unionization differs significantly by state, with the northeastern states and California most unionized. Unionization is far more common in urban areas. In hospitals, unskilled workers and mem- bers of the building trades are the most likely to be organized. Nurses are next most likely; other clinical professionals are rarely organized. Periodic efforts to organize attending physicians and resident physicians have gained little headway.36
The National Labor Relations Board (NLRB) regulates unions and organization efforts. It requires unions to organize in specific job classes: physicians, registered nurses, all professional personnel other than doctors and nurses, technical personnel (including practical nurses and internally trained assistants and technicians), skilled maintenance employees, business office clerical employees, guards, and all other employees. Any organizing vote must gain support of a majority of all the associates of a given class.37 An NLRB ruling in 1999 redefined medical residents as employees (rather than students) and permitted them to organize as a separate group.38 The NLRB maintains that physicians in private practice are independent contractors and thus are not eligible to organize. Well-managed HCOs respond to organiz- ing drives by hiring legal counsel to guide them in fulfilling their NLRB rights and obligations.
Unions are likely to continue to be important in specific institutions and job classes but are unlikely to expand dramatically. Well-run HCOs seek to discourage unionization and establish nonadversarial, collaborative relationships with existing unions. Such a strategy is actualized through transformational management, which explicitly recognizes employee needs without requiring union representation. Well-run organizations use experi- enced bargainers, have expert legal counsel, and promote union participation in ongoing process improvement teams (PITs) and planning activities. They will accept a strike on issues that substantially disrupt the environmental pres- sures for patients or associates, but as a strategy they avoid strikes whenever possible. Considerable supervisory education is necessary to implement this policy. Supervisors should know the contract and abide by it, but whenever possible their actions should be governed by the goals of transformational management. Any distinction between unionized and nonunionized groups should be minimized.
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Improve Continuously HR supports continuous improvement in its own unit and throughout the organization. Its customers are both associates and employing units. The department also prepares its own OFIs and goals and implements its own improvements. HR will measure its own performance using multidimen- sional measures. Most of the functions can be benchmarked on cost and quality against competitors and nonhealthcare service organizations. Exhibit 11.4 shows typical OFIs and likely outcomes for HR improvement.
People
Human Resources Professionals HR management emerged as a profession after World War II, in response to the complexities created by union contracts, wage and hour laws, and ben- efits management. HCOs were sheltered from these developments for several
Indicator Opportunity Example
Potential RN shortage
Expand RN recruit- ment program
Install expanded part-time RN pro- gram, emphasizing retraining, child care, flexible hours
High health insurance costs
Promote more cost- effective program
Revise health insurance benefits Install managed care Promote healthy lifestyles
Low associate incentive payments
Redesign incentive pay program
Expand eligibility for incentives Improve measurement of
contribution
Low employee satisfaction
Identify common causes and address individually
Improve employee amenities Offer special training for super-
visors with low employee satisfaction
Inadequate operational performance improvement
Support line review of root causes
Conduct focus groups on motivation
Seek evidence of worker dissatisfaction
Review incentive programs
Labor costs over goal
Support orderly employment reduction
Curtail hiring in surplus categories Design and offer early retirement
program Start cross-training and retraining
programs
Note: RN = registered nurse.
EXHIBIT 11.4 Typical
Improvements
for Human
Resources
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years, but as the need arose, HCOs moved to establish an identifiable HR system and to hire specially trained leadership for it. HR professionals have a distinctive curriculum of formal education and a recognizable pattern of pro- fessional experience, and they may be voluntarily credentialed as professionals in HR (see www.hrci.org). Healthcare practitioners have an association—the American Society for Healthcare Human Resources Administration, an affiliate of the American Hospital Association (see www.ashhra.org). Well-run organizations now recruit professionals with experience in the healthcare or service sectors to fill their HR director or vice president positions. Profes- sional training and experience contribute to mastery of the several areas in which laws, precedents, or specialized skills define appropriate actions.
Organization of the Human Resources Department HR is organized by function, to take advantage of specialized skills and pro- cesses. Exhibit 11.5 shows a typical accountability hierarchy for a large HCO with labor union contracts. Small organizations often use consulting organiza- tions for support. (While unionization is rare, and less common in small insti- tutions, urban HCOs usually have some contracts with specialized unions.)
Health and safety
Chief operating of�cer
Vice president for human resources
Human resources planning task
force*
HR improvement task force*
Recruitment
Professional
Compensation Education and counseling
Employee services
HR department management
Wage and salary
Nonprofessional
Incentive programs
Bene�ts
Collective bargaining
Orientation
Quality training
Management education
Recreation
Childcare
Continuous improvement
Operations
Mediation and grievance
EXHIBIT 11.5 Organization of a Large Human Resources Department
Note: HR = human resources.
*Dotted lines show advisory relationships. The two task forces draw broadly from inside and outside the HR department.
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In multistate healthcare systems, HR tends to be decentralized by work site. While some activities, such as records management, can be centralized, most require frequent contact with employees and supervisors, demanding a local presence. Some policies are driven by state laws, which vary. A central office can monitor planning, support more elaborate educational programs, operate a uniform information system, and promote consistency of many policies. Decentralized representatives available in each site concentrate on implementation of these programs. Similarly, HR services can be contracted from outside vendors. The use of multidimensional performance measures makes contracting useful, and contracts can be arranged for specific functions or the entire HR unit. Outsourcing all or part of HR services is probably a viable solution for small organizations.
Measures
HR requires two measurement systems. One measures the workforce itself; supports planning; and identifies OFIs for recruitment, training, or compen- sation. The other measures the unit’s own performance, using the standard operational measures template. Exhibit 11.6 lists many of the commonly used measures for describing and assessing the workforce.
Measures of the human resource are an important part of the annual environmental assessment. The values for most demand, cost, efficiency,
Dimension Measure
Workforce characteristics Age, sex, ethnic origin, language skills, profes- sion or job, training, certifications, other
Demand New hires per year Unfilled positions Positions filled with short-term contract labor
Costs and efficiency Labor costs per unit of output Overtime, differential, and incentive payments Benefit costs per associate, by benefit HR department costs per associate
Quality Personal development plans Skill levels and cross-training Recruitment of chosen candidates Analysis of voluntary terminations
Satisfaction and engagement Employee satisfaction or engagement surveys Turnover and absenteeism Grievances
Note: HR = human resources.
EXHIBIT 11.6 Measures of the
Human Resource
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quality, and satisfaction measures can be compared with benchmarks, with competitors, and with the organization’s own history. OFIs can be identi- fied and pursued. They are often in specific units of the HCO or job classes. For example, satisfaction or efficiency may be lower in one or two service lines, allowing a focused PIT to identify improvements. The workforce itself changes only slowly. Improvement goals are possible, but they sometimes take several years to achieve.
An additional set of measures is important in the HR operational scorecard, as shown in exhibit 11.7. More than 250 metrics exist for various details of department operation, and consulting companies provide bench- marks and other services. The quality of HR services includes measures of the workforce, as shown in exhibit 11.6. Specific goals can be set and achieved by HR. Many require collaboration with operating units, but the improvements should be reflected in their measures as well.
Dimension Concept Representative Measures
Demand Requests for HR department service
Requests for training and counseling services
Requests for recruitment Number of employees*
Cost Resources consumed in department operation
Department costs Physical resources used by
department Benefits costs, by benefit
Human resource
Workforce in the department
Satisfaction, turnover, absenteeism, grievances in the department
Output and efficiency
Cost per unit of service
New hires per year
Hours of training provided per employee
Cost per hire, employee, training hour, etc.
Quality Quality of department services
Goals from measures of the workforce
Time to fill open positions Results of training Audit of services Service-error rates
Customer satisfaction
Services as viewed by employees and supervisors
Surveys of other units’ satisfaction with HR
Employee satisfaction with benefits, training programs, etc.
Note: HR = human resources.
*Employees automatically receive many services from HR and thus are a good indicator of overall
demand for service.
EXHIBIT 11.7 Human Resource
Management
Operational
Scorecard
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The use of both workforce and effectiveness metrics helps identify goals for both the strategic focus on investing in the human resource and the departmental operation.
Managerial Leadership
The two foundations of proven excellence in HCOs, transformational man- agement and continuous improvement, demand a strong HR program. Both depend on training. The success of training depends on the trainee’s receptiveness, which in turn is a function of their comfort in the workplace. The start of success is the HR operational scorecard, exhibit 11.7. It can be benchmarked, and it provides an ongoing set of OFIs about HR operations. Full achievement of success requires a further step, the strategic management of the human resource measured in exhibit 11.6. Benchmarks for exhibit 11.6 can be distant goals drawn from HCOs not completely comparable. To reach them, managers must monitor several complex issues—associates’ per- ception of their skills and their work environment, HR operational capability, and leadership’s support of the working teams.
Associates’ Perceptions The goal of the Baldrige model is that every associate is committed to the mission, fully trained, completely comfortable in executing his contribu- tion, and systematically rewarded for goal achievement. The measures of success are in exhibit 11.6. Most of the measures can be tracked at the level of individual teams, and aggregated to larger organization units. Compari- son of performance and benchmarking are difficult, because few units are similar, but a systematic search for OFIs is critical. HR’s goal is uniformly high performance. Combinations of improvable dimensions—costs and satisfaction or demand and quality, for example—are valuable OFIs. Root causes are often in behaviors of first-line and intermediate managers. PITs that bring high performers and leaders with OFIs together can be fruitful. Retraining of first-line managers may be a solution, and their success should be rewarded. At some point, leaders whose performance does not improve must be replaced.
Excellence and associates’ perception of fairness are interrelated. An associate’s rewards—compensation, learning opportunities, recognition, and work conditions—are perceived to be fair when the associate believes a similar effort by a different associate would receive similar returns. The HR processes that set compensation, evaluate individual performance, distribute incentives, resolve conflicts, and open learning and promotion opportunities must all pass intense scrutiny.
The first-line team leader must not have favorites. Evaluations must be unbiased. Pay must be systematically matched to competitive opportunities.
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Bonuses and promotions must be distributed on the basis of individual contribution, and learning opportunities must be distributed on the basis of organizational need. The test is stronger than the absence of a hostile envi- ronment; it must be the presence of a uniformly healthy, comfortable, and supportive work environment. HR and senior leadership must see that fair processes are in place, enforced, and respected. That, of course, means that leaders must go beyond the letter of the law as individuals.
Adequate Human Resources Funding Modern HR is an expensive support activity. In budget discussions, the appropriateness of the expenditures is often questioned. It can be tempting to protect profit margins by cutting HR costs. The model used by high- performing HCOs is “spend enough on HR to build a loyal, engaged associ- ate group.” The evidence shows that overall HCO performance is improved by finding talent in advance for key job openings, by stressing organizational culture and values in the selection process, and by basing individual or team compensation on goal-oriented results.39 All of these activities increase HR costs. The evidence is clear that the investment pays off.
Consistent Leadership As discussed in chapter 2, the organization’s culture is supported through leadership actions and reinforced through consistent messages to associates and other key stakeholders. Senior leadership achieves this consistency with two major themes:
1. Making the mission, vision, and values real. Service excellence organizations use their mission, vision, and values constantly. The mission, vision, and values are always public, widely disseminated, and referenced in debate. Management must promote them, respect them, and live by them.
2. “Walking the talk” with the associates. The messages to the associates are the following: • “We are truly and deeply committed to our mission” (hence
incentive pay for mission achievement, abundant training, and support for service recovery).
• “We value not only your effort but also your opinion” (which is why we spend time doing surveys and invite you to meetings).
• “We want to help you grow and be promoted” (seen in employees’ personal and professional development plans).
• “We support your engagement in meaningful work in a healthy work environment” (hence our investment in your satisfaction and a culture of empowerment).
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As with any communications campaign, these messages must be repeated thousands of times, with high consistency, to be credible. Senior leadership must make a visible presence throughout the organization, and leaders must respond in ways that convince associates that they have been heard. That means simple problems are fixed, complicated problems are explained, progress toward solutions is publicized, and roadblocks to prog- ress are removed. The test of success is the associates’ belief that management has been fair and aggressive in attacking the improvement agenda. It is mea- sured by surveys, face-to-face meetings, incidents, and retention statistics.
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. You are talking with the superintendent of schools in your HCO’s com- munity, who is a potential governing board member. Explain to her the HCO’s human resource strategy, assuming that the HCO implements the Well-Managed Healthcare Organization/Baldrige approach.
2. The school superintendent is interested in diversity. Explain to her why some ethnic groups, women, and members of the lesbian, gay, bisexual, and transgender community are often underrepresented in leadership in HCOs generally, and describe the steps that are recommended to improve diversity.
3. The local news calls, having found the HCO’s IRS Form 990. The reporter notes that the CEO and several employed physicians are listed with generous compensation, many multiples of the community’s median family income. She’d like an explanation of the HCO’s policy. What’s the best answer? What are the key takeaways you want the reporter to put in her story?
4. The HR functions in exhibit 11.2 cost a lot of money. Ten days of training will add 4 percent to payroll if the workers are replaced on the job. Gener- ous benefits will add 5–10 percent of base pay over the minimum set. Service recovery adds a small cost, as does employee counseling. A board member on the finance committee says, “We’ve gone too far with this. We have to cut back to protect our income for expansion and debt service.” How should senior leadership respond?
5. Suppose you accepted a senior leadership role in an HCO that was in trouble on many of the strategic scorecard measures in exhibit 3.4. Your due diligence before accepting suggested that a solid market exists; the HCO’s problems are the result of ineffective leadership and can be corrected. Where would you start? What are the key steps for a successful recovery strategy?
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Additional Resources
Davidson, M. N. 2011. The End of Diversity as We Know It: Why Diversity Efforts Fail and How Leveraging Difference Can Succeed. Oakland, CA: Berrett-Koehler.
Fried, B., and M. D. Fottler. 2015. Human Resources in Healthcare: Managing for Success, 4th ed. Chicago: Health Administration Press.
Human Rights Campaign. 2018. “Resources for Healthcare Facilities.” Accessed Septem- ber 18. www.hrc.org/hei/resource-guide.
Ulrich, D., J. Younger, W. Brockbank, and M. Ulrich. 2012. HR from the Outside In: Six Competencies for the Future of Human Resources. New York: McGraw-Hill.
Notes
1. North Mississippi Health Services (NMHS). 2012. “Application for the 2012 Mal- colm Baldrige National Quality Award.” Accessed May 11. www.nist.gov/sites/ default/files/documents/2017/10/11/2012_North_MS_Application_Summary .pdf. See also Henry Ford Health System (HFHS). 2011. Application for the Malcolm Baldrige National Quality Award. Accessed May 11, 2018. www.nist.gov/baldrige /award-recipients.
2. NMHS 2012. 3. NMHS 2012, 21. 4. Kocakulah, M. C., and D. Harris. 2002. “Measuring Human Capital Cost Through
Benchmarking in Health Care Environment.” Journal of Health Care Finance 29 (2): 27–37.
5. US Department of Labor. 2018. “Equal Employment Opportunity.” Accessed May 11. www.dol.gov/dol/topic/discrimination.
6. National Practitioner Data Bank. 2018. “How to Get Started for Organizations.” Accessed May 11. www.npdb.hrsa.gov/hcorg/howToGetStarted.jsp.
7. Bureau of Labor Statistics. 2018. “Injuries, Illness, and Fatalities.” Modified July 27. www.bls.gov/iif/oshsum.htm.
8. Occupational Safety and Health Administration. 2018. “Worker Safety in Hospi- tals.” Accessed May 11. www.osha.gov/dsg/hospitals/index.html.
9. US Equal Employment Opportunity Commission. 1990. “Policy Guidance on Current Issues of Sexual Harassment.” Notice N-915-050. Issued March 19. www .eeoc.gov/policy/docs/currentissues.html.
10. Ibid. 11. American Association of Critical-Care Nurses. 2018. “Healthy Work Environments.”
Accessed May 28. www.aacn.org/nursing - excellence/healthy -work-environments. 12. The Joint Commission. 2014. “Advancing Effective Communication, Cultural
Competence, and Patient- and Family-Centered Care for the Lesbian, Gay, Bisexual, and Transgender (LGBT) Community: A Field Guide.” Published April 3. www. jointcommission.org/lgbt/. See also Dreachslin, J. L. 2007. “The Role of Leader- ship in Creating a Diversity-Sensitive Organization.” Journal of Healthcare Manage- ment 52 (3): 151–55.
13. Myers, V. L., and J. L. Dreachslin. 2007. “Recruitment and Retention of a Diverse Workforce: Challenges and Opportunities.” Journal of Healthcare Management 52 (5): 290–98.
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14. McCracken, D. M. 2000. “Winning the Talent War for Women: Sometimes It Takes a Revolution.” Harvard Business Review 78 (6): 159–67.
15. Dotson, E., and A. Nuru-Jeter. 2012. “Setting the Stage for a Business Case for Leadership Diversity in Healthcare: History, Research, and Leverage.” Journal of Healthcare Management 57 (1): 35–46.
16. Davidson, M. N. 2011. The End of Diversity as We Know It: Why Diversity Efforts Fail and How Leveraging Difference Can Succeed. Oakland, CA: Berrett-Koehler.
17. American College of Healthcare Executives. 2008. “A Race/Ethnic Comparison of Career Attainments in Healthcare Management: 2008.” Accessed May 11. www.ache.org/PUBS/research/Report_Tables.pdf. See also American College of Healthcare Executives. 2012. “Executive Summary: A Comparison of the Career Attainments of Men and Women Healthcare Executives.” Published December. www.ache.org/pubs/research/2012-Gender-ExecSummary.pdf.
18. Clement, D. G., M. A. Curran, and S. L. Jahn. 2015. “Employee Benefits.” In Human Resources in Healthcare: Managing for Success, 4th ed., edited by B. J. Fried and M. D. Fottler. Chicago: Health Administration Press.
19. HFHS 2011, 23. 20. Ibid. 21. Ibid., p. 24 22. Ibid., p. 25. 23. Ibid., p. 24. 24. Leebov, W. 2012. Resolving Complaints for Professionals in Health Care. Scotts Val-
ley, CA: Create-Space Independent Publishing Platform. 25. Evans, R. M., Sr., 2014. “Workforce Diversity.” In Human Resources in Healthcare:
Managing for Success, 4th ed., edited by B. J. Fried and M. D. Fottler. Chicago: Health Administration Press.
26. The Joint Commission. 2010. Cultural and Linguistic Care in Area Hospitals: Final Report. Oakbrook Terrace, IL: Joint Commission. See also Office of Minor- ity Health. 2018. National Standards for Culturally and Linguistically Appropriate Services in Health and Health Care. US Department of Health and Human Services. Accessed September 18. www.thinkculturalhealth.hhs.gov/assets/pdfs/Enhanced- NationalCLASStandards.pdf.
27. Cohen, J., B. Gabriel, and C. Terrell. 2002. “The Case for Diversity in the Health Care Workforce.” Health Affairs 21 (5): 90–102.
28. Tschurtz, B. A., R. G. Koss, N. J. Kupka, and S. C. Williams. 2011. “Language Ser- vices in Hospitals: Discordance in Availability and Staff Use.” Journal of Healthcare Management 56 (6): 403–18.
29. Dreachslin, J. L., and V. L. Myers. 2007. “A Systems Approach to Culturally and Linguistically Competent Care.” Journal of Healthcare Management 52 (4): 220– 26. See also Lewis, M. G. 2007. “A Cultural Diversity Assessment and the Path to Magnet Status.” Journal of Healthcare Management 52 (1): 64–70.
30. Woodward, C. A., H. S. Shannon, C. Cunningham, J. McIntosh, B. Lendrum, D. Rosenbloom, and J. Brown. 1999. “The Impact of Reengineering and Other Cost Reduction Strategies on the Staff of a Large Teaching Hospital: A Longitudinal Study.” Medical Care 37 (6): 556–69. See also Burke, R. J., and E. R. Greenglass. 2001. “Hospital Restructuring and Nursing Staff Well Being: The Role of Personal Resources.” Journal of Health and Human Services Administration 24 (1): 3–26.
31. Milkovich, G., J. Newman, and B. Gerhart. 2013. Compensation, 11th ed. New York: McGraw-Hill/Irwin.
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32. US Department of Labor. 2018. “Family and Medical Leave Act.” Accessed Sep- tember 18. www.dol.gov/whd/fmla.
33. Aldana, S. G. 2001. “Financial Impact of Health Promotion Programs: A Compre- hensive Review of the Literature.” American Journal of Health Promotion 15 (5): 296–320.
34. Whysall, Z., J. Bowden, and M. 2018. “Sickness Presenteeism: Measurement and Management Challenges.” Ergonomics 61 (3): 341–54. doi:https://dx.doi.org/10 .1080/00140139.2017.1365949.
35. US Bureau of Labor Statistics. 2018. “Economic News Release.” Modified January 19. www.bls.gov/news.release/union2.t03.htm.
36. For background on this topic, see Hoff, T. J. 2000. “Physician Unionization in the United States: Fad or Phenomenon?” Journal of Health and Human Services Administration 23 (1): 5–23.
37. Gullett, C. R., and M. J. Kroll. 1990. “Rule Making and the National Labor Rela- tions Board: Implications for the Health Care Industry.” Health Care Management Review 15 (2): 61–65.
38. Hein, J. G., Jr. 2000. “Employment: NLRB Empowers Residents to Unionize.” Journal of Law, Medicine and Ethics 28 (3): 307–9.
39. Platonova, E. A., and S. R. Hernandez. 2013. “Innovative Human Resource Prac- tices in U.S. Hospitals: An Empirical Study.” Journal of Healthcare Management 58 (4): 290–303.
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CRITICAL ACTIONS
12 ENVIRONMENT OF CARE
1. Designing space for improved patient outcomes:
• Choose architecture, design, and equipment that emphasize safety and environmental stewardship.
• Maintain a visually welcoming atmosphere.
• Require preventive maintenance.
2. Planning the best use of space:
• Assign space allocation to one central office.
• Institute a formal, open process for review of requests for expansion.
• Periodically review space use to determine continuing need.
3. Using benchmarks and goals to support security, environmental safety, facilities maintenance, and materials management services:
• Adopt zero harm as an achievable goal.
• Delight internal and external customers.
• Train, support, and reward service employees and supervisors.
4. Using contract services to improve performance:
• Specify service requirements in cost, quality, and satisfaction dimensions.
• Benchmark and compare service alternatives.
• Integrate outside suppliers to ensure performance.
5. Developing disaster and emergency response plans for incidents such as fires, natural disasters, large-scale accidents, and terrorism:
• Maintain internal plans for response to multiple threats.
• Drill and test emergency response skills.
• Coordinate with other community and government agencies.
• Participate in and comply with the National Incident Management System.
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Purpose
The purpose of managing the environment of care is to
provide safety for all persons in the healthcare organization (HCO); provide the physical environment required for the mission, including all buildings, equipment, and supplies; plan for contingencies and implement risk mitigation strategies;
and
maintain reliable guest services at satisfactory levels of economy, attractive- ness, and convenience.
Functions
Environment-of-care functions can be grouped into six major categories, as shown in exhibit 12.1. It is noteworthy that the functions include the management of all the plant, equipment and supplies, and many nonclinical services for guests and associates. The functions range from lawn mowing and snow removal to security, signage, and meals to the life-support environ- ments of surgery and intensive care. Everything must be done well—from sweeping the entranceway to maintaining intensive care unit equipment— with the number one goal to ensure safety for all persons.
Design and Plan Facilities and Allocate Space The HCO’s physical facility—often an array of buildings of various ages in several locations—is a resource that must be planned to accommodate future technology and market changes, designed or redesigned to fit user needs, acquired, and uniquely allocated to meet the needs of specific activities in the context of environmental responsibility. The planning and design function is centralized to ensuring consistency across the HCO.
Planning Facility Requirements Healthcare facilities are built for their users; thus, plans begin with identifying specific needs and architectural requirements. Plans continue through the management of construction contracts and the life cycle of maintenance, renovation, and eventual replacement.
As shown in exhibit 12.2, the facilities mas- ter plan begins with an estimate of the space needs of each service or activity proposed in the services plan. Space needs must be described by location, special requirements, and size. Need is compared to
Facilities master plan A document that begins with an estimate of the space needs of each service or activity proposed in the services plan.
Chapter 12: Environment of Care 371
EXHIBIT 12.1 Functions of Environment of Care
Function Activities Examples
Design and plan facilities and allocate space
Using design to improve performance
Patient-, associate-, and environment-friendly designs
Planning, building, acquiring, and divesting facilities
Facilities management plan Construction and renovation management Facilities leasing and purchase Space allocation
Promoting environmental sustainability
LEED certification Recycling
Maintain facili- ties and pro- vide guest services
Environmental service Cleanliness
Groundskeeping Landscaping and decorating
Transportation Snow removal Parking
Guest services Support for associates, patients, and visitors Food service Signage and wayfinding
Preventive maintenance Preventive maintenance schedules
Comply with regulatory and safety requirements
Safety Accident and harm prevention and risk management; elimination of hazards
Security Around-the-clock facility security and risk mitigation
Hazardous materials and waste
Chemical and radiation hazard management
Life-safety code compliance Fire prevention and management
Medical equipment Maintaining and repairing medical equipment Compliance with Safe Medical Device Act
Utilities Utility backup and failure prevention
Manage supply chain and end-user satisfaction
Purchasing, receiving, storing, and distributing supplies
Clinical supplies Foodstuffs Drugs Office supplies Medical gases Value analysis and selection of supplies
Plan for emer- gency and disaster response
Emergency preparedness Preparing for large-volume disasters—internal and external
Weather-related disasters
Life-safety and fire protection Response to internal fire or safety problem
Improve continuously
Customer-focused identifica- tion of OFIs
Ensuring that internal and external customer needs are met
Contracting with service vendors
Developing a long-range vision
Coordinating multiyear plans Maintaining competitive services
Note: LEED = Leadership in Energy and Environmental Design; OFI = opportunity for improvement.
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available space, and deficits are met at the lowest cost. Conversion—the sim- ple reassignment of space from one activity to another—is the least expensive, but so many healthcare needs necessitate specific locations and have specific requirements that renovation, acquisition, or construction are frequently necessary. The final facilities master plan shows the future location of all ser- vices and documents the renovation, acquisition, or construction necessary in terms of specific actions, timetables, and costs.
Facilities are sized based on forecasts of demand, using the epide- miologic planning model (see chapter 3). The model assumes that historical trends will continue; in reality, emerging technology can lead to substantial
Services plan
Translation to size and location
requirements
Comparison of need to availability
Design of needed
facilities
Acquisition by purchase, lease, renovation, and
construction
Inventory of existing space:
Size Location Capabilities Limitations
Facilities master plan
EXHIBIT 12.2 Facilities
Planning Process
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changes. Often several alternative assumptions are used to improve con- fidence in the forecast. For example, surgeries are categorized by type of room and square footage required. Each type of room has several sources of demand that are forecast separately. The length and complexity of opera- tions are studied carefully. The literature on emerging surgical techniques and alternatives to surgical care must be evaluated. Trade-offs are required; a room designed for a certain specialty might be less than fully used but unsuitable for other uses. The efficiency of high load factors must be weighed against patient safety and increased associate satisfaction. A simulation model might be constructed to evaluate trade-offs between alternative designs.
In general, plans minimize costs by seeking high load, or occupancy, factors. For example, it is usually possible to schedule maintenance in times of low demand. Unattractive times can be filled by using incentives—dis- counts, faster service to customers, or extra pay to associates. Facilities where emergency demand is often encountered, such as obstetrics and coronary care, will require standby capacity, which may reduce expected occupancy, sometimes to as low as 50 percent. These allowances cannot be changed by internal performance improvement, but they can be changed by centralizing to larger facilities. Thus, facilities planning is often a multisite exploration; convenience must not be sacrificed for safety but may be traded for lower costs.
Using Design to Improve Performance Poor HCO design is an important cause of preventable hospital errors, infec- tions, and work-related stress and injuries. For example, poor ventilation can increase nosocomial infections, while inadequate or inappropriate lighting is linked to suboptimal patient outcomes and medication errors. Noise is an important cause of lower HCAHPS scores. Better, safer, and evidence-based design environments promote healing and satisfy healthcare staff.1
Several design elements are recognized to be important: private rooms, sound control, air quality, ecological impact, signage, and information sta- tions. New design must address wireless communication, delivery robots, and appearance. Bronson Methodist Hospital’s facility in Kalamazoo, Michigan, introduced many improvements, including art, light, nature elements (such as a central garden courtyard), and information technology (such as touch- screen kiosks).2 Bon Secours St. Francis Medical Center, a hospital in Rich- mond, Virginia, uses natural elements such as fountains, meditative gardens, and a chapel that opens to walking paths not only for patients, families, and associates but for the surrounding community,3 ascribing to the urban plan- ning principles of New Urbanism.4
Money spent on design innovations and upgrades can be recov- ered through operational savings and increased revenue. In a study of 19 replacement hospitals, 75 percent experienced overall average increases of 15 percent in admissions, 33 percent in outpatient visits, and 2.5 percent
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in operating margins in the first year.5 Investing in better hospitals requires that leadership recognize the need for and plan strategically to promote an environment that minimizes stress.
Good design is an evolution, rather than an adoption of radical changes.6 Improved design is clearly an important component of a successful
continuous improvement program. Hospitals and health systems have begun to follow performance- based building practices, such as applying for LEED (Leadership in Energy and Environmental Design) certification, to maximize ecological sustainability,7 as well as decrease waste, reduce their environmental footprint, and promote public environmental health.8
Renovation, Construction, and Acquisition Implementing the facilities master plan requires a comprehensive program of real estate and building management that indicates the way the requirements will be met. Unfulfilled needs, including renovations, must be expanded into specifications and drawings for both space and fixed equipment and translated to reality. Real estate must sometimes be acquired, contracts let, progress maintained, and results inspected and approved before the facility can be occupied. In large projects, several years elapse between approval of the facilities plan and opening day. Plans have specific, carefully developed time schedules.
Real estate is acquired through purchase or lease. It is possible to lease all or part of a facility, including a single lease for a building and equipment designed and constructed specifically for the HCO. Major equipment can also be leased. Real estate transactions generally require governing board approval, and the finance department is always involved (see chapter 13).
Major construction and renovation usually call for extensive outside contracting. The traditional approach is to retain an architect, a construction management firm, and a general contractor. Construction financed directly by public funds, such as that of public hospitals, usually must be contracted via formal competitive bids. Private organizations frequently prefer more flexible arrangements, negotiating contracts with selected vendors. Recent innovations have simplified the contracts by combining various elements; for example, turnkey construction involves a single contract to deliver the fin- ished facility. Advantages of speed and flexibility are cited, and costs likely can be reduced if the HCO is well prepared and supervises the process carefully. Small renovation projects are often handled by internal staff. As an interim step, the organization can provide design and construction management, preparing the plans and contracting with subcontractors.
Regardless of the size or complexity of the project, any project to change the use of space should be carefully planned in advance and closely managed as it evolves. A sound program includes the following ten elements:
Sustainability The quality of not being harmful to the environment or depleting natural resources, thereby supporting long-term ecological balance.
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1. Review of the space and equipment needs forecast 2. Identification of special needs 3. Trial of alternative layouts, designs, and equipment configurations 4. Development of a written plan and specifications 5. Review of code requirements and plans for compliance 6. Approval of plan and specifications by the operating unit 7. Development of a timetable identifying critical elements of the
construction 8. Contracting or formal designation of a work crew and its
accountability 9. Ongoing review of work against specifications and timetable
10. Final review, acceptance, and approval of occupancy
Involvement of end users, especially care-providing associates and phy- sicians, in planning and specifying the space requirements from conception to completion maximizes space functionality and stakeholder satisfaction and minimizes costly change orders.
Space Allocation The criterion for allocating existing space is conceptually simple. Each space should be used or disposed of in the way that optimizes achievement of the organizational mission. In reality, this criterion is difficult to apply. Activi- ties tend to expand to fill the available space. As a result, there are always complaints of shortages of space and an agenda of possible reallocations or expansions. When activities shrink, the space is often difficult to recover and reuse. Space is highly valuable and unique: The third floor is not identical to the first. Space also confers prestige and symbolic rewards. Space next to the doctors’ lounge, for example, is more prestigious than space adjacent to the employment office. As a result, space allocation decisions tend to be strenu- ously contested.
Each unit that seeks substantial additional space or renovation must prepare a formal request and gain approval from the space office before sub- mitting a new program or capital proposal. The following guidelines assist in space management:
• Space management is assigned to a single office that permits occupancy and controls access to space. The office participates in new programs and capital budget review activities (see chapters 8 and 13), where most changes originate, and designs appropriate ad hoc review for other requests.
• A key function of the space management office is the preparation of the facilities master plan. Internal consulting and marketing staff assist in the preparation. The draft plan is derived from the services
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plan, and the final version becomes part of the planning package. The facilities master plan includes forecasts of specific commitments for existing and approved space; plans for acquisition of land, buildings, and equipment; plans for renovation and refurbishing requirements for existing space; and plans for new construction.
• The facilities master plan is incorporated into the long-range financial plan and annual review and approval processes.
• The plant services department implements acquisition, construction, and renovation. Details of interior design are reviewed and approved by units that will use the space. Financing is managed by the finance department.
Maintain Facilities and Provide Guest Services A safe and attractive environment of care helps determine the impressions and attitudes that people form about an organization. It is a central compo- nent of the HCO’s culture and important in promotional activity, not only to patients but also to associates. An excellent environment-of-care system is safe, reliable, convenient, attractive, and economical. It includes facilities, supplies, equipment, security, waste disposal, food service, and maintenance services. Exhibit 12.3 shows several HCO environments and their special needs. All of these environments must provide safety, comfort, sanitation, and, except for the smallest, food service. All of them have needs unique to healthcare. At the extreme, the acute care hospital provides complete envi- ronmental support not only for patients but also for staff and visitors. It must have multiple supplies of power and water to allow it to operate through disruptions of those services. It has narrower standards for temperature, humidity, air quality, cleanliness, and wastes. It has high volumes of human traffic and, as a result, has high risks of personal and property safety, includ- ing a risk of direct terrorist attacks. Several hazards, including fire, chemical spillage, radiation, infection, and criminal violence, can be life-threatening to employees, visitors, and patients. The well-run organization uses carefully designed, conscientiously maintained programs to make these services trans- parent, reliable, and risk-free.
Facilities Maintenance Facility maintenance includes decorating; maintaining lighting, water, heat- ing, and air-conditioning; supplying power; cleaning; and repairing all build- ings and grounds. The goal is an attractive, supportive environment, free of hazards, dirt, noise, and odors. These activities are more complex in HCOs because the facilities are large, have high traffic volumes, and in some cases, must operate year-round, around-the-clock. Special needs arise from many clinical activities. Facilities maintenance must respond to local conditions, including weather, and be performed in compliance with a variety of federal
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regulations established by the Occupational Safety and Health Administra- tion (OSHA) and the Environmental Protection Agency (EPA).
The objective of preventive maintenance is to maintain a regular schedule in order to detect needs early and correct them promptly. It improves the environment and safety for patients, visitors, and staff and also reduces total repair costs. Well-managed plant systems schedule preventive maintenance for all the mechanical services and spe- cific building areas. They regularly inspect general- use equipment (e.g., elevators, air-handling units) and plant conditions (e.g., floor and wall coverings, plumbing, roofs, structural integrity). They perform repairs and routine maintenance as needed, and their
Preventive maintenance Care and servicing by personnel for the pur- pose of maintaining equipment and facilities in satisfactory operating condition by provid- ing for systematic inspection, detection, and correction of incipient failures either before they occur or before they develop into major defects.
Activity Facility Nonhealth Counterpart Special Needs
Primary care
Small office
Small retail store
X-ray machine Drugs and clinical supplies Clinical waste removal
Outpatient specialty care
Medical office building
Shopping mall
Special electrical and radiologic requirements
Drugs and clinical supplies Clinical waste removal Disaster preparation
Long-term care
Nursing home
Motel Extra fire safety and disability assistance
Drugs and clinical supplies Clinical waste removal Pathogenic organisms Special air handling 24-hour security
Acute and intensive care
Hospital Hotel Extra fire safety and disability assistance
Drugs and clinical supplies Clinical waste removal Pathogenic organisms Special air handling 24-hour security Disaster and terrorism preparation Dangerous chemicals High-voltage radiology Radioactive products Emergency utilities preparation
EXHIBIT 12.3 Facilities
Maintenance
Requirements
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logs are used to assess replacement needs. A significant fraction of mechanics’ time is devoted to preventive maintenance, and adherence to the schedule is one measure of the quality of the department’s work.
Outside vendors are used to maintain many specialized equipment items. Well-run organizations tend to place the responsibility for managing the contract on the unit that uses the equipment, if only one unit is involved. The plant department is responsible for equipment in general use, such as elevators, heating, and air-conditioning. Actual contracting for all equipment maintenance is centralized through materials management, which must con- sult with the responsible units.
Housekeeping and groundskeeping must maintain buildings and cam- puses efficiently and at standards that ensure visual attractiveness and control microbial and other hazards. Some services, such as snow removal and exte- rior lighting, must be available around the clock. These activities also interact with important programs for environmental safety. In well-run HCOs these activities are conducted to explicit standards of quality and are monitored by inspectors using formal survey methods. Continuous improvement, training, and carefully specified equipment and supplies are used to attain high levels of cleanliness and safety.
Housekeeping and landscape services are frequently subcontracted. The most common contracts are for management-level services. The outside firm supplies procedures, training, and supervision; the workers are hourly employees. Large organizations with access to central services for training and developing methods may be able to justify their own management.
Decorating and landscaping are performed with an understanding of public taste and the cost of specific materials. Colors, fabrics, and designs are selected for comfort, durability, and conformity with applicable safety codes (rating for fire retardancy and prevention). The best decor creates an attractive ambiance but consists of materials that do not show wear and are durable, fire resistant, and easy to clean. Careful initial design leads to higher capital costs, lower operating costs, and greater user satisfaction. Evidence- based design environments have been shown to contribute to improved patient outcomes.9
Medical Equipment HCOs require a wide variety of specialized medical equipment that must be maintained near optimal operating condition and repaired or replaced as necessary. Apparatus—such as ventilators, magnetic resonance imaging machines, ultrasound equipment, multichannel chemical analyzers, elec- tronic monitoring equipment, heart and lung pumps, and surgical lasers and robots—have become commonplace. The acquisition, maintenance, and replacement of this equipment require specially trained personnel (usu- ally called biomedical or clinical engineers), who can be either employees or contractors. Their understanding of purposes, mechanics, hazards, and
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requirements allows them to increase the reliability of the machinery and reduce operating costs.
The role of clinical engineering includes the following activities:
• Assisting the user department or group as they develop specifications, review competing sources, and select medical equipment
• Verifying that power, weight, size, and safety requirements are met • Contracting for preventive and routine maintenance, or arranging
training for internal maintenance personnel • Periodically inspecting equipment for safety and effectiveness • Developing plans for replacement when necessary
Utilities Most HCOs need highly reliable supplies of all utilities. Utilities for most outpatient offices are no different from those for other commercial buildings, but inpatient hospitals operate sophisticated utility systems that provide air, steam, and water at several temperatures and pressures and filter some air to reduce bacterial contamination.10 The enhanced performance requires extra safeguards against failure.
Electrical systems are particularly complex. Feeds from two or more substations, approaching the hospital from different directions, are desir- able. In addition, the hospital must have on-site generating capability to sustain emergency surgery, ventilator, safety lighting, and communication operations. Critical areas must be able to switch to the emergency supply automatically.
Several utilities are unique to hospitals. Most hospitals pipe oxygen and suction to all patient care areas. Many also pipe nitrous oxide to surgical areas. Many hospitals use pneumatic tubes to transport small items such as paper records, drugs, and specimens. A few use robot cart systems to trans- port large supplies.
Guest Services Large numbers of patients, visitors, and staff become the guests of HCOs and require a variety of services. People expect to come to a facility; park; find what they want; get certain amenities such as waiting areas, lounges, or a cafeteria; and leave without even recognizing that they have received such services. They expect, and are fully entitled to, strenuous efforts by the HCO to maintain a safe environment. Those who access the organization by telephone or electronic communication expect a similarly complete, prompt, and unobtrusive response. The organization’s attractiveness is diminished if the services listed in exhibit 12.4 are either inadequate or intrusive.
Coordinated management of guest services stresses the importance of a satisfactory overall impression. Guest services occur in multiple locations
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and encounters. For example, receptionists and security personnel need train- ing in handling recurring situations consistently; current knowledge of the location of each inpatient unit, event, or activity; and a central source for advice on unexpected events. Training in service management, recognition of potentially serious situations, and HCO geography are necessary to do the job well.
Food Service Food service should provide inexpensive, nutritious, appealing, and tasty meals that encourage good eating habits. HCOs typically offer a choice of entrees, appetizers, and desserts to each patient. “On demand” food service is popular. Patient meals must also be provided to a variety of clinical specifi- cations. Soft, low-sodium, and sodium-free diets account for up to half of all patient meals. Patients are often susceptible to food bacteria, so food service must be conducted according to exceptional standards of safety in prepara- tion and distribution.
In addition to patient meals, about an equal number of meals are pro- vided to associates and guests, usually in cafeterias. Visitors and employees expect greater variety, a range of prices, and service at odd hours. A snack bar, a coffee shop, and a variety of vending machines with food and drinks are among common offerings. Food service also supports home care and meals-on-wheels distribution.
Food service is frequently contracted. Contract food suppliers meet quality and cost constraints through centralized menu planning, well-devel- oped training programs for workers and managers, and careful attention to work methods.
Food service is supplemented by therapeutic dietetics, a clinical sup- port service. Clinical dietitians focus on nutritional therapy in acute and post- acute settings. They provide nutritional education and consultation and the preparation of special diets to meet medical needs.
Security Services Security officers Employee identification Traffic control Facility safety inspection and
monitoring
Parking Services
Food Service Cafeteria and vending service Patient food service Therapeutic diets
Communication and Transportation Services
Telephone, television, and music Messenger Pneumatic tube transport systems Reception and guidance Wayfinding Parking Internet access Public website design and maintenance Intranet design and maintenance Cellular phone reception
EXHIBIT 12.4 Guest Services:
Workforce,
Patient, and
Visitor Support
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Comply with Regulatory and Safety Requirements The environment of care is highly regulated by licensure, accreditation, and statutory requirements. For accredited organizations in all settings, the six environment-of-care functional areas described in this section require management plans to reduce risks and threats to safety. Each of these man- agement plans must include risk assessment; staff development; emergency response and procedures; inspection, testing, and maintenance; information collection and evaluation; performance monitoring; and annual evaluation.11
Safety and Risk Management Safety should be a universal concern in HCOs. Risks arising from both patient care and the environment are overseen by a risk management com- mittee with representatives from senior management, legal counsel, clinical services, and support services. The committee is charged to develop and pro- tect a culture of safety, monitor the risk management process, and evaluate safety threats and opportunities for improvement (OFIs). Its duties are often split between clinical and environmental subcommittees. An environmental safety officer is charged with implementing safety improvements. Improve- ments can include process revision, equipment and facilities redesign, and expanded training for associates.
All unexpected events and safety concerns relating to the environment are routinely reported and reviewed by a risk manager or teams account- able to the patient safety committee (see chapter 2). These “unexpected event” reports (often called by other names) provide alerts for individual corrective action or recovery and statistics on the frequency and serious- ness of events that can identify correctable processes. Reporting failures are a known problem. Training, recognition, and examples are used to create a blame-free culture, where associates feel comfortable identifying errors and other safety issues. Reporting of near misses is encouraged. Associates are rewarded for reporting diligently. As associates attain greater psychological safety, the number of reports often increases. While complex and rigorous, patient quality and safety programs that identify the source of adverse events and take corrective action achieve substantially improved patient outcomes and business metrics.12
Security Security services are necessary to protect associates, visitors, patients, and property. There are recognized hazards of theft, property destruction, and personal injury to associates and visitors. Both associates and visitors can commit violent acts. The hazard is particularly high in urban areas and at night. High-quality security services are preventive. They control access, monitor traffic flow, and provide and verify employee identification. They work with risk management and facilities planning to create an environment that is reassuring to guests and discouraging to persons with destructive
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intentions. Digital cameras and emergency call systems amplify the scope of surveillance. Special attention must be given to high-risk areas, such as the emergency department and parking areas. Uniformed guards serve as a visible symbol of authority, respond to questions and concerns, and provide emergency assistance in those infrequent events that exceed the capability of reception personnel.
Security is frequently a contract service. It must be coordinated with local police and fire service. Municipal units sometimes provide the contract service, particularly in government hospitals. Not-for-profit HCOs usually do not pay local taxes in support of local fire and police service. As a result, agreements on the integration of taxpayer services with HCO associates are necessary.
Hazardous Materials and Waste Environmental needs and the hazards of biological and clinical wastes com- plicate an HCO’s waste management. Waste disposal must meet increasingly stringent EPA standards and state and local laws that protect the safety of landfills, water supplies, and air. Many cities require segregation of nonclini- cal wastes to permit recycling. Federal and state laws govern burning and shipment of wastes. Federal laws govern handling and disposal of medical waste13 and other hazardous items, such as chemical, biological, radiologi- cal, and nuclear materials that may be used in terrorist attacks.14 Emergency response plans must include requirements for personal protective equipment and clear assignment of tasks, locations, and training to prevent healthcare workers from exposures.
Within the HCO, wastes must be handled correctly and efficiently. Clinical wastes are known to transmit contagious diseases, such as hepati- tis and HIV. In addition, procedures should outline the steps to be taken for decontaminating patients who seek emergency medical care after being exposed to hazardous materials. Specially designed systems for decontamina- tion and waste management must be carefully planned. Personnel who are most likely to come into contact with hazardous materials or waste contami- nation (e.g., emergency department, housekeeping, nursing staff) must be trained. Drills must be conducted for unusual threats.
Following are five basic approaches to managing hazardous materials:
1. Restricting exposure at the source. Good design and good procedures for use reduce bacteriological and chemical contamination. Air- and water-handling systems can be made almost completely safe. Special handling is necessary for contaminated wastes. Human vectors in the spread of infection are harder to control, and they include both care providers and plant personnel. Hand hygiene, or handwashing, is basic to infection prevention; it takes repeated training and reinforcement to achieve improved patient outcomes.15 Development of comprehensive
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control systems and monitoring of actual infection rates are clinical functions usually assigned to an infection control committee, which includes persons from facilities maintenance, housekeeping, and central supply services.
2. Cleaning and removal. The housekeeping department is usually responsible for cleaning and removing hazardous substances. Techniques are adjusted to the level of risk. Special cleaning materials and associate protective gear are necessary for handling spills of hazardous material.
3. Attention to exposed patients, visitors, and associates. Trauma or infection from contaminants can occur either during patient treatment or in cleaning and disposing of equipment. Needle sticks are a common safety hazard for clinical associates. The OSHA standard to protect workers from exposure to blood-borne pathogens requires employers to maintain an exposure control plan, ensure the use of personal protective equipment, provide initial and ongoing training, maintain records, report exposures to the required bodies,16 and initiate postexposure prophylaxis, if indicated.17 Well-designed clinical waste–removal systems protect associates and guests. Any associate or guest believed to be injured or exposed should receive care following protocols recommended by the Centers for Disease Control and Prevention. Workers’ compensation insurance covers treatment costs and loss of income for any employee injury.
4. Epidemiologic analysis of failures. Studies of the incidence of specific illnesses and injuries can identify process improvements and, in the case of communicable diseases, detect impending epidemics. The work requires special training in epidemiology.
5. Strategic management of waste disposal. HCOs have sewage and solid wastes to dispose of. The best basic strategy is to select supplies that minimize waste, to recycle whenever possible, and to meet special handling needs. Used needles and blades represent a particular problem and are handled through a dedicated collection system from point of use to ultimate destruction.
HCOs usually contract for hazardous materials and waste removal. The contractor team is deeply integrated into the HCO to coordinate these activities. They work side by side with employees on the job and on numer- ous process improvement teams (PITs).
Fire Safety A life-safety program protects persons and property from fire hazards. The life-safety management plan must include provisions for staff education on life-safety issues, a plan for emergency procedures, and periodic plan
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review. In addition, the plan must address facility-wide and area-specific fire response, evacuation routes, and specific roles and responsibilities of person- nel at and away from a fire’s point of origin and in preparing for building evacuation. Additional written policies must address recognized hazards and construction projects.18 State licensure, accreditation by The Joint Commis- sion,19 and Medicare certification requirements enforce compliance.
The National Fire Protection Association Life Safety Code requires routine inspection and maintenance of facilities and often dictates specifica- tions of new construction. Although facilities must comply with any code that is in effect when they are opened, when a renovation is made to an area, all violations of current code must be corrected. The degree of departure from current code is an important factor in renovation and remodeling plans. An old building may contain many violations and be costly to renovate.
Although these provisions are frequently viewed as onerous, fire safety is one area where US HCOs approach zero defect. Reported fires and fire injuries are extremely rare.
Manage Supply Chain and End-User Satisfaction HCOs typically spend 25 to 30 percent of their budget on supplies. Most supply costs are represented in the following inventory groups, which are either large volumes of inexpensive items (such as foodstuffs) or relatively small volumes of expensive items (such as implants):
• Surgical supplies and implants • Pharmaceuticals, intravenous solutions, and medical gases • Foodstuffs • Linens • Dressings, kits, and supplies for patient care
Supply chain management concentrates supply purchases under a single unit that is responsible for meeting standards of quality and service at a minimum total cost. The supply chain management function activities are shown in exhibit 12.5.
Materials managers work with users, including clinical users such as the pharmacy and therapeutics committee, to identify the most economi- cal supplies consistent with patient needs. Many of the costliest supplies are physician-preference items. Their use is standardized through the protocol- setting process. Buyers then negotiate prices, manage inventories, and main- tain accounting records of use.
Improvement of materials management lies in systems that achieve the lowest overall costs, rather than those that simply purchase at the least expensive price. End-user involvement—often on value analysis commit- tees—to evaluate and specify supplies is a critical component. Working with
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PITs and end users, materials management personnel strive to standardize items, reduce the number of different items purchased, establish criteria for appropriate quality, eliminate unnecessary purchases, and maintain accept- able end-user satisfaction. They examine alternative processes and identify improved methods and new supply specifications. For example, disposables may be compared to reusable alternatives.
Most important, the large volumes of standardized materials can be controlled more carefully for quality, and the high quantity can be leveraged to negotiate lower prices. The purchasing process itself uses long-term contracting and competitive bidding to reduce prices. Most well-managed organi- zations now use group purchasing—cooperatives that use the collective buying power of several orga- nizations to leverage prices downward. Some large vendors offer comprehensive materials management, providing a complete service at competitive costs.
Vendors can reduce the cost of the materials-handling system. Auto- mation of inventories, ordering, and billing reduces handling costs. Most major vendors supply just-in-time service, effectively bearing the cost of inventory management as part of their activities. Vendors guarantee specific quality levels and are certified to comply with standards of the Interna- tional Standards Organization. Compliance eliminates the need for routine sampling of received goods. Centralized storage protects against theft and
Group purchasing Cooperatives that use the collective buying power of several organizations to leverage prices downward.
Material selection and control Specifications for cost-effective
supplies Standardization of items Reduction in the number of items End-user involvement in selection and
evaluation
Purchasing Standardized purchasing procedures Competitive bids Annual or periodic contracts Group purchasing contracts
Receipt, storage, and protection Reduction of inventory size Control of shipment size and
frequency Reduction of handling Reduction of damage or theft Economical warehousing
Processing Elimination of processing by purchase
or contract Improved processing methods Reduced reprocessing or turnaround
time
Distribution Elimination or automation of ordering Improved delivery methods Reduced end-user inventories Reduced wastage and unauthorized
usage
Revenue enhancement and cost accounting
Uniform records of supplies usage Integration of clinical ordering and
patient billing systems
EXHIBIT 12.5 Functions of
Supply Chain
Management
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damage. Careful accounting and division of duties guard against theft and embezzlement. Some bulk supplies are delivered by robots to reduce costs. Finally, electronic records of supply usage provide data for cost analysis.
Plan for Emergency and Disaster Response HCOs must have a planned and systematic response to community disasters where large numbers of patients must be treated for trauma and stress. They must also maintain responses for emergencies such as fires, loss of electrical
power, or other utility failure. The programs shown in exhibit 12.6 are deliberate efforts to ensure opera- tions continue and to improve outcomes under natu- ral and manmade disasters systematically. The Joint Commission standards include these (and more) general standards for life-safety protection and emer- gency response management.20 The United States Department of Homeland Security developed the National Incident Management System (NIMS) to facilitate coordination between all responders to emergencies and disasters. NIMS provides the tem-
plate for the management of incidents and works hand in hand with the National Response Framework, which provides the structure and mecha- nisms for national-level policy for incident management.21
Emergency preparation for unplanned and unexpected mass casualty events—such as natural disasters, pandemics, large-scale accidents, civil dis- turbances, or terrorist attacks—is an important and expected function of community HCOs. Disaster is defined as any event that suddenly increases demand substantially beyond the HCO’s normal capacity. Advance warn- ing, medical needs, and the number and severity of injuries differ greatly
National Incident Management System (NIMS) A systematic, proactive approach to guide departments and agencies at all levels of government, nongovernmental organizations, and the private sector to work seamlessly to prevent, protect against, respond to, recover from, and mitigate the effects of incidents, regardless of cause, size, location, or com- plexity, in order to reduce the loss of life and property and harm to the environment.
Program Example
Emergency preparedness
Disaster plan Disaster training Disaster utilities and communications management Routine drills with formal evaluation Annual review and approval by senior leadership Evaluation of all disaster occurrences and drills to identify OFIs Collaboration with community response partners
Life-safety and fire protection
Evacuation plans and routes Routine inspection and testing of fire suppression equipment Preparation for radioactive or chemical contamination Life-safety training and drills
Note: OFI = opportunity for improvement.
EXHIBIT 12.6 Emergency
Management
Requirements
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depending on the disaster. Terrorist attacks have drawn the nation’s atten- tion, but the most common disasters are storms and large-scale accidents such as fires and mass transportation crashes. Management of disaster events addresses four phases: mitigation, preparedness, response, and recovery.
When disaster strikes, people turn instinctively to the hospital. Victims are brought by rescue vehicles, in private cars, or by other means. Even a large emergency service can face 20 times its normal peak load with little warning. Word of disaster spreads quickly through local radio, television, telephone, and social media. The hospital may be inundated with visitors, families, and well-meaning volunteers in addition to the sick and injured. Communication with other community agencies is essential, and normal channels are often overwhelmed or inoperable.
The clinical response to mass casualties begins with triage, a method for sorting patients according to the urgency of their need for care. Although specific events vary, generally only a small fraction of victims require hospitalization. A great many more require ambulatory treatment. Temporary patient stabilization is often important. The Centers for Dis- ease Control and Prevention maintains a website of clinical information for both professionals and the public. It provides advice on treatment responses and mass casualty management.22
An effective HCO response requires a detailed plan; normal opera- tions must be suspended to the extent possible so that personnel, space, equipment, and supplies can be reallocated to the surge.23 The design of the plan is a major project that requires the coordinated efforts of virtually all HCO leadership. The elements of the response include
• rapid assembly of clinical and other personnel; • inclusion of HCO leaders; • reassignment of tasks, space, and equipment; • establishment of supplementary telephone and radio communication; • triage of arriving injured; • temporary shelter for the homeless; • continued care of patients already in the hospital; • housing and food for hospital associates; and • provision of information to the media, volunteers, and families.
The Agency for Healthcare Research and Quality maintains an emer- gency preparedness website and lists areas that must be addressed to respond to terrorist activity:
• Communication and notification • Disease surveillance, disease reporting, and laboratory identification
Triage A method of sorting patients according to the urgency of their need for care.
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• Personal protective equipment • Dedicated decontamination facilities • Medical/surgical and pharmaceutical supplies • Mental health resources24
Major and extended disasters, such as September 11, 2001, and Hurricane Katrina, severely stress associates, and provision for relief and rehabilitation for associates is important.
The hospital’s response must be coordinated with other community resources. Police, fire, and public health organizations are immediately involved, and schools, churches, and businesses can be converted for emer- gency needs. Coordination requires careful collaboration on roles, alternative plans, public messages, communications, and central leadership. A military- type command structure is necessary to reduce confusion and address rapidly changing situations. Government public safety personnel generally assume this role, under emergency powers.
The HCO disaster response requires broad involvement from all asso- ciates. The need to convert spaces, enhance communication, expand supply distribution, and arrange utilities gives the facilities management department a central role. Training for disaster is difficult. The plan must be tested as realistically as possible, and the test often uncovers substantial weaknesses. Once tested, the plan must be rehearsed periodically and include drills with mock casualties and postdrill evaluation. The evaluation identifies OFIs that require PITs. The HCO’s overall plan must be reviewed annually by senior leadership.
Improve Continuously Performance improvement for environment-of-care services must deal with three realities:
1. The services must view themselves as competing for customer approval. Satisfaction of customer requirements, including both price and quality, must be the consuming objective.
2. Many environmental services are delivered by long-term contract with outside vendors, often called strategic partners. The contracts must meet terms that include continuous improvement. No vendor or employed service team can consider itself independent of benchmarks and competing suppliers. HCOs can solicit offers from competing companies and compare outside competition to their internal capability. The selected provider should be able to document near- benchmark performance on the operational scorecard, and the contract should explicitly reference continued benchmarking, annual goals, and improvement.
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Environment-of-care services must seek world-class benchmarks and best practices. A housekeeping service, for example, should compare its performance to hotels. Food service must draw its benchmarks from commercial restaurants. At the same time, environment-of-care services must meet the specific needs of sick patients and integrate their services with the other systems of the HCO. Improvement opportunities often include process revisions, cross-training, revised scheduling, and special needs that must be coordinated with other units.
3. As a result of strategic partnerships and of the capital requirements for environmental services, improvement planning must adopt a multiyear horizon.
Major change in environmental services, such as replacing a vendor, requires long time windows and multiyear forecasting. For example, consider an organization that has operated its own inventory for many years. Its exist- ing storage and distribution equipment is still useful but is aging and already less efficient than current models. As long as the equipment is still service- able, contract inventory management may not be price competitive, but when the organization faces a major investment to replace that equipment, contract services are suddenly more attractive. Similarly, an opportunity to use the existing space for more productive activities will make contract service more attractive. These needs must be anticipated months or years in advance to gain maximum advantage.
People
Leadership and Professional Personnel Environment of care has a few widely recognized educational programs. Con- tract management firms that have extensive on-the-job training programs may be the best source for management talent. A bachelor’s degree in engineering is generally considered necessary for facility operation managers, particularly if construction responsibilities are included. Some large organizations also employ architects, a profession with both formal education and licensure.
The American Society for Healthcare Engineering is a professional association that offers publications and educational opportunities (see www. ashe.org). There are licensure requirements for professional engineers and architects in a consulting practice, but they do not apply to employment situ- ations. The American Hospital Association (AHA) offers five certificates in facilities services: certified healthcare environmental services professional, certi- fied healthcare facility manager, certified materials and resource professional, certified professional in healthcare risk management, and certified healthcare
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constructor.25 These certifications stress experience and practical training, and they are open to high school graduates. Clinical engineers have baccalaureate degrees in engineering and a sequence of professional recognition (see the American College of Clinical Engineering at www.accenet.org). Maintenance services on clinical equipment are provided by biomedical equipment techni- cians. Materials managers should acquire purchasing and supply chain manage- ment knowledge, including general business education and relevant experience. Much of the needed knowledge can also be acquired through a well-supervised work experience, which need not be in healthcare. A professional association— Association for Healthcare Resource & Materials Management—provides edu- cational materials and services to supply chain professionals (see www.ahrmm. org). Security managers frequently have active-duty police experience and at least a bachelor’s degree in their field. Food service managers have a bachelor’s degree and extensive experience in bulk food preparation.
Several professions are involved in environmental safety. Infection prevention is in the purview of an infection prevention practitioner—a nurse or another clinician with special education and training in infectious diseases and epidemiology or certification by the Association for Professionals in Infection Control and Epidemiology—and generally an infectious disease physician consultant. Organizations with high-voltage radiation therapy ser- vices usually employ a radiation physicist who can also assist with radiation safety standards and compliance with the Nuclear Regulatory Commission. Large organizations employ toxicologists to assist with control of chemical contamination. There is an engineering specialty known as safety engineer- ing. Consultative services are available in many of these areas. The Centers for Disease Control and Prevention and local public health departments may also have useful resources.
Outside Contractors All plant services except facilities planning can be provided by contract with outside vendors. The plant functions and their components differ little from hospital to hospital, allowing contractors to develop significant advantages in specialized knowledge. Facilities construction, facility operation, mainte- nance and guest services, and clinical engineering are often provided by out- side vendors. Some supply companies provide complete management of the supply function. Two forms of contracting arrangements are used. In one, all the associates of the service work for the contractor. In the other—probably more common—form, management personnel work for the contractor while hourly workers are the HCO’s employees. The contractor supplies processes, training, performance measures, and supervision in both models.
The contract should specify the performance measures to be used in the operational scorecard. The HCO should negotiate annual improvement goals with the contractors as it does with internal suppliers. It should moni- tor performance against the goals and independently audit and benchmark
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as many of the measures as possible. The contract should be periodically reopened, allowing change of vendor if necessary. The vendor competes against similar vendors and against the possibility of internal operations and wins the competition because it does as good a job, overall, as any alternative.
Training As environmental control methods and equipment become more sophisti- cated, workers require orientation, process training, and continuing educa- tion on an ongoing basis. In addition to job content, purpose, and method, employee training for several environment-of-care areas must include guest relations. As participation on improvement teams increases, associates must be trained in performance improvement fundamentals. Much technical train- ing is assigned to contractors, but elements such as orientation and supervi- sion must be integrated with the HCO’s training.
Leaders need mastery of the work methods and explicit training in servant leadership. Training with case studies and role-playing establishes the desired model. Reinforcement with coaching and rounding keep it in place. Leaders also need advanced training in performance improvement, budget- ing, and regulatory compliance.
Associate training programs must be carried out at a high school level, and in many communities they must be available in several languages. The emphasis is on action, practice, graphics, and—only last—words. All training programs present important opportunities to build the employee’s pride in craftsmanship and loyalty to the organization.
Incentives and Rewards The most important incentives are nonmonetary. Pride of achievement is probably the most important. It is supported by prompt reporting of formal measures, well-designed methods, appropriate training, and responsive super- vision. Recognition of achievement includes both encouragement from the supervisor and celebration of team achievements. The amount of recognition should be tailored to the level of achievement: Leaders should recognize any positive response, coworkers should recognize above-average results, and the organization at large should recognize extraordinary achievement.
Explicit monetary incentives are most powerful as supplements to nonmonetary incentives. Even a small payment serves to show the serious- ness of management intent. The gain-sharing approach, with negotiated goals and ongoing measures of progress, is effective. When contractors man- age the service and employees work for the HCO, the incentive must be comparable to opportunities in similar HCO job classes.
Organization Exhibit 12.7 shows a general organizational model for plant systems in a large HCO. Any element in exhibit 12.8 can be contracted to an outside
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firm. Facility planning and space allocation are the most likely to be retained internally. A contract manager employed by the institution must be desig- nated at the level of the contract. For example, if food service is contracted, the guest services manager is designated as contract manager. Contract managers are often supported by committees made up of various users. The committees form a platform for addressing OFIs arising in the services.
Measures
All environmental services must first be reliable and safe, then satisfactory to associates and guests, and finally efficient. Measures for the six dimensions of the operational scorecard are well developed and can usually be bench- marked from other HCOs or comparable services in other industries. Human resources measures are similar to those in clinical and other support systems. Customer satisfaction measures recognize that all the other units of the orga- nization are internal customers. Many services also have external customers: patients, families, and other guests.
Demand is usually forecast by analysis of historical data on the inci- dence and duration of demand for each identified physical resource. Peak
Guest services
Facilities management
Space advisory
committee
Space allocation
and planning
Chief operating
of�cer
Real estate and leasing
Facilities construction, renovation, maintenance
General and medical equipment installation, maintenance
Purchasing stores and distribution
General supplies
Foodstuffs Pharmaceuticals Clinical supplies
Security Reception Signage Food service Transportation
Housekeeping Waste removal Groundskeeping Interior design Laundry
VP of plant services
Environmental services
Materials management
EXHIBIT 12.7 Environment-
of-Care
Organization for
Large HCOs
Note: VP = vice president.
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loads are frequently important. Analysis of cyclical fluctuation and other vari- ation in demand is frequently required to set sound resource expectations.
Many activities of the plant system require short-term forecasts, with horizons ranging from hours to months. For example, operating room activity may require that plant services be able to raise or lower room tem- perature in advance of surgical start times. Efficiency in supply and service processes, such as housekeeping, heating, and food service, depends on care- ful adjustment to variation in demand. Supplies usage forecasts can be used to minimize out-of-stock items and emergency trips, and to maintain optimal inventory levels and ordering cycles. The preparation of these forecasts is normally the obligation of the appropriate environment-of-care unit, with guidance from planning and the epidemiologic forecast. Experienced manag- ers can often contribute subjective refinements.
Resource Consumption and Effectiveness Environment-of-care services and products are used by all units of any HCO. Some products and services are sold to patients or customers, but most are consumed by HCO units. Managing the efficiency and effectiveness of these services requires careful accounting, as shown in exhibit 12.8. Establishing a transfer price based on the unit cost allows an in- house “sale” that emulates a market purchase and substantially clarifies accountability. Contemporary cost accounting (see chapter 13) has allowed accurate estimates of unit cost for most of the goods and ser- vices provided by environmental care. The alternative to transfer pricing is cost allocation, which simply assigns a portion of costs based on some approxima- tion, such as allocating housekeeping costs by square footage of space.
Transfer pricing has three important advantages:
1. The unit cost of producing the service can be benchmarked, improving the producing unit’s goal setting.
2. The unit cost can be compared to competing alternatives, such as purchasing instead of making the service or centralizing producers for efficiency.
3. The consuming unit can benchmark the volume of service used and establish OFIs to optimize the quantity of service. (Note that the “optimal” service is the one that best fulfills the user’s mission, but it is not necessarily the least expensive.)
Quality Exhibit 12.9 shows important measures of the quality of environment-of- care services. Compliance of a product or service with technical specification
Transfer price Imputed price for an item of goods or service transferred between two units of the same organization, such as housekeeping services provided to nursing units. The transfer price is based on cost of individual services.
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can be measured. Many processes can be inspected by unbiased experts, who score the result. Many services have automated records of failure or delay. Others can be estimated from user or inspector surveys.
Inspections are critical to laundry service, food service, supplies, maintenance, and housekeeping. Subjective judgment is usually required but is reliable when inspectors are trained and follow clear standards for cleanli- ness, temperature, taste, appearance, and so on. The frequency of inspection is adjusted to the level of performance, and performance is improved by training and methods rather than by negative feedback. Work reports—brief notes that identify specific events or issues—reveal correctable problem areas in plant maintenance and materials management.
Benchmarks and scientific standards for these values are widely available. Numerous consultants offer information on labor standards for laundries, kitchens, and the like and on cost standards for energy use, con- struction, renovation, and security. The AHA publishes a manual of materi- als management supply-cost benchmarks.26 Constraints on costs are derived from two sources—the competitive prices of outside vendors and the inter- nal needs developed from the budget guidelines. The former are preferable wherever they can be obtained.
Managerial Leadership
The focal points for senior leadership attention to the environment of care include facilities planning and space allocation, the selection and manage- ment of outsourcing contracts, and the integration of environmental services
Costing Method
Impact on Producing Activity
Impact on Consuming Activity
Transfer pricing
TC/U is calculated using activity-based costing.
TC/U can be benchmarked. TC/U can be compared to
that of the competition.
“Buys” service and controls units consumed.
Units per patient or customer can be benchmarked, established by protocol, or established by evaluating customer needs and satisfaction.
Cost allocation
TDC for producing activity. TDC can rarely be
benchmarked.
Receives an allocated “indirect cost” charge for service.
Indirect cost cannot be benchmarked.
Consumer has no incentive to control use.
Note: TC/U = total cost per unit of service; TDC = total direct cost.
EXHIBIT 12.8 Implications of
Cost Accounting
on Environmental
Services
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with other activities. The first two of these often generate expensive and difficult decisions. The third is an important source of failures in efficiency, safety, and associate satisfaction.
Facilities Planning and Space Allocation Facilities planning and space allocation present unique management prob- lems. Space has important symbolic and cultural implications (e.g., the corner office) as well as major practical implications. It is immutable and unique. Each square foot is exactly that, but because of location, it is differ- ent from every other square foot. The decisions have profound implications for individual stakeholders. Competing alternatives are normal and must be systematically managed.
Type Approaches Examples
Outcomes Technical standards Many environmental services have explicit technical standards developed by organizations such as the National Institute of Science and Technology or the American Society for Quality
Incident counts Guest and associate accidents Delay and failure rates Service interruption rates
Surveys Guest and associate satisfaction
User complaints —
Process Raw materials Technical standards Compliance with purchase specification Failures and returns
Service and product inspections
Food preparation Cleanliness Job completion
Contract compliance Return rates On-time supplies delivery
Supply failures Back-ordered items
Inventory wastage Losses of supplies
Automated monitoring
Atmospheric control Power and utility failure
Structure Facility Life-safety compliance
Equipment Elevator inspections
Worker qualifications Stationary engineer coverage
EXHIBIT 12.9 Measures of
Quality for
Environment-of-
Care Services
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Decisions must focus on the mission. The right space allocation is safe, effective, patient-centered, timely, efficient, and equitable, in that order. Customer convenience is important, but not at the expense of safety or effectiveness. Many decisions come down to a trade-off between efficiency and convenience, timeliness, and equity. Is it better to have three outpatient sites, emphasizing convenience and access, or one large one, which will be more efficient?
The decision-making body depends on the size of the issue. Many smaller allocations are made by representative teams of associates; bigger ones will go to the governing board. All follow a step-by-step routine:
1. Use the best available objective data and the epidemiologic planning model to forecast future needs.
2. Ensure the safety and effectiveness of options to be considered. 3. Use well-established, broadly communicated rules for making the
decisions. The rules will identify customer responses, costs, associate needs, and equity in treating special populations.
4. Make the decision process as transparent as possible, drawing all affected parties into the discussion at an early stage and allowing appeals.
The strategy for preventing and resolving conflict is to make sure that facts, rather than influence, determine the outcome and to aim for financial success necessary to remain competitive.
Selection and Management of Outsourcing Contracts Many services in the environment of care are supplied by contract with spe- cialized providers. Leadership must resolve questions of what to outsource, with whom, and how to ensure effective implementation. The operational scorecard provides the foundation for the contract. The contract should include measures for all dimensions and as many benchmarks as possible. Questions such as “Should we outsource?” or “Should we change suppliers?” convert to “What are our OFIs, and how do we achieve them?” Supplier change is not necessary because the current supplier changes to do the job better. The supplier becomes a “strategic partner,” a statement of intent for a continuing relationship.
The HCO must designate an employed service leader for the supplier, as it would for employed associates. The service leader establishes realistic benchmarks, helps rank OFIs, negotiates goals, and provides the support for implementing improved processes, as she would for employed teams. Often contract workers and employed associates work together. Contractors partici- pate in PITs. The leader rounds, sustaining the transformational culture by responding to associate and contractor concerns.
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Contracts must have a finite time period, usually three years or less, and a provision to review and renegotiate. The HCO has a duty to validate both service and price against competition. Continuing a contract that overpays violates leadership’s commitment to other stakeholders and jeopardizes tax exemption. The renewal should document that the price is competitive with alternatives, including HCO employment of service pro- viders, and that progress toward benchmark has been and will continue to be acceptable.
Integration of Environmental Services with Other Activities Neither vendors nor employed associates can be viewed as outsiders. Strate- gic partner means part of our team. Many issues arise from the coordination between clinical services and environmental services. New food service sys- tems must coordinate with nursing, patient transportation must adapt to new facility layouts and service needs, and new patient care protocols require new supplies and new delivery methods. PITs must incorporate all the involved services, regardless of contract status.
Contractor participation in PITs is valuable in three senses. First, the exchange of information identifies best practice, particularly with a skilled vendor that has experience at many HCOs. Second, participants gain insight into the underlying needs. They come away understanding why the improvement was necessary and more committed to making it work. Third, participation is a reward. PIT assignments empower associates and provide an opportunity to reward effort.
The HCO’s service leader implements this structure. He must do the following:
• See that contract associates have access to resources necessary for their job, including training, information services, equipment, physical facilities, and parking.
• Round and monitor service goal achievement. • Receive information on OFIs, unexpected events, and other concerns
raised by customers of the service. • Ensure customer representation and contractor representation on PITs
involving the service. • Prepare the records for contract renegotiation, including information
on competitive alternatives.
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
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1. To accommodate a rapidly growing and aging community, it is proposed that the HCO expand capacity for inpatient long-term care by constructing a new wing. Outline for senior leadership how to evaluate this proposal, how you would determine the facility needs for this population, and how you would develop a program to meet those needs. (Note that the question is about how, not what. You are not expected to develop the program.)
2. Your organization will contract with a company supplying security services. What steps would you take in selecting vendors, writing contract specifica- tions, and administering a contract? (The question can be asked about any environmental services vendor.)
3. Patient satisfaction survey scores on overall facility appearances have been a long-standing OFI for your HCO. Your leadership team has been address- ing other priorities, but the process improvement committee is now ready to tackle the issue. Outline for senior leadership the steps it will take to imple- ment an improvement program.
4. Your community HCO is in a large coastal city and in hurricane territory. You are assigned to review disaster planning. What issues should your disaster plan address, and how will you evaluate the HCO’s plans?
5. You have an offer from a vendor to outsource your entire supply chain function. How would you evaluate that offer? A quick check shows that the HCO has 45 people working in supplies management, including four first- line leaders. Average tenure is nearly eight years. Cost is above benchmark, but there are few user complaints.
Additional Resources
Guenther, G., and R. Vittori. 2013. Sustainable Healthcare Architecture, 2nd ed. New York: Wiley.
Joint Commission, The. 2018. 2018 Environment of Care Essentials for Health Care. Oakbrook Terrace, IL: Joint Commission Resources.
. 2016. Emergency Management in Health Care: An All-Hazards Approach, 3rd ed. Oakbrook Terrace, IL: Joint Commission Resources.
. 2015. Planning, Design, and Construction of Health Care Facilities, 3rd ed. Oak- brook Terrace, IL: Joint Commission Resources.
Ledlow, G. R., K. Manrodt, and D. Schott. 2016. Health Care Supply Chain Manage- ment: Elements, Operations, and Strategies. Burlington, MA: Jones & Bartlett Learning.
Puckett, R. P. 2012. Foodservice Manual for Health Care Institutions, 4th ed. San Fran- cisco: Jossey-Bass.
Rich, C. R., J. K. Singleton, and S. S. Wadhwa. 2018. Sustainability for Healthcare Man- agement, 2nd ed. New York: Routledge.
Shore, D. A. 2014. Launching and Leading Change Initiatives in Health Care Organiza- tions: Managing Successful Projects. San Francisco: Jossey-Bass Public Health.
Chapter 12: Environment of Care 399
Notes
1. Ulrich, R. S., L. L. Berry, X. Quan, and J. T. Parish. 2010. “A Conceptual Frame- work for the Domain of Evidence-Based Design.” Health Environments Research and Design Journal 4 (1): 95–114.
2. Bronson Methodist Hospital. 2005. “2005 Malcolm Baldrige National Qual- ity Award Application.” Accessed May 14. www.nist.gov/sites/default/files/ documents/2017/10/11/Bronson_Methodist_Hospital_Application_Summary .pdf.
3. Hewitt, D. H. 2010. “Models from Past Mold the Future in Evidence-Based Health Care Design.” Health Progress 91 (2): 9–13.
4. Bernard, P. J. 2010. “New Urbanism Drives Hospital Site Plan.” Health Progress 91 (2): 21–25.
5. Hosking, J. E., and R. J. Jarvis. 2003. “Developing a Replacement Facility Strat- egy: Lessons from the Healthcare Sector.” Journal of Facilities Management 2 (2): 214–28.
6. Hosking, J. E. 2004. “What Really Drives Better Outcomes?” Frontiers of Health Services Management 21 (1): 35–39.
7. Green Guide for Health Care. 2018. Accessed May 14. www.gghc.org. See also Zimring, C. M., G. L. Augenbroe, E. B. Malone, and B. L. Sadler. 2008. “Imple- menting Healthcare Excellence: The Vital Role of the CEO in Evidence-Based Design.” Healthcare Leadership White Paper Series, No. 3. Center for Health Design, Georgia Institute of Technology.
8. Rich, C. R., J. K. Singleton, and S. S. Wadhwa. 2018. Sustainability for Healthcare Management. New York: Routledge.
9. Ulrich, Berry, Quan, and Parish 2010. 10. Centers for Disease Control and Prevention. “Clinical Resources.” Updated July
28. www.cdc.gov/phpr/readiness/healthcare/tools-resources.htm. 11. Ibid. 12. Barnas, K. 2011. “ThedaCare’s Business Performance System: Sustaining Continu-
ous Daily Improvement Through Hospital Management in a Lean Environment.” Joint Commission Journal on Quality and Patient Safety 37 (9): 387–99.
13. Environmental Protection Agency. 2018. “Medical Waste.” Accessed May 14. www .epa.gov/osw/nonhaz/industrial/medical.
14. Occupational Safety and Health Administration. 2005. “OSHA/NIOSH Interim Guidance: Chemical, Biological, Radiological, and Nuclear (CBRN) Personal Protective Equipment Selection Matrix for Emergency Responders.” Published April. www.osha.gov/SLTC/emergencypreparedness/cbrnmatrix/index.html #Introduction.
15. Song, X., D. C. Stockwell, T. Floyd, B. L. Short, and N. Singh. 2013. “Improv- ing Hand Hygiene Compliance in Health Care Workers: Strategies and Impact on Patient Outcomes.” American Journal of Infection Control 41 (10): 101–5.
16. Occupational Safety and Health Administration. 2018. “Bloodborne Pathogens Standard: 1910.1030.” Accessed May 14. www.osha.gov/pls/oshaweb/owadisp .show_document?p_table=STANDARDS&p_id=10051.
17. Kuhar, D. T., D. K. Henderson, K. A. Struble, W. Heneine, V. Thomas, L. W. Cheever, A. Gomaa, and A. L. Panlilio, and US Public Health Service Working Group. 2013. “Updated U.S. Public Health Service Guidelines for the Manage- ment of Occupational Exposures to Human Immunodeficiency Virus and Rec- ommendations for Postexposure Prophylaxis.” Infection Control and Hospital Epidemiology 34 (9): 875–92.
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18. Bigda, K. C., and G. E. Harrington. 2017. NFPA 101: Life Safety Code Handbook, 2018 ed. Quincy, MA: National Fire Protection Association.
19. The Joint Commission. 2018. “Environment of Care.” In Comprehensive Accredi- tation Manual for Hospitals. Oakbrook Terrace, IL: Joint Commission Resources.
20. American Society for Healthcare Engineering. 2018. “Hospital Conditions of Participation/Accreditation Crosswalk.” American Hospital Association. Published April 14. www.ashe.org/resources/library.dhtml?search=the+joint+commission& Submit=Search.
21. US Department of Homeland Security. 2008. National Incident Management Sys- tem. Published December. www.fema.gov/pdf/emergency/nims/NIMS_core.pdf.
22. The Joint Commission. 2013. “Environment of Care Management Plans: Making Sure Your Plans Get the Job Done.” Joint Commission Perspectives 33 (6): 6–7.
23. Ginter, P. M., W. J. Duncan, and M. Abdolrasulnia. 2007. “Hospital Strategic Preparedness Planning: The New Imperative.” Prehospital and Disaster Medicine 22 (6): 529–36.
24. Agency for Healthcare Research and Quality. 2018. “Public Health Emergency Preparedness.” Accessed May 14. https://archive.ahrq.gov/prep/.
25. American Hospital Association. 2018. “Certification Center.” Accessed May 15. www.aha.org/certifcenter/index.shtml.
26. Association for Healthcare Resource & Materials Management. 2005. 2005 Per- formance Indicators Study on Healthcare Supply Cost Management. Chicago: AHA Publishing.
CHAPTER
401
CRITICAL ACTIONS
13 FINANCIAL MANAGEMENT
1. Using the accounting system to support an evidence-based culture:
• Identify and report costs for unit scorecards.
• Provide analysis and forecasts for process improvement teams.
• Support the annual goal-setting process.
2. Providing adequate financial resources:
• Identify long-term financial needs.
• Manage debt and liquid assets to meet needs.
• Negotiate contracts with health insurers to maximize revenue.
• Facilitate strategic partnerships.
3. Promoting integrity with internal and external auditing:
• Ensure accuracy of accounting and financial data.
• Support a culture where honesty is expected.
• Protect the organization’s assets.
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Purpose
The purpose of the finance system is to
Support the enterprise by identifying, quantifying, and recording each trans- action that changes the value of the firm; report the value of the firm, including forecasts of future value; and guard assets and resources against theft, waste, or loss.
Financial management of the healthcare organization (HCO) controls all the assets; posts and collects all the revenue; settles all the financial obligations; arranges all the funding; and makes major data contributions to strategic planning, performance measurement, and cost control. It deals directly with all the units of the organization, from the governing board to the first-line teams. Its role in HCOs is not substantially different from its role in other sectors, although some of the approaches are modified to accommodate not- for-profit structures, health insurance contracts, and the complexity of care delivery.
Functions
The purpose is accomplished through the functions shown in exhibit 13.1.
Record and Report Transactions That Change the Value of the Firm The transaction accounting function records and reports all transactions that affect the value of the firm and its subsidiaries. Transactions form the basis of all analysis and reporting. Most are either revenue transactions (those related to the provision of clinical services or other services such as cafeteria retail or employee parking) or expense transactions (those that acquire or use resources such as personnel, supplies, and equipment). The physical transactions—such as patient days of care, hours worked, and drugs used—are generally captured by the knowledge management system described in chapter 10. Account- ing attaches a dollar value and assigns each transaction to a mission-related category. The transaction data support three different analyses—financial accounting, performance reporting, and managerial accounting studies. Transaction accounting keeps finance personnel involved in most areas of the organization.
Revenue transactions record virtually all the HCO’s routine cash acquisition, except gifts, loans, and sales of assets. Computerization permits recording extensive detail: the patient, service, quantity, time, and unit or associate supplying the service. The record must meet Health Insurance Portability and Accountability Act (HIPAA) confidentiality requirements.1 When organized by individual patient, revenue transactions create the
Chapter 13: F inancial Management 403
Function Activity Purpose
Record and report transactions that change the value of the firm
Capture data on all oper- ational transactions
Complete nonoperational transactions
Create financial reports Prepare cost and rev-
enue data for monitor- ing and performance improvement
Record and control resources and sales
Establish value of organization Report to owners and external
stakeholders Support all work teams with
resource and output data Support PITs with forecasts and
models
Assist operations in setting and achieving performance improvements
Forecast major demand measures
Compile operating, financial, and capital budgets
Support line management in setting performance goals
Coordinate organization-wide activities
Support strategic decisions
Manage future financial status
Establish the long-range financial plan
Establish prices and revenue contracts
Conduct financial analysis of new business opportunities, new programs, and large investments
Forecast the future viability of the organization
Develop pricing strategy and support specific price negotiations
Support analysis of alternative strategic opportunities
Establish budget guidelines for profit, cost, and capital investment
Manage cash, financing, and debt
Meet contractual obligations
Manage revenue cycle Manage cash, debt, and
capital structure to implement governance decisions
Settle the organization’s accounts with patients, suppliers, and employees
Collect revenue for patient care Ensure effective use of capital
and debt
Protect corporate assets against loss, distortion, or conversion
Verify accounting transactions
Establish accounting systems and rules affecting financial reports
Ensure accuracy of performance management reports
Ensure compliance with contracts, financial laws, and regulations
Guard against loss and diversion of property
Improve continuously
Monitor and bench- mark satisfaction with accounting and financial performance
Identify, pursue, and implement OFIs in accounting, financial management, and auditing
Ensure satisfaction of customer and associate stakeholders
Implement more effective methods and results
Note: OFI = opportunity for improvement; PIT = process improvement team.
EXHIBIT 13.1 Functions of the
Finance System
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patient ledger—a detailed record of the individual services or supplies rendered to each patient. The ledger is a financial reflection of the electronic health record described in chapter 10.
Expense transactions describe all commit- ments to pay cash. Data captured include the order- ing or using unit, quantities, allocation, time, and prices of the resource purchased or disbursed. Cost ledgers are organized by type of resource (e.g., labor, supplies). The payroll system records hours worked
by the employees, generates paychecks, and produces data on labor costs. The supply system provides count and cost data on supplies, issues checks for purchased goods and services, and maintains inventories.
Some expense transactions are internal rather than external exchanges; these are called general ledger transactions. General ledger entries assign capital costs through depreciation of long-term assets, adjust inventory val- ues, and allocate expenses of central services. They tend to reflect resources that are shared by the organization as a whole rather than by individual accountability centers, and they tend to deal with resources that last consider- ably longer than one budget or financial cycle.
The value of most transactions is set by the market (i.e., the price of either a purchase or a sale), but because of general ledger transactions and the complexity of healthcare finance, external prices are not available for all transactions or all levels of aggregation. As a simple example, depreciation cost is the loss in value of buildings and equipment. The true loss in value is unknown and must be estimated according to widely accepted and audited rules. More complicated issues arise from “bundled” revenue. Inpatient care is priced as a package based on diagnosis-related groups (DRGs). Several patient care teams treat most patients; the revenue is provided collectively, not for each team. Similarly, although the pharmacy fills many prescriptions to outpatients for established market prices, it sells many pharmacologic products to inpatients where bundled payments do not specify individual item prices. The result is that pharmacy profitability is not available; continu- ous improvement must rely on costs and benchmarking.
Financial accounting fulfills a direct obligation to the organization’s owners and creditors and to the public. It assembles the transactions to state, as accurately as possible, the position of the institution in terms of the value of its assets, the equity residual to its owners, and the change in value occur- ring in each accounting period.
Four reports have become standard for HCOs and most other non- governmental enterprises:
1. Balance sheet 2. Income or profit-and-loss statement
Patient ledger Account of the charges rendered to an indi- vidual patient.
General ledger Technically, the record of all the firm’s transac- tions; the term often refers to the fixed and collective assets, such as depreciation, that must be allocated to operational units.
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3. Statement of sources and uses of funds 4. Statement of changes in fund balances
These summarize the financial activities and situation of the organization in a form now almost universal in the business world. The entries are defined by the Financial Accounting Standards Board (FASB), which publishes Gener- ally Accepted Accounting Principles (GAAP) guiding the construction and use of accounts.2 The Government Accounting Standards Board (GASB) outlines accounting standards for HCOs that may be controlled by state and local governments (www.gasb.org).
Financial Statements Financial statements are usually issued monthly to the associates and annually to outside stakeholders. They are a critical report to the governing board, which is obligated to monitor performance and protect assets on behalf of the owners. They constitute the record of the board’s discharge of its obliga- tion to exercise fiscal prudence.
The annual statements are audited by the external auditor—a public accounting firm that attests that the statements follow the GAAP rules, fairly represent the financial position of the organization, and are free of material distortion. Audited state- ments are the basis for most of the organization’s financial communication with the outside world. Health insurance companies often demand access to HCO financial statements as a condition of pay- ment. Audited income statements and balance sheets must be reported to the federal government as a condition of partici- pation in Medicare. Once filed, the reports are accessible to the public under the Freedom of Information Act. Several states now require public release of financial reports as well. HCOs that issue bonds on public markets are also required to reveal standard financial information, plus pro formas, documents that follow the format of audited statements and forecast perfor- mance in future years.
Not-for-profit HCOs have substantial obligations to report their financial activities through the Internal Revenue Service (IRS) Form 990. The form becomes public information. It is intended to monitor the public’s return for the organization’s privilege of tax exemption. It requires reporting of income, profit, executive compensation, and community benefit for par- ent corporations, major subsidiaries, and joint ventures. Community benefit is identified as charitable care, bad debts, Medicaid losses, community health activities, formal education, and research. The reporting schedule requires estimation of the actual cost of each benefit. The values reported on Form 990 are subject to a “reasonableness” test.3 The IRS may eliminate an HCO’s tax exemption in whole or in part based on the values reported.
Pro forma A forecast of financial statements establish- ing the future financial position of the organi- zation for a given set of operating conditions or decisions.
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Well-managed HCOs deliberately publish their financial reports as part of their program of community relations. Subsidiaries of integrated systems, both for-profit and not-for-profit, are not automatically required to disclose their financial information, but many multihospital organizations make them public as basic community relations.
Revenue Accounting Individual charges are associated with each transaction to calculate gross revenue, but the charges have become meaningless under aggregate payment
contracts. The actual amount paid—net revenue— has become the meaningful value. Patient ledger transactions are summed to generate net operating revenue generated from patient care reported in the income statement.
Collection of revenue is complex. Most patients have multiple insurance plans, such as Medicare and a private Medicare supplement. The HCO maintains contracts with most insurers. It must meet the contract terms for information, post revenue from each, and collect the remainder from the patient. Counseling and financial assistance is provided to patients without resources to pay. The process, called the revenue cycle, is measured by days in accounts receivable, the ratio of the total outstand-
ing divided by the average revenue posted per day. Under Form 990 requirements, net revenue also specifies charity care
(care given to the needy without expectation of payment) and bad debts (costs for patients who were expected to pay but did not do so). Patient ledger data are also used in many case-based payment schemes to identify catastrophically expensive cases, called outliers, that qualify for special addi- tional payments.
Nonoperational Transactions Nonoperating revenue—income generated from non-patient-care activities, including gifts, investments in securities, and earnings from unrelated busi-
nesses—is also accounted on the income statement. It is an important contribution to overall profit for many HCOs. The funds flow statement and balance sheet include nonoperational transactions. The sale of assets and the incurrence of debt (and the sale of equity in for-profit companies) generate cash for the
firm. The purchase of capital goods, the retirement of debt (dividends and repurchase of stock in for-profit companies), and charges for restructurings consume cash. These are recorded with the cash transactions of operations in
Gross revenue An entry to the patient ledger of the charge for a specific healthcare service; no longer a meaningful measure.
Net revenue Actual revenue received, as opposed to that initially posted; equal to gross revenue minus adjustments for bad debts, charity, and discounts to third parties (“contractual allowance”).
Bad debt Cost for patients who were expected to pay for care but did not.
Nonoperating revenue Income generated from non-patient-care activities, including investments in securities and earnings from unrelated businesses.
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a statement of sources and uses of funds or funds flow. Subsidiary corpora- tions can be used to handle major ongoing operations, such as donations, unrelated businesses, or joint ventures. Their summary results are included in the owning corporation’s balance sheet.
Assist Operations in Setting and Achieving Performance Improvements The annual goal-setting process shown in exhibit 3.7 as “May to August” typically takes several months, involves virtually everyone in the organiza- tion, and is the stimulus for continuous improvement and operational excel- lence. There are multiple rounds as the units seek realistic, achievable goals. The budget office supports goal setting with accounting data, working closely with internal consulting and managing the extensive flows of infor- mation necessary. As shown in exhibit 13.2, the environmental assessment and strategic analysis (see chapters 4 and 15) lead to goals for the strategic scorecard. Each operating unit uses the strategic goals and its own opportu- nities for improvement (OFIs) to identify goals for the coming year for all dimensions of its operational scorecard. Capital requests are carefully devel- oped and subject to competitive review (see chapter 14). First-line leaders monitor progress against the goals as the year evolves. The unit scorecard replaces the traditional “budget.” The expectation is that all goals will be attained.
The budget office assists units with forecasts and aggregates unit deci- sions to compare with overall strategic goals.
• Demand for major activity groups, such as primary care contacts, emergency visits, hospitalizations, births, and surgeries, is forecast using the epidemiologic planning model, statistical analysis of market trends, and judgments of leadership. Forecasts for more detailed activities are derived from the major groups. They are developed first by the budget office and then refined for each unit by unit personnel.
• Resource prices are forecast by type of resource from history and external references. The purchasing unit usually prepares the price forecasts for supplies, human resources for personnel, and finance for transfer-priced resources.
The initial forecasts are ceteris paribus (meaning “a continuation of past conditions”). The unit leaders and their supervisors respond with plans for the coming year. The forecasts, guidelines from the governing board, and benchmarks impose discipline on the process. Each unit and each measure should move toward benchmark, and the aggregate expectation must match the guidelines. The results of process improvement teams (PITs) are incorpo- rated into the coming year’s goals. The unmet benchmarks or values suggest the OFIs for study and their PITs during the coming year.
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Managerial Accounting Forecasts of unit operating costs are prepared by the budget office using managerial accounting. Managerial accounting restructures transaction data to support monitoring, planning, setting expectations, and improving perfor- mance. It provides operational measures of cost, efficiency, and demand, supporting monitoring and decisions about revision, continuation, and
Managerial accounting A process of restructuring transaction data to support monitoring, planning, setting expecta- tions, and improving performance of account- ability centers.
Operational Budget Guidelines Demand, cost, associate satisfaction,
ef�ciency, quality, and customer satisfaction
Environmental assessment and forecast of external events
Negotiation of individual accountability center operational goals
Development and competitive review of capital and new program proposals
Capital and New Programs Guidelines Expected expenditures for
strategic projects, replacement and expansion
Strategic Scorecard Goals Financial, market, quality and
effectiveness, associate satisfaction
Long-Range Financial Plan Capital sources
Strategic uses of funds
Identi�cation of OFIs and improvement of forecasting and
goal-setting processes
Preparation of capital budget Preparation of operating budget
Submission of operating and capital budgets to governing
board
Board approval and implementation
Indicates major integrative activity
⇔
⇔
⇔
EXHIBIT 13.2 Integrating
Strategic and
Operational Goal
Setting
Note: OFI = opportunity for improvement.
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discontinuation of services. It is organized around an internal chart of accounts that identifies every accountable unit. It records quantities and costs of resources consumed by the unit (direct costs) and allocated to the unit, such as depreciation and shared central services (indirect costs or overhead). Tradi- tional allocated costs were often crude approxima- tions; activity-based costing improves the estimates and allows more resources to be treated as direct costs.
Managerial accounting reports identify the quantities and cost of resources consumed, the pricing mechanism (market priced, transfer priced, allocated), and the assigned transfer and allocated costs. Unit management can classify these costs as fixed, variable, or semivariable. These reports are now usually electronic. They are available in summary or in detail for each accountable unit and larger aggregates, and they provide drill-down to indi- vidual transactions. The data are useful as an ongoing audit of management performance, as a source of detail when an unexpected event occurs, and as a data source for managerial analyses and construction of the following year’s goals. The cost reports allow any level of management to say, “Our costs are equal to or better than goals,” and to identify the OFIs for next year’s goals.
The data in the reports can be accumulated and aggregated to sup- port analyses of variation and what-if projections that allow management to identify and evaluate alternatives. Common uses of managerial accounting analyses include the following:
• Comparing alternative protocols or work processes, particularly those substituting capital for labor
• Comparing local production with outside purchase, often called make- or-buy decisions
• Ranking cost-saving opportunities to identify promising areas in which to eliminate or reduce use
• Preparing forecasts for expanding or closing units • Analyzing and forecasting trends in demand, cost, output, and
efficiency • Understanding seasonal and day-of-week variation • Developing new budget expectations, particularly for new or expanded
services when the operating conditions have changed • Preparing and analyzing transfer prices and cost-allocation estimates
Managerial accounting analysis requires a cost-data archive (a system to retrieve relevant information), the ability to develop simulations and forecasts of future situations, and consultation on the limitations and appli- cations of the data. Specific proposals often call for extrapolation to new
Managerial Accounting Forecasts of unit operating costs are prepared by the budget office using managerial accounting. Managerial accounting restructures transaction data to support monitoring, planning, setting expectations, and improving perfor- mance. It provides operational measures of cost, efficiency, and demand, supporting monitoring and decisions about revision, continuation, and
Managerial accounting A process of restructuring transaction data to support monitoring, planning, setting expecta- tions, and improving performance of account- ability centers.
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work processes. Ideally, finance personnel work directly with accountability centers and internal consulting teams, helping them identify fruitful avenues of investigation, develop useful proposals, and translate operational changes to accounting and financial implications.
Activity-Based Costing Historically, the precision and reliability of managerial accounting was limited by the difficulties of data collection and analysis. Large blocks of cost were allocated, rather than transfer priced, using formulas based on assumed prox- ies such as facility space, number of employees, total direct costs, or gross revenues. Electronic databases permit a significantly more accurate process called activity-based costing (ABC).4 ABC activities are work processes that can be defined and consistently measured as needed. They are often work processes under study by PITs.
ABC has four objectives:5
1. Show the resource elements of cost so that the producing unit or a PIT can compare to benchmark and evaluate changes in the activity.
2. Provide a transfer price for internal transactions. The transfer price can be compared to prices offered by external vendors. It also encourages the using unit to identify and control consumption.
3. Encourage the producing unit to think of the purchasing units as customers whose needs must be met.
4. Provide the purchasing units better understanding of resource usage and how that ultimately translates to marginal utility to customers. ABC promotes control of services, the use of make-or-buy decisions, and improvement of processes that cross several accountability centers. Entire systems, including information services, finance, executive management, and human resources management, can be evaluated. Alternatives such as mergers, acquisitions, preferred partnerships, and alliances can be modeled. These large-scale reorganizations can change patterns of demand, introduce work processes that were previously impractical, and create other returns to scale. For example:
• A small clinic that fails to generate demand and has excessive fixed costs per case may become viable by a merger or partnership with an outside organization. (The market share served will increase, generating enough demand to cover the fixed costs.)
• The scope of clinical support services may be increased and transfer prices may be reduced by a merger. (The fixed costs will be spread over a larger base. Along with reduced costs, increased volume may improve quality.)
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• The costs of governance and executive management may be reduced by merger. (Two senior management teams reduced to one, and the market share increased.)
• A major service, such as imaging, human resources management, financial management, or information services, can be purchased from a vendor. (The vendor has returns to scale and superior experience and is better positioned to keep up-to-date.)
• The capabilities of smaller units can expand while simultaneously lowering the cost of larger ones. Telemedicine programs for intensive care patients in small hospitals, which provide access to the advice of experienced intensivist physicians and allow centralized specialist monitoring of rural patients, are striking examples.
Manage Future Financial Status The financial management function projects future financial needs and arranges to meet them with pricing and revenue contracts. It also evaluates strategic proposals for corporate revisions that increase its mission achieve- ment. The growth of Medicare, Medicaid, and widespread private health insurance provides HCOs with reliable income streams that open a broad spectrum of financing opportunities. These are supported by multiple corpo- rations, joint ventures, and complex structures of bonded indebtedness. The subfunctions—financial planning, pricing, and analysis of strategic opportu- nities—are now essential to survival.
Financial management is a forward-looking activity with a long hori- zon. It begins with the generation of a long-range financial plan (LRFP). It continues with the translation of plan values to annual setting of goals and uses the goals to build detailed budgets. The results establish the institution’s ability to acquire capital funds through debt or equity.
Long-Range Financial Plan The LRFP incorporates the expected future income and expense for every element of the strategic plan (see chapter 15), specifying the amount and the time of its occurrence. It models the financial outcomes for alternative sce- narios, reflecting possible future operating conditions. The scenarios incor- porate forecasts of need from the epidemiologic planning model and trends in clinical practice. The LRFP is now commonly prepared with specialized software and counsel from a respected accounting firm. The software gener- ates pro forma annual statements of income, asset and liability position, and cash flow for many years into the future, allowing senior leadership and the finance committee of the governing board to identify and assess financial alternatives to fulfill the mission.
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The structural changes in US healthcare that have arisen from the Affordable Care Act, concerns over cost trends, and the growth of multicor- porate systems make a careful and sophisticated LRFP essential. Accountable care organizations and other wellness programs deliberately organized to promote continued health will reduce demand for emergency and inpatient services. Primary care other than emergency will grow substantially, with a focus on lower-cost care settings, and will seek to optimize the use of non- physician clinicians who practice at the full scope of their license. Palliative care to manage symptoms of chronic life-limiting diseases and conditions outside of acute care settings are likely to grow, as a result of both an aging population and a sectorwide focus on treatment in the optimal care setting. Some surgical and acute inpatient services that have been growing rapidly are expected to stabilize or shrink. All these trends can be identified by well- designed epidemiologic planning models integrated with LRFPs.
Activities such as bond repayments and major facility replacement require 30-year financial planning horizons. Large financial requirements must be accommodated, though they are several years away. The accuracy of the estimates deteriorates in distant years. Most of the attention is focused on the first three to five years, when the irreversible decisions will be made. The LRFP process should include evaluation of the widest possible variety of alternative scenarios (what-ifs) that address future uncertainties, such as the following:
• Cost of borrowing from various sources • Cash flow required to support debt payments • Efficiency improvements required to meet market constraints on
revenue • Multiyear programs, such as the development of information
technology and the electronic health record • Financial prospects of specific service lines • Identity and magnitude of various financial risks • Overall prudence of the financial structure • The impact of inflation and the business cycle • Changes in demand because of population shifts, technology, or
competition • Proposed federal and state legislation • Trends in health insurance coverage and benefits • Impact of value-based purchasing (incentive payments or penalties
linked to outcomes) • Sources of donations, grants, and subsidized funding • Alternative debt structures and timing • Opportunities for joint ventures and equity capitalization
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The objective is to identify the implications of the operating condi- tion on long-term achievement of the mission. The HCO might respond by changing prices, revising debt structure, improving work processes, acquir- ing new equity investors, revising expansion strategies, acquiring or divesting units, merging, or closing. Unacceptable LRFP results can force a complete reevaluation of the strategic position and the continued existence of the institution.
The LRFP is used by the governing board to establish the annual strategic guidelines for revenue, profit, costs, and capital expenditures. The senior management team develops forecasts of market share, costs, and revenue and prepares a recommendation that translates the cash and profit requirements of the LRFP to the guidelines for the coming year or two. The finance committee of the governing board discusses the recommenda- tion and alternatives and recommends the guidelines to the full board. The board’s action initiates the annual goal-setting process and is a more critical step than the final budget approval, which is often a formality because the negotiated goals meet the guidelines.
Financial leadership is responsible for generating information about the alternatives. Exhibit 13.3 shows the tests and the kinds of rethinking necessary to make the strategic plan fit financial realities. The financial ratios provide a way to benchmark financial performance. Bond-rating agencies use the ratios and other financial statement data to issue public ratings of the risk associated with long-term debt. Lower ratings (higher risks) bring higher interest costs on debt. A similar but less formal process operates with equity capital and, to some extent, with gifts. Thus, the institution’s ability to acquire capital is directly dependent on its ability to construct a competi- tive LRFP.
Test External Source Adjustment Required
Debt ratios Bond market Keep debt within bond-rating limits
Price Buyers and intermediaries Keep price competitive
Earnings Bond and equity investment markets
Keep cash flow within bond- rating limits
Demand and market share
Competitor analysis Keep demand forecast consistent with competitor and market conditions
Cost Benchmarks, competition Keep cost at or below (Expected revenue − Needed profit)
EXHIBIT 13.3 Tests and
Adjustments
in Financial
Planning
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The ideal LRFP generates operating costs substantially below expected revenues, creating a steady stream of profits. The organization can invest the excess revenues in growth, community health, or service improvement and can amplify the investment with borrowed, donated, or invested capital. High-performing HCOs use the plan to recognize danger signals in advance and make the necessary adjustments. Two principles guide their actions and are weighed as the plan is considered and adopted:
• The necessary profit is the amount required to sustain the mission, maintain a contemporary and high-reliability infrastructure, and expand as community need grows. Well-run nonprofit HCOs have tended to seek returns in the range of 5 percent of total costs. Large for-profit organizations seek before-tax returns two to three times that high.
• The criteria for investment decisions are biased toward liquidity and away from risk. The bias toward liquidity means that most projects must justify themselves in terms of cash flow as well as community benefit. There are four basic causes of increased risk:
1. Poor prior management has reduced financial capacity. 2. Management systems lack the control required to meet stated
goals. 3. Individual proposals are inherently risky because they involve
speculative goals, such as unproven clinical guidelines, or challenging market responses.
4. The rate of expansion exceeds what the organization can support.
Well-run organizations guard against the first and second by building and sustaining effective leadership teams, documented by improvement on the strategic scorecard. They meet the third with evidence-based planning processes and competitive review. They meet the fourth by adhering to the capital investment limits suggested by the LRFP.
Short-Term Budgets Finance prepares a set of budgets (including the operating budget, the new programs and capital budget, and the funds flow budget), pro formas of financial expectations, from the goal-setting process and including all other
expected transactions (see exhibit 13.4). Well-run institutions forecast a second or even a third year in preliminary terms. These budgets are useful as global indicators of expected HCO financial performance and guides to strategic planning.
Operating budget A forecast of expected income and expenses developed by finance and used to assess corporate or major service line performance.
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Establish Prices and Revenue Contracts The LRFP incorporates prices, expected demand, and revenue. It is the foundation of the HCO’s prices and negotiations with payers. The issues in pricing relate to three concerns: the unit of payment, the HCO mission, and the HCO’s market strength— including customer choice. The traditional units of payment were fees for specific physician services and charges for hospital services and supplies. Insur- ance payment systems have moved to progressively broader aggregates in an effort to emphasize out- comes of care rather than inputs. Exhibit 13.5 shows the major options for pricing structures as sequential levels of risk taking and requirements for inte- gration of the institution and its clinical staff. All but level 1 require increased collaboration. Care-providing associates must coordinate with each other, and the HCO must support and encourage that coordination.
An HCO with a community health mission, as opposed to an excel- lence-in-care mission, has a relatively straightforward pricing strategy. Its mission calls for maximizing health, reducing unnecessary use of services, and maintaining high efficiency for all services offered. Its strategic perfor- mance measures address the needs of community health as well as those of individual patients and associates. At least in theory and usually in reality, the community health mission minimizes the community’s healthcare cost per capita, aligning the mission of the HCO with that of the insurers and insur- ance buyers. The HCO will accept all levels of exhibit 13.5, with preference for the higher levels because they reward the HCO and its care providers
New programs and capital budget Expected capital expenditures and new pro- grams accepted by the governing board, with their implications for the operating and cash budgets by period and accountability center.
Funds flow budget Estimates of cash income and outgo by pe- riod, developed by finance and used in cash and debt management.
Budget Contents Use
Operating budget
Detailed projection of corpo- rate income and expense for each operating unit, service line, and department, with balance sheets and funds flow for subsidiary corporations
Monitor financial performance, including expected revenue and profit
Verify capital management strategies and confirm the long-range financial plan
New pro- grams and capital budget
Plan for implementing approved capital expendi- tures and managing capital funding
Manage investments in capital equipment and facilities
Manage financing
Funds flow budget
Projection of monthly cash flows
Manage working capital
EXHIBIT 13.4 Major Budgets
and Their
Relation to
Strategic Goals
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for achieving the mission. The HCO will offer the insurer the lowest price consistent with its operating costs and financial needs.
For HCOs that pursue an excellence-in-care mission, pricing is consid- erably more complex. The relationship between buyer and seller is adversarial and depends in part on the relative market power. The extent to which the seller can set the sales price measures monopoly-pricing power. The HCO is frequently in a monopoly situation regarding uninsured purchasers, and the management of charges to these individuals is a matter of substantial board and societal concern. Also concerning is that large health systems may acquire subsidiary HCOs in a geographic area, which limits competition and allows for prices to be hiked. Such situations have led to repercussions from employers and consumers.6 Although many healthcare systems have acquired some monopoly power over private health insurance contracts,7 major buy- ers—such as Medicare, Medicaid, and large commercial insurers—have the balance of market power.
The Medicare Payment Advisory Commission conducts research and holds hearings to develop market price recommendations. Medicaid pay- ments are established by the states; they commonly do not cover any funding for capital replacement, innovation, or expansion. The emphasis has been on reaching levels 4 and 5 in exhibit 13.5—bundled payment for episodes of care offered jointly to the institution and its physicians, and incentives that reward the hospital and physician for more effective overall care, which mini- mizes readmissions of chronically ill patients.8
All HCOs must have a systematic pricing response that recognizes the reality of purchaser pricing power and the broad array of pricing structures. The impact of an offered price must be evaluated using the LRFP. All HCOs have high fixed costs, and as a result, profits are dependent on volume. To retain market share, they must meet most market demands in both price and service. As a practical matter, they cannot walk away from major insurers such as Medicare. Pricing strategy cannot be set alone; it must be integrated with a strategy to manage the risks involved. Private insurers will want the lowest price possible. Their offers must be evaluated against the financial needs reflected in the LRFP and the HCO’s bargaining strength. Pricing and charging policies must also be established for uninsured patients. Pric- ing must include guidelines for charity care, for patients’ out-of-pocket pay- ments, arrangements for deferred payment, and management of delinquent accounts. The basic HCO response is an effective program of evidence-based medicine and evidence-based management, as described throughout this text. This approach holds cost per case to levels that are acceptable to insurers and generally ensures some profit under Medicare.
Evaluate Strategic Investments Implementing a cost management strategy will generate many proposals for strategic revisions. The advanced levels in exhibit 13.5 force more integration
Chapter 13: F inancial Management 417
Structure Example Risk for Provider Integration
Fee-for- service/ charges
Cash payments, catastrophic and tradi- tional health insurance
None beyond normal business risks
Traditional physician–HCO relationship
Negotiated fees and charges
PPO contracts, some tradi- tional insur- ance contracts
Normal busi- ness risks, plus constraints imposed by contract limits
Traditional physician–HCO relationship
Fees for epi- sodes of care negotiated separately between HCO and physicians
Medicare DRGs, APCs, some insurance contracts
HCO is at risk for the costs and quantities of services ordered by physicians during the episode
Physician has no additional risk
HCO must gain physician cooperation to meet its risk
Fees for epi- sodes of care offered jointly to HCO and physicians
Single-price contracts for discrete episodes of care, such as cardiovascu- lar surgery or chemotherapy
Both physician and HCO are at risk for the cost of the episode
Requires physician–HCO collaboration on cost per episode
Fees subject to a group incentive
Contracts with penalties or bonuses for meeting utiliza- tion or quality targets, such as readmission penalties
Physician and HCO share limited risk for the cost, qual- ity, and appropri- ateness of care
Requires physician–HCO collaboration on process improvements to meet specific targets
Capitation Payment con- tracts indepen- dent of disease incidence or actual costs of treatment
Physician and HCO at unlimited risk for the cost of the episode and appropriateness of care
Requires physician–HCO collaboration on cost per episode, utilization, and disease incidence
Note: APC = ambulatory patient classification; DRG = diagnosis-related group; HCO = healthcare
organization; PPO = preferred provider organization.
EXHIBIT 13.5 Pricing
Structures for
Healthcare
Contracts
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not only between each physician and the HCO but also among physicians. The pricing and risk management strategy must integrate a broad range of knowledge from practicing physicians, service line leaders, clinical support services leaders, and financial analysts. It will restructure service lines and involve mergers and corporate restructurings for many HCOs. Each proposal must be evaluated with the LRFP. The governing board will make the final decision, but senior leadership and finance will prepare the analyses. Many proposals will require analysis of alternative assumptions. The time frame for strategy implementation must allow for individual learning and the develop- ment of effective teams.
Manage Cash, Financing, and Debt Finance is responsible for managing all loans, bonds, and cash assets. It evalu- ates alternative sources of funds and recommends the best solution to the governing board as part of the funds flow budget. It arranges borrowing; prepares supporting financial information; and manages repayment sched- ules, mandatory reserves, and other elements of debt obligation. It monitors the financial markets for opportunities to restructure financing. It manages liquid assets (cash and readily saleable investments). It manages endowments of not-for-profit HCOs.
Debt and Equity Capitalization Any HCO must establish a core of equity finance. Successful not-for-profit HCOs have accumulated substantial equity. The equity of not-for-profit organizations can increase only from donations and retained earnings. Equity is also useful in joint ventures, allowing the partners to be rewarded for suc- cessful risk taking. For-profit equity investors generally expect returns com- mensurate with their risk, often several times the return expected by lenders. Tax laws are important in equity finance, from both the point of view of the corporation and that of the investor. They permit not-for-profit organiza- tions to retain tax exemption for their share of the earnings if they hold certain levels of control.
Well-managed not-for-profit HCOs exercise extreme prudence in deploying equity. Investments in mission-related projects should minimize risk. The HCO can pursue some higher-risk investments limited to amounts that the organization could lose without seriously impairing its mission. The HCO’s cash investments should be in low-risk debt securities.
Borrowing, principally the long-term tax-exempt bonds, will remain an important form of capital finance. HCOs’ borrowing capacity and cost of borrowing depend on the overall level of risk to the lenders. Assets that have tangible independent value, such as real estate and accounts receivable, can be pledged to support debt. The typical community hospital holds long-term debt that is about 50 percent of its equity.9 Well-managed HCOs deliberately manage their debt and investments to attract lenders at advantageous rates.10
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Effective investment of borrowed funds, maintenance of cash reserves, and profitable operations are all important. In the long run, the organization can maintain a favored position only by investing prudently to enhance its own customer base.
Exhibit 13.6 shows a simplified example to clarify the complex finan- cial and operational issues involved in capital funds acquisition. A certain HCO might plan to spend $50 million over the next three years to expand primary care and outpatient services. It anticipates a handsome increase in net income of $10 million per year from the new service, with relatively small risk that the income will fall below that level. It has several sources for the $50 million. It could use cash reserved from prior earnings. It could seek tax-exempt bonds, which are likely to have the lowest cost of capital. It could create a for-profit joint venture with its physicians or with another corpora- tion and raise part of the money from equity investment. Finally, it could combine any or all of these approaches.
The use of debt finance can substantially increase the project attrac- tiveness, and the use of a joint venture partner can reduce the capital require- ment. The combination of the two allows the institution to start the project with a minimum investment of its own capital and an appealing return on the capital, if earnings match expectations. If earnings fall short, the bond inter- est is fixed and the entire drop is borne by the equity investors. Partnership with a physician organization commits the physicians to the project’s success and reduces the risk of failure.
The number of questions and assumptions required even in this simple example indicates the complexity and challenge. Obviously, a carefully
Scenario ($ in millions)
HCO Equity
Investment
Earnings from
Project
Bond Interest Paid*
Net HCO Income/ Year**
Return on Equity***
100% from equity
$50 $10 $0 $10 20%
50% bonds, 50% equity
$25 $10 $2 $8 32%
50% bonds, 25% equity, 25% joint venture equity
$12.5 $10 $2 $4 32%
*Bond interest 8%
**(Project earnings − Bond interest) − HCO equity share
***Net HCO income as percentage of HCO equity
Note: HCO = healthcare organization.
EXHIBIT 13.6 Implications
of Alternative
Funding
Sources for an
Ambulatory Care
Project
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developed model of operations and a reliable LRFP are essential; opening is several years away. Assumptions must be made about the following:
• Price and volume interactions for the new service. A nuanced understanding of the market tolerance for prices and the risks involved if demand does not meet expectations are essential to evaluating the project and the financing mechanisms.
• Costs of alternative sources of capital. Each of the sources has different costs and obligations built into it. The use of retained earnings may impair the organization’s ability to meet other needs, such as the replacement of equipment or an increase in market share by the acquisition of competitors. Bonds will have an interest rate dependent on the market at the time of sale, the organization’s overall financial position, and federal tax policy. Organizations that have been prudently managed in the past will have advantages for all kinds of capital. They will have more retained earnings, lower bond interest, and more debt capacity. They will have a record of success, and thus will be more attractive to outside investors.
• Impact of the financing on other strategic goals. The financing may affect competitors or partners in ways that are advantageous to the organization. A joint venture with primary care physicians may provide an avenue to affiliate them more closely with the organization and may improve the ability to recruit. The result may be higher market share and an increased overall profitability. A joint venture with a potential competitor may reduce risk and expand resources simultaneously.
• Tax implications. If ordinary income taxes apply, they will be enough to make substantial differences in the results. (Federal corporate tax rates were 21 percent of earnings in 2018.) A tax adviser may be able to find precedents that establish the tax obligations of the various structures, or it may be necessary to seek a consultation letter from the IRS.
The LRFP will be employed to test outcomes not only for the expected conditions but for a range of possible futures. Each major funding avenue will be explored several times, under varying assumptions. Consultants will advise on approaches, assumptions, and implications. The financial results will be evaluated against the marketing and operational considerations. The final solution can be recommended to the board with widespread support from the participants.
Short-Term Assets and Liabilities Any operation requires working capital—funds that are used to cover expen- ditures made in advance of payment for services. The finance system manages these transactions to maximum advantage for the organization. A healthcare
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system with a nine-week average billing cycle, a biweekly payroll, and a four- week inventory cycle requires about $25 million in working capital for $100 million of annual expenses. The cost of this capital—about $1 million per year in interest paid or forgone from investments—is the equivalent of 10 or 15 full-time employees.
Working capital management deals in terms of days. Income can be obtained by moving assets rapidly. Cash and other liquid assets are placed where they will obtain the highest return consistent with risk and the length of time available. (Large sums of money can be invested for small inter- est returns on an overnight basis.) Accounts receivable and inventories are minimized because they earn no return. Accounts payable, payroll, and other short-term debts are settled exactly when due (or when discounts can be applied), allowing the organization to use the funds involved longer.
Short-term borrowing is available to HCOs. Bank loans and factor- ing of receivables are common sources. Short-term borrowing is minimized because it costs money. At the same time, however, costs of borrowing need to be compared to opportunity costs of liquidating assets or failing to meet liabilities in a timely fashion. The objective is to reduce total costs of work- ing capital, rather than to avoid borrowing per se. HCOs can reduce capital needs by leasing equipment, paying extra (in effect an interest rate) for the privilege of deferring payment.
Collections and Revenue HCOs are paid for their services once they have submitted an invoice—the patient ledger—to the responsible party. Health insurers insist on substantial documentation of the invoice. Most now require a specific diagnosis follow- ing the International Classification of Diseases and an attestation by the phy- sician affirming the diagnosis. Because complex diagnoses are more highly paid, entering the correct diagnosis is important to both parties. The HCO should identify all disease but is obviously forbidden to enter nonexistent disease. It is also important to prepare the invoice in a timely fashion. Each day of delay—best practice is to gain payment in less than 50 days—adds to the working capital need. Large HCOs establish a substantial mechanism to prepare invoices promptly, assist the physician to identify all existing diseases, and audit to avoid violating the law.
Multicorporate Accounting Many HCOs are now multicorporate structures or healthcare systems. Both for-profit and not-for-profit legal entities are permitted to create or acquire subsidiaries by forming new corporations, purchasing or leasing existing organizations, and investing in other corporations. They can reverse these actions by sale, liquidation, or transfer. The only restrictions on these actions are those established by antitrust laws and regulations that govern tax-exempt
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status. Investment in a given subsidiary can range from negligible to wholly owned, although to qualify for tax exemption it must be controlled by a not- for-profit board. Any combination of for-profit and not-for-profit entities is possible. The tax obligations of each corporation are considered individually as the structures develop.
Two major types of systems have emerged. First, individual hospitals in the same market have merged, formed joint ventures, or established sub- sidiaries. These tend to be relatively small—$500 million a year or less. They are essentially the same as individual hospitals. Second, about a hundred multimarket systems have become important suppliers of healthcare. Many now exceed $1 billion per year in revenue. Many are religious, and many are for-profit. Kaiser Permanente, by far the largest system, is a secular not- for-profit healthcare system that includes its own insurance operation. These systems may centralize important components and generate returns to scale; finance, for example, can perform many functions in one office and serve dozens of hospitals. The system’s member HCOs can also form multicorpo- rate structures.
The major financial benefits of multiple corporate structures are as follows:
• Capital opportunities. Subsidiary corporations of either single-market or large systems offer opportunities to dedicate capital and to raise new capital through borrowing, gifts, or equity. Activities attractive to equity capital can be pursued only through a for-profit structure, but a not-for-profit parent corporation can form a for-profit subsidiary. Large systems offer scale and diversification attractive to bond buyers. As a result, they can obtain lower interest rates.
• Reward. Separate for-profit corporations allow various groups to invest in activities of interest to them and to receive financial reward for the success of those activities. Joint subsidiaries can reward physicians for loyalty and quality.
• Risk. The liabilities and obligations of the owned or subsidiary corporation cannot generally be transferred to the parent. (There are certain exceptions, and the law in this area is changing.) Thus, the parent risks only those assets actually invested in the subsidiary.
• Taxation. Not-for-profit corporations can be taxed on certain activities, and for-profit corporations can respond to incentives built into the tax law. Separate corporations can frequently be designed with a view toward minimizing the overall tax obligation.
The finance system has the obligation to identify, evaluate, and recom- mend these opportunities. They must work within the limits established by
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accepted accounting practice, Medicare fraud and abuse provisions, and IRS regulations.
A relatively common example is an HCO that is exempt from taxes forming a for-profit corporation with outside investors and then contracting with that corporation to carry out certain activities. The HCO reduces its capital requirement, retains control of the cost and quality of services, and expects to earn profits from its ownership position. The transactions must be priced at fair market value. Joint ventures and equity arrangements with physicians, like other physician contracts, may not offer financial incentives to refer or admit patients to the parent HCO, except under certain types of managed care insurance. They also may not extend tax exemption to physi- cians in private practice, and they may not reward physicians for improvement of the profitability of the parent corporation.
Endowments Most nonprofit HCOs have acquired some endowments or funds they expect to hold for long periods, although the amounts are relatively small. These funds can be invested for growth or income. The assistance of professional investment managers is advisable. Larger organizations use several different managers. The organization must evaluate its overall investment strategy, weighing its risk against potential earnings. The return is often dedicated to specific purposes such as research, education, and charity care.
Protect Corporate Assets Against Loss, Distortion, or Conversion Any corporate entity is required to maintain control of all its properties for its owners. The governing board and members of management are individually and collectively responsible for the prudent protection of assets. They act as agents for owners and must avoid inurement in not-for-profit organizations. The assets include property, cash, and intangibles such as reputation and established market recognition. Information is one of the most valuable and at-risk assets. The agency obligation extends through the organization. Asset protection is every associate’s responsibility, and specific protection functions are assigned to various units. Assets are further protected by a combination of an internal audit function (see chapter 2) and a hired external auditor.
Information Assets The organization’s data warehouse—the source of truth—is protected physi- cally by knowledge management services, which is also responsible for the definition and accurate capture of information. The internal audit function monitors actual compliance to definition—whether the reported measure is calculated and recorded exactly. The split responsibilities are deliberate; divi- sion and some duplication of functions is a widely accepted pattern for pro- tection. The accounting information in the warehouse is routinely audited,
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including cash balances and accounts receivables, supplies, and the accurate posting of payroll and other expenses. Basic statistics, such as discharges by DRG or ambulatory patient group, must be audited to assure third-party payers of the validity of charges. In the process of auditing the medical record information, internal auditing can validate the statistics used in specification and adjustment and in many measures of quality.
Physical Assets Generally, the protection of the physical assets is considered part of the func- tion of the plant system, assigned to security, maintenance, and materials management. Prudent purchasing practices are included in the responsibili- ties of materials management. The controller is responsible for the physical protection of cash, securities, and receivables. The risk of misappropriation of assets is probably greater than the risk of theft or destruction by outside sources. Internal auditing is responsible for estimating the actual loss of physical property and for reviewing processes that protect against loss. The major risks it guards against are the following:
• Inurement • Unjustified free or unbilled service to patients • Embezzlement of cash in the collections and supply processes • Bribes and kickbacks in purchasing arrangements • Diversion or theft of supplies and equipment • Falsified employment and hours • Purchase of supplies or equipment without appropriate authorization • Supervision of financial conflicts of interest among governing board
members and officers
All organizations face risk of losses of physical assets, and acceptable performance requires continuing diligence. A sound and well-understood program has been developed for this purpose. It has six parts:
1. Detailed, written procedures govern the handling of the various assets and transactions. These procedures primarily rely on the division of functions between two or more individuals and the routine reporting of checks and balances to protect assets. It is common to assign the responsibility for authorizing the transaction (a payment or charge) to operations leaders and the responsibility for collecting or disbursing funds to accounting personnel.
2. Adequate written records and accounting systems document the actual use of assets. The software used in automated systems must conform to FASB or GASB accounting rules.
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3. Special attention is paid to collections and cashiering. Significant efforts must be made to ensure that third parties and individuals pay promptly and fully. Payment in cash and checks must be protected against embezzlement. Carefully designed systems to ensure prompt collection and protect receivables and cash rely heavily on the principle of division of functions and on calculations designed to verify completion of transactions.
4. Adherence to risk-control procedures and documentation requirements is monitored through internal auditors.
5. The independence of the internal auditor can be ensured by arranging reporting directly to the chair of the board audit committee.
6. Annual outside audits verify adherence to procedure and validity of reported outcome.
Inurement, Fraud, and Abuse Not-for-profit structure requires that no individual benefit be accrued from service to the corporation beyond any stipulated salary or compensation. Inurement is the diversion of funds to persons in governance or leadership as a result of their position of trust. Under these rules, directors, officers, or trustees are prohibited from engaging in business that allows them to derive financial advantage from their governing board role. The corporation is not enjoined from doing business with a board member if such business and board membership are in the owners’ interests. Thus, the key word is advantage.
To protect against inurement, the institution must establish, and the internal auditor must enforce, policies that reduce financial conflict of inter- est. These policies have two parts. First, every governing board member and officer is required to file an annual disclosure statement that identifies all financial interests and potentially conflicting interests and commitments, including membership on other voluntary boards. Second, members are expected to divorce themselves from any specific decision or action that involves their interests or conflicting affiliations. Well-run organizations achieve this by making the point well in advance of any specific application and by selecting members who understand both the law and the ethics.
The rule applies as well to physicians, but its application is more complex. Physicians cannot gain beyond specified benefits of privilege to avoid inurement and specific prohibitions, called fraud and abuse. All physi- cian contracts must be reviewed for compliance (discussed in chapter 6). Many organizations have an independent compliance officer who is assigned responsibility for the review. The compliance officer should also report independently to the governing board, and her activity should be subject to internal audit.
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External Audits Outside auditors certify the financial statements to be correct, usually on a fiscal-year basis. The federal government requires an audit as a condition of participation in Medicare, and many intermediaries have similar require- ments. Lenders require annual audits before and during the period of any loan. The external audit is less extensive than the internal, although it now typically includes an assessment of the internal audit. It emphasizes areas of known high risk.
Sampling techniques are commonly used in auditing, with attention focused on proportion to the risk involved. Auditors are expected to main- tain a deliberate distance from internal employees being audited, includ- ing the internal auditors, and to use objective methods to ascertain the accuracy of reported values for balance sheet items. They are also expected to review accounting processes and to suggest changes that will improve accounting accuracy.
The governing board selects the outside auditors, receives their report, reviews it carefully, and corrects any deficiencies. Considerable care in selecting and instructing the auditor is justified.11 The auditor should be accountable directly to the board’s finance committee. The firm should be free of any other financial relationship to the organization. This condition means that consultants should not be hired from the same firm handling the audit. It is unacceptable to use a firm that is represented on the gov- erning board.
The audit committee of the governing board includes the independent trustees who serve as chair, finance chair, treasurer, or secretary of the board. It may consult with, but should not include, employed associates. The com- mittee formulates instructions to the auditor, revising them annually. The revisions can bring different aspects of the asset-protection system under scrutiny each year. The instructions should be based in part on advice from management but should be confidential between the finance committee and the auditor.
The auditor’s report goes directly to the audit committee. Thus, the auditors are free to comment on all levels of management. The auditors’ comments on both problems with the accounts and weaknesses identified in the asset-protection policies are included in a document called the manage- ment letter, which accompanies the audited financial reports. The audit com- mittee should hear an oral summary and discussion of the management letter. The full board should formally accept both the reports and the letter. The expectation for the management letter is “no deficiencies,” and it is usually achieved. Well-run HCOs have little trouble with this system. The success of this system assures all stakeholders of truthfulness and equity, removing those concerns from negotiations.
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Improve Continuously In addition to its role managing the financial resources of the HCO, the finance activity is a critical component of evidence-based management, constantly sup- plying routine and special reports and managing the goal-setting process. It must pursue continuous improvement of all its activities, using its operational performance measures and listening responsively to its many clients.
People
Various professional and skilled personnel work in the finance system of even small HCOs. Many of these people perform tasks that are indistinguishable from those in any other corporation, while others perform tasks that require extensive familiarity with healthcare. On-the-job training is often practical at lower levels, but supervisory staff now usually have advanced degrees in accounting or finance.
Professional personnel with healthcare experience are often in short supply. HCOs experience a chronic shortage of chief financial officers (CFOs). Recruitment should always be national, health-specific knowledge should be highly prized, and the governing board should be directly involved in the CFO selection. Job specifications for a CFO tend not to depend on the size of the organization. Sustaining qualified, professional financial man- agement in small organizations is a severe problem—one that may underlie more mergers and contract management than the field generally recognizes. Contract financial management is available through firms that provide gen- eral management.
Chief Financial Officer The CFO is accountable for the operation of the finance systems, including the financial management functions, and advises the CEO and the govern- ing board on finance issues. The responsibility includes cash collections and disbursement, asset control, and management of debt and equity, duties that are assigned to an employed treasurer in some commercial corporations. The HCO’s treasurer is frequently a trustee who chairs the finance committee.
The CFO of a well-run HCO should have substantial experience that includes exposure to the finance systems of several organizations, familiarity with all functions of the finance system, experience with debt management, and the revenue cycle, and demonstrated ability to collaborate with leaders throughout the organization. The credentials for a CFO usually include a master’s degree in management or business and may include certification as a public accountant. The larger public accounting firms often assist in finding CFOs and, not surprisingly, are also a major source of supply. The
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recruitment team should include senior leadership, clinical leadership, and governing board representation.
Other Professional Personnel The functions of finance and accounting require substantial technical knowl- edge. The leaders of the activity should have experience in the areas where they are accountable. Specialty certification is available. The Healthcare Financial Management Association provides certification in several specialty areas.12 The certified public accountant examination is required for exter- nal auditors and popular among HCO financial leaders;13 the examination includes mastery of FASB requirements. Certification is also available for managerial accounting.14 The Institute of Internal Auditors offers training programs (www.theiia.org).
Organization of the Finance System
In the Finance Unit The organization of the finance system is dictated by its functions and has been thoroughly codified, in part because of the use of separation of activi- ties to protect assets. Budgeting, cost accounting, financial management, and auditing require relatively small numbers of people, with the largest numbers of personnel being in various aspects of patient accounting and collections. Exhibit 13.7 shows a common organization pattern, but other arrays of the eight major units are also effective.
Relation of Finance to Operations Almost every part of the organization shown in exhibit 13.7 is in direct daily contact with the rest of the HCO, often about sensitive matters. The key to success is maintaining a professional, productive level of exchange. Clear, convenient systems and forms make routine information gathering as effi- cient as possible. Orientation and training sessions for finance personnel at all levels help them understand clinical procedures and participate in continuous improvement projects. Well-designed processes and training in consensus building make the interactions effective. It should be universally understood that operations management is responsible for setting, achieving, and depart- ing from expectations. Finance personnel provide data and interpret them; they do not enforce budget discipline.
Relation of Finance to the Governing Board The finance system relates directly to the governing board through the finance committee, and the CFO often represents the senior management team on the committee. Provision must be made for executive sessions of the committee, meeting without members employed by the HCO. Reports from the internal and external auditors should be first received in executive session.
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In this and preceding chapters, several tasks have been specifically identified for the finance committee of the board:
• Assist in selecting the CFO • Annually review the LRFP and recommend the final version to the full
board • Recommend the budget guidelines to the full board • Recommend pricing policies to the full board • Review the proposed annual budget, and recommend it to the full
board • Set the final priorities, and recommend the capital and new programs
budget to the board • Receive the monthly or quarterly report that compares operations to
expectations • Support the audit committee, supervising both the internal and
external audits • Review major capital expenditure and financing proposals
This list explains why membership on the finance committee is time- consuming and intellectually demanding. Members’ input is important at meetings of the full board as well, and overlapping appointments or joint
Controller
Budget of�cer
Managerial accounting
Transaction accounting
General ledger accounting
Chief �nancial of�cer
Associate �nancial of�cer
Credit and collection
Accounts receivable
Payroll
Investment and debt management
Internal auditor
Reports directly to �nance committee of the board
Transaction accounting
Property control
Systems and procedures
EXHIBIT 13.7 Organization
of the Finance
System
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meetings with the planning committee occur. In addition, the finance com- mittee has routine obligations to approve the HCO’s banks and financial contracts, real estate transactions, and contracts over predetermined amounts. The list can easily fill 10 or 12 fast-paced meetings each year. Virtually all of the work for the finance committee is done by finance personnel.
Measures
Quantitative Performance Measures Accounting and finance have a battery of established quality measures arising in the course of their activity. The measures shown under “Quality—Finan- cial Management” in exhibit 13.8 are universal and long-standing for organi- zations of all kinds. Lenders expect high performance on these measures and penalize failure with higher interest rates or denial of funds. Financial leaders are familiar with the concepts of performance scorecards. Their action can lead to failure of the HCO. Accounting procedures are designed to support high accuracy and prevent fraud. Performance is extensively audited, and the expectation for audits is 100 percent compliance. The traditional measures, however, address only part of the functions; there is a danger that focusing on these will distract from other important functions. Exhibit 13.8 adds measures for the costs of financial operations, satisfaction of both patients and internal customers, associates using finance’s services, and satisfaction of associates in finance. The broader array of operational measures expands the opportunity to identify OFIs, negotiate goals, and achieve continuous improvement. Most important, it ensures that finance’s contributions to other HCO teams will be effective.
Subjective Quality Assessment Additional insights into OFIs can be gained by systematic collection of opinions. Opinions from associates in the finance committee, internal and external auditors, and customers can be revealing and constructive. Outside consultants can also review performance. The LRFP, other financial analyses, and the budgeting process are particularly likely to benefit from these subjec- tive assessments.
The following are subjectively evaluated criteria met by successful organizations:
• The LRFP, analytic report, or budget package is clear, concise, internally consistent, and consistent with external realities.
• Assumptions and their implications are specified. • Prudent and reasonable sources have been used to develop external
trends, and a variety of opinions has been reviewed whenever possible.
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• The plan or report develops contingencies on major, unpredictable future events.
• Unexpected events that require modification are unforeseen by competitors and other external sources.
• The plan or report is well received by knowledgeable board members and outsiders such as consultants, bond rating agencies, and investment bankers.
Similar subjective criteria for all finance and accounting functions are avail- able in textbooks and from consultants.
Scorecard Dimension Measures Available Benchmark
Demand Only a few functions—most notably patient ledger accounting—have usable measures of demand
Rarely available
Cost Number of personnel and labor costs, per function
Cost per patient
Rarely available
Associate satisfaction
Satisfaction survey
Absenteeism and retention
Provided by survey companies
From personnel records
Output and productivity
Cost and labor hours per function Compare similar noncompeting HCOs
Quality— financial management
Financial ratios for cash and receivables Days in receivables Short-term borrowing amounts and cost Endowment earnings Debt service cost Age of plant Investments in replacement and new
technology Earnings from short-term liquid assets
Compare similar noncompeting HCOs
Quality— analytic and consultative services
User complaints and corrections Post hoc accuracy of forecasts Comparison to external consultants Service delays Surveys of internal user satisfaction
Compare similar noncompeting HCOs
Note: HCO = healthcare organization.
EXHIBIT 13.8 Operational
Measures of
Finance and
Accounting
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Managerial Leadership
National concern with the rising cost of healthcare, particularly in Medicare and Medicaid expenses, is likely to present financial challenges to many HCOs in the coming decades. Payment incentives have shifted away from individual items of care toward global payment that encourages sustain- ing health. Effective implementation will reduce emergency care and many expensive inpatient admissions. The changes will create financial challenges for some clinical service lines. As revenue becomes more limited, many smaller HCOs will close or merge. They will offer market opportunities for larger HCOs that have established a foundation for growth and acquisi- tion using the approaches outlined in The Well-Managed Healthcare Orga- nization. Empowerment; continuous improvement; a culture of service excellence; and the two planning models, epidemiologic planning and the LRFP—all will support expanded success. Optimizing these tools requires leadership attention to three fundamental issues in financial management: supporting an atmosphere of honesty and transparency, fostering a collegial, blame-free relationship with other units, and continuously improving finan- cial processes themselves.
Supporting an Atmosphere of Honesty and Transparency Senior leadership must ensure that all the financial functions are fully achieved in an atmosphere supporting associate empowerment. These func- tions are unusually susceptible to human failings—denial, avoidance, neglect, deliberate subversion or falsification, and greed. The organization constantly risks letting some matters slide, particularly when addressing them is likely to be unpleasant. The governing board and senior leadership are the first line of defense against this tendency. They must provide full and visible support for effective financial performance. The culture in finance must reward support of clinical care. It must celebrate improvements and avoid blame for honest error. It must promptly and forcefully address any threat to the integrity of the assets or the information.
This level of discipline is essential not simply to ensuring integrity but also to reassuring all associates and suppliers that their own actions will not be undercut by fraud, distortion, or even carelessness. Contracts will be ful- filled. The data will be reliable. Gaming will not be tolerated. Much of this is communicated by demonstration and repetition. The values are made clear at employment, reinforced by training and coaching, and demonstrated daily by leadership and associates in finance. Widespread commitment establishes good habits. Violations will be rare, although they must receive swift and appropriate response.
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Maintaining a Collegial, Supportive Culture Other leaders rely on finance for critical information, including several mea- sures on their unit scorecards, extensive support for PITs, and advice on negotiating goals. Interaction between finance and other leaders is almost constant. The others must perceive these interactions as constructive. Empowerment means that the associates receiving the information must be satisfied. They must understand the data, their implications, and their limitations. In authoritarian organizations, finance was often established as enforcement, and viewed as adversaries by others. Enforcement is not a finance function. The responsibility for achievement of unit scorecard goals lies exclusively with unit leaders and their supporting staff.
In large part, building constructive relationships is a matter of training and modeling, achieved by demonstration, repetition, and reward. Finance personnel can be trained to fulfill Sharp HealthCare’s twelve behavioral stan- dards and five must-haves (see chapter 2) as well as any associate. The CFO and the finance leadership must understand, implement, and model those behaviors. Users’ understanding becomes a finance goal as important as col- lecting receivables and meeting payroll. Leaders teach finance associates to seek users’ questions and test users’ understanding. Success is measured on the finance scorecard (see exhibit 13.8). Individual achievement is recog- nized and rewarded.
Continuously Improving Finance Keeping finance honest, transparent, and collegial is a foundation for excel- lence, but financial management itself must improve. Areas known to be fruitful OFIs include accuracy of financial accounting, the accuracy of mana- gerial accounting, and the reliability of estimates for goal setting and financial planning. Associates’ understanding and acceptance of financial reports is also an area of concern; it must be addressed by training and senior leadership encouragement, as well as by finance.
Financial Accounting Revenue accounting is a challenge. Much payment depends on diagnoses. Many patients have several diagnoses; the multiple entries affect payment. Treating physicians and practitioners must identify diagnoses and attest to their accuracy. Assigning incorrect codes to increase severity, called upcod- ing, is illegal and should be monitored by both internal and external audits. Assigning too few codes or understating the severity of disease reduces rev- enue. The attestation requirement, with its threat of criminal charges, can lead physicians to understate diagnoses. The solution is in diagnostic coding assistance, including analysis of diagnostic and treatment orders to ensure
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capture of all treated diseases. The solution also includes reassurance to the treating physicians. Leadership’s job is to see that both conditions are fully met—all diagnoses are documented, and attesting practitioners are comfort- able with the process.
Certain elements of the financial reports—such as allowances for bad debts, reserves for changes in payment from third parties, reserves for con- tracted future costs, and reserves for employee pensions—must be estimated. The estimates are subjective and can be deliberately varied within FASB limits to affect net income. In intercorporate accounting, allocations for indirect costs are also subjective. Deliberate distortion beyond FASB limits or for individual gain (such as the distortion of profits to ensure incentive payments to management) is illegal. Well-managed organizations use consistent rules for these transactions. They include these rules in contracts with subsidiaries and audit the contracts to ensure compliance.
Managerial Accounting The elements of the cost data routinely reported from general ledger transac- tions, such as depreciation costs, charges for central services, and allocated costs, are always a source of contention. Operations leaders deserve assurance that the charges are given the same level of scrutiny and rigorous control that their direct costs receive. Senior leadership should ensure the following five items and explain the process to all managers and leaders:
1. Costs of generating these services are accurately accounted and benchmarked.
2. Wherever practical, the best possible source of service is selected. This means that outside vendors are used where appropriate.
3. Transfer prices are used whenever feasible. Transfer prices give managers control over quantity and can be compared easily to outside vendors.
4. Allocated costs are used only when necessary and are based on fair, reasonable, and consistent allocations.
5. Specific complaints are addressed promptly and thoroughly, and indicated changes are implemented.
Managerial accounting is also used extensively in performance improve- ment to model alternative solutions. These applications are often complex technical exercises. The leadership role is to see that all members of the PIT are comfortable with the assumptions and analyses and understand the impli- cations of the findings. This comfort is usually a matter of clear reporting by the analysts, adequate discussion, and thoughtful response to questions. The operations leaders’ perspective can lead to important improvements in the
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modeling. Sensitive response to their questions increases their confidence in the results.
Goal Setting Setting the annual goals is never easy. The exercise is designed to force the organization to consider the demands of customer stakeholders, and it is inevitably stressful. Three major activities distinguish excellence:
1. The information-handling technology is carefully established. The information is clearly described and understood by operations leaders. Calculations are automated, allowing leaders to focus on the decisions rather than on paperwork. The best organizations train leaders in how to use the software to explore the implications of various answers. Hands-on training, support from superiors, and mentoring from experienced peers help first-line leaders master their roles.
2. The board’s guidelines are clearly explained. Each manager understands why the guidelines are important, how they were established, and how they are extrapolated from the organization to his unit. Because all members of the team should understand the guidelines, the manager should be able to explain them to others.
3. The negotiations to reach the budget should be considerate, fair, and realistic. This inevitably means that some units that are doing well will be challenged to excel, while others that are struggling are given extra support.
Financial Planning The assumptions are the critical element of financial planning. LRFP results are often sensitive to small changes in forecasts for demand and prices of patient services and for costs of purchased items. Because they are forecasts, there is no right answer. Leadership should insist on four specific protections:
1. Forecasts are obtained from respected and unbiased sources if available.
2. An effort is made to obtain alternate forecasts. 3. Sensitivity analysis is used in the model to test the impact of alternative
forecasts, and the implications of the results are fully discussed. 4. Prior forecasts are routinely examined for accuracy, and forecasting
methodologies are continuously updated and refined.
The point of these protections is that ceteris paribus extrapolations are not enough; critical variables must be thoroughly understood and carefully forecasted.
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Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. Why are accounting measures and other performance measures so com- plicated? Concepts such as cost per case or percent postoperative infections seem simple enough. Why must an HCO use FASB rules and National Healthcare Safety Network definitions and maintain internal and external audits? If it does, can we always compare two nationally defined, audited values for these or other measures? If not, what questions should we answer? Would an HCO ever design its own measures that were different from the national ones?
2. A hardworking associate says to a senior leader, “Our unit just got the bill for human resources. It was huge! We had to pay for the mandatory train- ing for our new supervisor, plus the annual HIPAA, harassment, and disaster management training. Why do we have to pay for this? How do we know we’re getting a fair price?”
3. How does the organization evaluate its endowment capital and liquid asset management program? What questions would you ask, and what numbers would you want, if you were a nonfinancial senior leader exploring this ques- tion with the chief financial officer and her financial management team?
4. How much should the audit functions cost? The system described is expensive; many organizations complain that auditing costs are excessive. What exactly are the benefits the organization gains from those expenditures, and how are they measured? How will the organization judge whether the investment is wise?
5. Suppose you are on a PIT to improve an HCO’s goal-setting processes, the “May to August” portion of exhibit 3.7. What criteria should the pro- cesses meet? How could the criteria be measured? Where could benchmarks be found? Beyond the measures, what else would you do to identify oppor- tunities for improvement in the goal-setting process?
Additional Resources
Cleverley, W. O., and J. O. Cleverley. 2017. Essentials of Health Care Finance, 8th ed. Burlington, MA: Jones & Bartlett Learning.
Finkler, S. A., and D. M. Ward. 2018. Accounting Fundamentals for Health Care Manage- ment, 3rd ed. Burlington, MA: Jones & Bartlett Learning.
Healthcare Financial Management Association. 2016. Patient Financial Communications Best Practices. Accessed September 26, 2018. www.hfma.org/dollars/.
Chapter 13: F inancial Management 437
Reiter, K. L., and P. H. Song. 2018. Gapenski’s Fundamentals of Healthcare Finance, 3rd ed. Chicago: Health Administration Press.
Nowicki, M. 2017. Introduction to the Financial Management of Healthcare Organiza- tions, 7th ed. Chicago: Health Administration Press.
Notes
1. Centers for Medicare & Medicaid Services. 2018. “Health Information Privacy.” Accessed May 16. www.hhs.gov/ocr/privacy/index.html.
2. Financial Accounting Standards Board. 2018. “Accounting Standards Updates Issued.” Accessed June 5. www.fasb.org/jsp/FASB/Page/SectionPage& cid= 117 61 56316498.
3. US Internal Revenue Service. 2017. “Instructions for Schedule H (Form 990).” Accessed May 16, 2018. www.irs.gov/pub/irs-pdf/i990sh.pdf.
4. Player, S. 1998. “Activity-Based Analyses Lead to Better Decision Making.” Health- care Financial Management 52 (8): 66–70. See also Baker, J. J. 1995. “Activity- Based Costing for Integrated Delivery Systems.” Journal of Health Care Finance 22 (2): 57–61.
5. Finkler, S. A., and D. M. Ward. 2018. Accounting Fundamentals for Health Care Management, 3rd ed. Burlington, MA: Jones & Bartlett Learning.
6. Terhune, C. 2018. “California Giant Sutter Health Faces Heavy Backlash on Prices.” Kaiser Health News. Published May 16. https://khn.org/news/california -hospital-giant-sutter-health-faces-heavy-backlash-on-prices.
7. Lindrooth, R. C. 2008. “Research on the Hospital Market: Recent Advances and Continuing Data Needs.” Inquiry 45 (1): 19–29.
8. Jencks, S. F., M. V. Williams, and E. A. Coleman. 2009. “Rehospitalizations Among Patients in the Medicare Fee-for-Service Program.” New England Journal of Medi- cine 360 (14): 1418–28. See also Davis, K., and S. Guterman. 2007. “Rewarding Excellence and Efficiency in Medicare Payments.” Milbank Quarterly 85 (3): 449–68.
9. Reiter, K. L., J. R. C. Wheeler, and D. G. Smith. 2008. “Liquidity Constraints on Hospital Investment When Credit Markets Are Tight.” Journal of Health Care Finance 35 (1): 24–33.
10. Wheeler, J. R., D. G. Smith, H. L. Rivenson, and K. L. Reiter. 2000. “Capital Structure Strategy in Health Care Systems.” Journal of Health Care Finance 26 (4): 42–52.
11. Reinstein, A., and R. W. Luecke. 2001. “AICPA Standard Can Help Improve Audit Committee Performance.” Healthcare Financial Management 55 (8): 56–60.
12. Healthcare Financial Management Association. 2018. “Online Education for Indi- viduals.” Accessed June 5. www.hfma.org/selfstudy/.
13. National Association of State Boards of Accountancy. 2018. “What Is the Uniform CPA Examination?” Accessed May 17. https://nasba.org/education/becoming acpa/whatistheuniformcpaexam/.
14. Institute of Management Accountants. 2018. “CMA Certification.” Accessed May 17. www.imanet.org/cma_certification.aspx.
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CRITICAL ACTIONS
14 INTERNAL CONSULTING
1. Maintain and interpret verified information that describes the community served:
• Identify population, economic, healthcare, and competitor trends.
• Design and conduct surveys.
• Manage the epidemiologic planning model.
• Plan for service and workforce requirements.
2. Support the use of scorecards and performance reporting:
• Assist the information technology (IT) steering committee in identifying and defining measures.
• Analyze and interpret statistical data.
• Help operators identify improvable variation.
• Obtain and validate benchmarks and best practices.
• Advise on legal and regulatory issues and approve healthcare organization contracts.
3. Provide process improvement teams (PITs), planning teams, leadership, and governance with timely and effective knowledge-based support:
• Support chairs of PITs and planning teams in efficient committee practices.
• Guide teams in Lean, Six Sigma, and other quality improvement models in analyzing and interpreting data.
• Model proposed processes.
• Conduct tests of proposed processes.
4. Identify, evaluate, select, and implement new programs and capital investments that yield returns in improved performance:
• Assist individuals in developing feasibility studies and business plans.
• Assist units in preparing requests for capital.
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Purpose
The purpose of internal consulting is to
provide information, forecasts, tools, and analyses in support of evidence- based management and the continuous improvement of performance.
Internal consulting provides support for process improvement teams (PITs), planning teams, and leaders throughout the organization, helping them objectively investigate opportunities, issues, and alternatives. It also supports senior leadership and the governing board in strategic decisions—fundamen- tal questions about the future of the enterprise. The ideal is to make these operating and strategic decisions in such a way that even with complete hindsight, none would be changed. The reality is that organizations fall short, but well-managed organizations come closer than others. They thrive because their internal consulting units collect information exhaustively, fore- cast carefully, apply tools appropriately, and conduct analyses that allow them to identify the best alternatives.
Two fundamental concepts underpin internal consulting in high- performing healthcare organizations (HCOs):
1. Success requires the aggressive, far-reaching, unceasing search for improvement. Internal consulting provides the evidence and the analysis for the search, at both the strategic and operational levels.
2. Internal consulting does not make decisions. It supplies facts and analysis to its clients.
Functions
The questions raised by internal consulting clients arise from stakeholders, from opportunities for improvement (OFIs), and from specific proposals for the future. The answers can require input from any logistic or strategic sup- port activity and, in many situations, specific medical and nursing knowledge. All answers require forecasting—extrapolation to future environments. Inter- nal consulting must coordinate its own resources, those from other units, and external resources to answer those questions as accurately as possible.
The internal consulting functions shown in exhibit 14.1 emphasize information assembly, analysis, and integration. They divide the work of internal consulting somewhat arbitrarily into projects for the HCO—as a whole, for PITs, and for capital investment proposals. Many real projects involve all three areas. The “any other factual concern” function establishes both the unit’s universal breadth and its critical limitation to fact-finding rather than decision-making.
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Function Description Examples
Support the organization as a whole
Environmental assessment
Annual review of changes and trends that affect future performance
Trends in community employment, health insurance, and care- seeking behavior
Competitor activity
Community-based epidemiologic planning
Forecast of community demographics and disease incidence
Trends in population size, age, births, disease incidence, demand for care
Forecasts of care provider supply
Benchmarking and identifying best practice
Search for changes in clinical or other work practices in other communities
Changes in treatment technology and clinical protocols
Evidence from professional asso- ciations and collaboratives
Environmental control
Statistical analysis and interpretation
Analysis of variation in score- card data; statistical pro- cess control
Analysis, interpretation, and explanation of statistical data
Legal, regulatory, and ethical review
Compliance with guide- lines, regulations, court decisions, and the HCO’s own values
Federal and state regulatory requirements
Cultural competence
Any other factual concern
Assist senior leadership and governance with data collection, analysis, and forecasting
Due diligence for proposed merg- ers, acquisitions
New service lines Revised corporate structures
Support PITs
Increasing effectiveness of PITs
Training in process analysis Arrange outside consultation
Lean and Six Sigma analyses Assistance in process redesign
Process modeling Identifying implications of proposed work processes
Cost–benefit analyses Simulations Staffing models
Managing outside consultants
Coordinating all contracts for consultation
Assisting outside consultants
Planning a new service Evaluating merger and affiliation
alternatives
Evaluating and testing proposed solutions
Assisting PITs in identifying, selecting, and testing revised work processes
Designing pilots and evaluating trials
Worst-case scenarios
Support routine capital investment requests
Assisting operating units to identify capital opportunities and develop successful capital requests
Identifying opportunities for replacement or revision of space and equipment
Implementing consistent criteria for capital allocation
Replacing equipment Revising clinic locations and
services Documenting renovation needs
and OFIs
Implement and integrate recommendations
Implementing and integrating new programs and services
Coordinating multiunit changes in facilities, equip- ment, or work processes
Planning facilities, staffing, and corporate affiliations
Managing new construction Achieving proposal goals
Improve continuously
Note: OFI = opportunity for improvement; PIT = process improvement team.
EXHIBIT 14.1 Functions
of Internal
Consulting
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As shown in exhibit 14.2, internal consulting has five major vehicles for helping its clients:
1. Immediate reply. Many questions require only a short answer, brief discussion, or short follow-up message.
2. Just-in-time support. Internal consulting can arrange training or a specific service, including calling on other logistic and support services. For example, the HCO’s electrical power manager can consult on new equipment needs.
3. Staff support for client team. Internal consulting can assign one of its staff members to participate with the PIT, identifying, clarifying, and arranging fulfillment of PIT needs.
4. Internal consulting project team. For complex questions, a team of internal experts can be assembled. Members can come from any part of the HCO. The project team for a proposed clinical service line might include expertise in medicine, nursing, epidemiology, accounting, finance, law, and marketing. The team differs from the initial PIT as a result of its charge. It is fact-finding; the PIT is charged with making a recommendation.
5. External consultants. Even a large HCO does not have specialists in every field, and small ones can afford only the most limited internal consulting. Internal and external resources can be combined as well. The internal consulting manager can help select, instruct, and coordinate outside consultants.
The approach outlined in exhibit 14.2 has four important advantages:
1. It provides every client with a point of contact for technical support. 2. It clearly establishes the client’s customer position and gives the client
final say over the adequacy of the advice and the process. 3. It has two important feedback loops to ensure timely but thorough
service. 4. It allows the internal consulting manager to minimize cost and delay
by judicious use of the initial conversation, just-in-time opportunities, and coordination of projects.
It also has three important consequences:
1. Any clinical, logistic, or strategic support activity that can contribute to the client’s issue must respond to the internal consulting call. Knowledge management, human resources, environment services, accounting, and marketing can expect to contribute frequently to PITs. Internal consulting serves to coordinate and integrate these contributions.
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2. Internal consulting controls all outside consulting contracts. This allows careful selection of the vendor, effective management of the engagement, and full use of less expensive internal resources.
3. Decision-making is assigned to the client. Internal consulting does not decide. It focuses on the factual foundation needed for others to make evidence-based decisions.
Support the Organization as a Whole Internal consulting provides or coordinates services that support the ongoing activities of governance and leadership. The major applications are in envi- ronmental assessment, the epidemiologic planning model, benchmarking and best practices, statistical analysis, and various legal and ethical reviews, but the commitment to meeting client needs often aggregates these processes and calls on additional sources.
Feedback loop #1: Internal consulting dialogues with client to fully understand project
and issues.
Feedback loop # 2: Internal consulting and client
continuously review progress until client accepts results.
1. Client requests assistance.
2. Internal consulting develops client request
through dialogue.
3. Internal consulting routes request to initial solution through one or more appropriate response mechanisms.
Immediate reply
Just-in-time support
External consultant
4. Internal consulting and client review progress and expand support as necessary.
5. Client accepts �nal response.
Staff support for client
team
Note: Client = any duly constituted organization unit—usually a process improvement team, a planning team, the governing board, or senior management.
Internal consulting
project team
EXHIBIT 14.2 Internal
Consulting as a
Clearinghouse
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Environmental Assessment Internal consulting assembles an annual environmental assessment, support- ing a detailed quantitative analysis with a written summary highlighting criti- cal changes and opportunities. In addition to the quantitative analysis—and just as important—the assessment should include qualitative information from boundary-spanning activities. The report is widely circulated among the HCO leadership and provides background information for many PITs and planning activities.
Good environmental assessment reports the following:
• Community epidemiology, demography, and economy
– A thorough quantitative description of the market being served, identification of all major trends in demographics, economics, and disease incidence, and forecasts of the future
– Trends in volume of services by service line, with forecasts – Trends in total purchases of healthcare, sites of care, and sources of
payment – Review of competitor activities, as known
• Patient and community attitudes
– Market share with material changes highlighted – Satisfaction with care, with trends and benchmarks – Summaries from patient complaints and household surveys – Qualitative summaries of results from listening activities, focus
groups, direct interviews, and related sources
• Health insurance buyer intentions and health insurance trends
– Forecasts of volume, prices, and market share of the various insurance products
– Estimates of the willingness of employers, unions, and governments to pay for care and the terms they expect to use for payment
• Trends in clinical practice
– Outcomes quality, patient service delays, and cost of care, with benchmarks and forecasts
– Major changes in guidelines for care, demand for new services, and new modes of delivery
– Growth of accountable care organizations, with forecasts of impact on outpatient, emergency, and inpatient demand
• Trends in physician supply and organization
– Physicians in practice in the community, by specialty and other characteristics
– Trends in practice structures and compensation contracts
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• Trends in other health worker supply
– Employment, turnover, and compensation of care team members and clinical support teams
– Forecasts of need and supply for professional associates by profession
• Associate attitudes and capabilities
– Trends in the skills and attitudes of current employees, physicians, and volunteers
– Forecasts of compensation levels for major employed groups – Summaries of rounding, listening, and focus group activities – Summary of succession plan for senior leadership
The planning unit is accountable for a thorough and current database of all these elements and a written annual review that highlights important trends and developments. It should also be accountable for reporting and, where possible, integrating insights or beliefs regarding future trends offered by members of governance and senior leadership.
Community-Based Epidemiologic Planning Internal consulting is the source of truth for demographic, disease incidence, and market demand data. It maintains the databases that support epidemio- logic planning (chapter 3 and applications in many subsequent chapters). It works with clients to prepare multiyear forecasts of demand for clinical and other services. It produces short- and long-run forecasts for numerous mea- sures derived from clinical demand, such as employment, traffic, and supplies. The forecasts are used in strategic positioning (see chapter 15), the develop- ment of facility and service plans, and expectations for the next budget year.
The reliability of the forecasts and the interpretive advice provided by internal consulting are critical elements in long-term success of the organiza- tion. Important forecasts should be offered with sensitivity analysis, an exploration of the implica- tions of alternative assumptions about the future. Competent interpretation includes ranges for esti- mates of incidence rates, review of alternative sce- narios, and translation to resource requirements that help operators understand the dynamics of produc- tivity and the uncertainty of forecasts. The epidemiologic planning model is available from national consulting services. The input data requirements are difficult to replicate, even for a large healthcare system. The calculation and presentation software make the construction of forecasts, sensitivity analysis, and exploration of alternative scenarios quick and easy. An in-house capability is necessary to retrieve and trend internal data. It also becomes an important resource of expertise on the local situation.
Sensitivity analysis Analysis of the impact of alternative fore- casts, usually developing most favorable, ex- pected, and least favorable scenarios to show the robustness of a proposal and to indicate the degree of risk involved.
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Benchmarking and Identifying Best Practice A large, high-performing HCO needs thousands of benchmarks, and they are not easy to find. Internal consulting provides an expert who knows criteria for evidence and common sources and who can help clients select benchmarks and improve them. Benchmarking requires standard definitions of the measure being benchmarked. Benchmarking should include find- ing the best practice for a process. The benchmark data identify the best practice; the organization achieving benchmark is often willing to share its procedures and insights in return for reciprocal treatment. Benchmarks are frequently hierarchical—“best in HCO,” “best in system,” “best in nation,” and “world-class.” Ranking allows celebration of gains as they occur, but the opportunities for improvement (OFIs) are still clear.
Multihospital systems develop benchmarks for their members. The Centers for Medicare & Medicaid Services provides Hospital Compare data, which are useful for benchmarks at the local, regional, and national levels. Commercial companies and consultants offer a variety of cost and qual- ity data sets. National satisfaction surveys include comparative data with their reports. Some comparison sources are voluntary networks that also share best practices. Several successful systems promote direct relationships between associates with similar assignments, forming networks of nurses, purchasing agents, and so forth. Clinical collaboratives, such as those run by the Institute for Healthcare Improvement,1 and the case studies in Hospitals in Pursuit of Excellence (see www.hpoe.org), offer a way to learn by sharing experiences. Internal consulting assists by collecting the available alterna- tives and helping the client understand the differences between current and best practice.
Statistical Analysis The data warehouse and external sources support performance monitoring; the annual environmental assessment; and forecasts that evaluate process improvement proposals, investment opportunities, and make-or-buy deci- sions. Statistical analysis is essential for all of these applications to identify and deal with sources of variation. A good performance measure removes, as much as possible, the variation caused by factors outside the associates’ control. A good forecast identifies underlying sources of change and incor- porates them.
Operating team members and PIT members should be confident of the data in their reports. The question “How do I know these numbers are realistic?” deserves an honest, reassuring, and technically correct answer. The statistical techniques used to get those answers are increasingly sophisticated and should be carried out or reviewed by a professionally trained statistician. The analysis identifies external causes of variation, specifies their impact, adjusts measures to allow for them, and includes them in forecasts.
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Identifying External Causes of Variation Many elements of both clinical and logistic processes are beyond the control of HCOs and their teams. When measures of these processes are used in evi- dence-based management, benchmarks and goals should reflect only factors in the team members’ control. The approach is often important in identifying root causes. When measures are forecast, changes in external factors must be included. The epidemiologic planning model implements this approach for major demographic characteristics.
External causes are identified from the literature or by statistical test and accommodated by specification, adjustment, and carefully designed fore- casting models. The process of specification identifies external groups whose performance differs. In marketing, specification is called segmentation (see chapter 15). The analysis examines whether specific groups differ in perfor- mance characteristics. Specification usually follows established taxonomies, or ways of subdividing populations. Exhibits 14.3, 14.4, and 14.5 show com- mon taxonomies for specifying patients, payers, and providers, respectively.
Forecasting models identify trends in data and forecast them to future situations. Several different statistical methods are available to prepare fore- casts, and many important measures can be forecast subjectively. Forecasts of important variables, such as availability of personnel, are usually composites of several methods. Good forecasts also identify most likely, highest, and
Category Classifications
Demographic Age Gender Race Education
Economic Income Employment Social class
Geographic Zip code of residence Census tract Political subdivision
Healthcare finance Managed vs. traditional insurance Private vs. government insurance
Diagnosis Disease classification Procedure Diagnosis-related group Ambulatory patient group
Risk Health behavior attribute Preexisting condition Chronic or high-cost disease
EXHIBIT 14.3 Patient-Oriented
Specification
Taxonomies
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lowest values so that the implications of forecast error can be evaluated using sensitivity analysis.
Statistical Process Control Statistical process control uses the standard deviation of time series data to identify significant variations—that is, variations not likely to be random and therefore likely to be correctable. It allows the process manager to identify promising OFIs and avoid futile efforts to correct performance. Any measure reported over time can be graphed as a run chart—a simple line graph of reported values by date. Exhibit 14.6 shows a run chart and the same data in
Category Classifications
Employers Size Geographic location Industry Ownership Income level Union organization Health insurance benefit Health insurance type
Intermediary Health insurance type Ownership or corporate structure Size Number of health insurance subscribers Employer groups covered
EXHIBIT 14.4 Insurance
Intermediary
and Employer
Specification
Taxonomies
Category Classifications
Individual providers Training, certification, or licensure Specialization Organizational affiliation Location Age
Donors Interest Level of contribution
Organized providers Scope of service Geographic location Ownership Size Market share Financial strength Competitive position
EXHIBIT 14.5 Healthcare
Provider
Specification
Taxonomies
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a control chart, with statistical control limits. The control chart shows that there was a statistically significant change in the underlying process at month 21, resulting in both a lower mean and less variation. The control chart in exhibit 14.6 shows that no subsequent month is statistically different from the current mean; the process is “in control.” A process in control is not a good OFI unless a benchmark can be found that is significantly better than the current mean. Any measure that is uniformly defined and reported over time can be analyzed with process control, identifying the OFIs most suscep- tible to study and improvement.
0%
5%
10%
15%
20%
25%
30%
2 4 6 8 1 0
1 2
1 4
1 6
1 8
2 0
2 2
2 4
2 6
2 8
3 0
3 2
3 4
3 6
3 8
4 0
Run Chart of % Cesarean Sections
0%
5%
10%
15%
20%
25%
30%
Control Chart of % Cesarean Sections
UCL
LCL
M on
th
2 4 6 8 1 0
1 2
1 4
1 6
1 8
2 0
2 2
2 4
2 6
2 8
3 0
3 2
3 4
3 6
3 8
4 0
M on
th
EXHIBIT 14.6 Run Chart and
Control Chart
Note: LCL = lower control limit; UCL = upper control limit.
White-Griffith.indd 449 2/6/19 10:12 AM
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Legal, Regulatory, and Ethical Review Many performance improvement or planning projects raise complex ques- tions of law, regulation, and ethics. These questions must be resolved by careful study and authoritative information. Well-managed HCOs organize their response around the input from a compliance office, experts in envi- ronmental management and human resources management, and an ethics committee. Many larger HCOs also have an institutional review board (IRB) that addresses ethical questions related to research, particularly confidential- ity and other patient rights.
Compliance Management and Legal Consultation Many proposals for new services or revised processes involve various regula- tory and contractual constraints. Real estate transactions, construction, com- pensation agreements, billing practices, and supervision of nonprofessional care providers are all areas where legal review is advisable. As a result, many PITs and planning committees need advice. Internal consulting coordinates it with other design and fact-finding activities.
HCOs have created a compliance officer position to coordinate and integrate responses on these and other topics that present legal implications. The compliance officer is responsible for issuing guidelines to prevent illegal, improper, or unethical conduct; conducting independent reviews of opera- tions; and responding to all questions of potential or actual violations.2 In the absence of a designated compliance officer, the questions must be answered by the HCO’s general counsel, an attorney appointed to represent the orga- nization on legal matters.
Environmental and Human Resources Management HCOs must deal with both general environmental management issues and specific ones, such as high-voltage radiation and hazardous waste. They must also comply with laws and regulations governing worker safety, wages and hours, and collective bargaining contracts. Consultation on such questions is arranged through the environmental management and human resources management activities.
Ethics Committee and Internal Review Boards Well-managed HCOs have an advisory ethics committee to assist care providers, patients, and families with difficult ethical decisions. The com- mittee’s functions should also include “formulating institutional policies to guide the professional staff in making ethical decisions and educating hospital personnel about healthcare ethics in general.”3 Ethics committees fulfill these three functions by responding to questions and concerns raised by associates or patients. The approach improves the consistency and com- prehensiveness of protocols and work processes. It catches team members at a teachable moment.
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Similarly, at HCOs with active research programs, IRBs address ques- tions important to the rights of patients in research situations. IRB approval is mandatory for any research that directly involves human subjects. The Office for Human Research Protections (OHRP) of the US Department of Health and Human Services (HHS) monitors IRB performance to protect the rights of human subjects, including the right to confidentiality. Concerns sometimes arise regarding whether quality improvement activities are subject to IRB review. OHRP has explicitly ruled that HHS regulations for the pro- tection of human subjects do not apply to “quality improvement activities conducted by one or more institutions whose purposes are limited to (a) implementing a practice to improve the quality of patient care, and (b) col- lecting patient or provider data regarding the implementation of the practice for clinical, practical, or administrative purposes.”4 Ethics committee or IRB consultation may still be wise; patients’ rights to safety and confidentiality should always be respected.
Certificate of Need Many states require a certificate of need (CON) for new services and con- struction or renovation. CONs are a form of franchise, a government-issued permit to proceed with capital investment. These laws are enforced with varying degrees of rigor, and their importance is diminishing. In states where they remain, CON success depends on timing, well-designed and attractive services, technically well-prepared proposals, and the support of influen- tial persons in the community. Strategies for dealing with CONs vary. The influence of these laws is arguable,5 and the US Department of Justice has opposed the use of CONs.6 Most well-run HCOs have developed strategies and tactics for gaining the approval of all or nearly all their important options and proposals. Obtaining these approvals is usually the responsibility of the compliance officer or the general counsel, but documentation comes from the project itself, prepared by internal consulting.
Respond to Any Other Factual Concern Internal consulting is a knowledge management resource for the HCO. Its purpose is to contribute to any question or issue where understanding or resolution will be improved by a stronger grasp of the factual situation. An ongoing commitment to fact-finding becomes a major competitive advantage.
Internal consulting is available for any concern identified by the gov- erning board and senior management. These concerns often involve relation- ships with competitors and external stakeholders and have consequences that go beyond the usual PIT. Examples include merger and acquisition oppor- tunities, responses to competitor activity, and corporate restructuring. The issues often present special needs for confidentiality and careful development of sensitive information. Although external consultants are often advisable
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for such projects, internal consulting can assemble necessary facts, develop forecasts, and identify implications.
Support Process Improvement Teams Internal consulting has several resources to expand the analytic capabili- ties of PITs and planning teams. These include helping PITs operate more effectively, conducting advanced process analysis, coordinating skills of other logistic services, modeling alternative processes, managing outside consul- tants, and designing pilot tests of proposals.
Increasing the Effectiveness of PITs PITs and planning teams bring specialists together from different areas to focus on a shared OFI. PITs can easily become ineffective and frustrating for their members. Internal consulting has several devices to help the PITs become more effective, including training for PIT leaders, direct consulta- tion, and outside consultants.
High-performing HCOs provide basic continuous improvement training to all members of the leadership group. New leaders and promot- able associates are offered short courses (usually one or two days each) in goal setting, capital budgeting, and process analysis (including advanced training in the last). These courses are generally offered by human resources but are staffed by internal consulting personnel. They supplement programs in supervision and meeting management (discussed in chapter 11). They emphasize “how to” and actual examples, working simultaneously on ana- lytic skills, interpersonal skills, and self-confidence.
• Goal-setting courses include a full description of the goal-setting process, emphasizing the governing board’s role in setting strategic guidelines, the use of benchmarks, the identification of OFIs, the use of PITs to change work processes, and negotiation processes. Hands-on practice with exercises and cases familiarizes people with computerized budgeting tools. New leaders are often assigned an experienced mentor for their first round.
• Capital budgeting courses describe how expansions, new equipment, and replacements are planned, explaining how to prepare a competitive request, how the requests are competitively judged, and how capital expenditure is managed.
• Process analysis courses review the philosophy of continuous improvement and its elementary applications. The advantages of measures and an elementary review of measurement use, reliability, and validity are demonstrated, along with simple concepts of variability. Basic tools for analyzing processes are taught with examples and applications. These include flow process charting; bar, scatter, frequency,
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and Pareto graphs; fishbone diagrams; and run and control charts.7 The role and functioning of PITs are described. In action learning approaches, teams are formed and guided to address real problems. The approach develops both analytic and team-building skills.
The basic course allows analysis of simple issues, but its biggest benefit may be in demonstrating what evidence-based management means. It shows that objective study of work processes leads to new and useful insights; performance really is driven by process.
• Advanced training opportunities in process improvement emphasize process control (Six Sigma), elimination of waste, and integration of internal customers (Lean manufacturing) (see www.lean.org). Six Sigma and Lean are often merged, although Lean explicitly emphasizes associate empowerment.8 Some evidence supports the importance of empowerment for lasting results.9
This training produces a cadre of managers familiar with the basic approaches of process improvement, so that most important PITs have several knowl- edgeable members.
Process Modeling Many key OFIs are too complicated to solve with just the basic tools. PITs that address complex problems should have a trained adviser to coordinate consultation as the issues are raised and understood by the group. The adviser can draw on internal consulting to develop sophisticated analytic models, allowing a much clearer and more detailed picture of proposed improvements.
Activity-based cost analysis provides the basis for make-or-buy deci- sions. Econometric models can indicate price trends. Simulation models allow exploration of hourly operation, testing performance against uncontrollable variation. Markov approaches allow study of complex chains of demand— for example, from the emergency department to the catheterization lab to the operating room. Optimization models allow examination of trade-offs between resources and outputs and help identify critical constraints.
These models expand understanding of the process under study, identify useful solutions, allow sensitivity analysis, and establish realistic per- formance goals for the ultimate solution. Although they can make important improvements in unit scorecards, they are costly to develop, often requiring dozens of hours from highly skilled professionals. Even when a basic model has been developed and tested elsewhere, it must be applied using local data. Data needs are usually extensive, requiring either special studies or a sophisticated search of patient record and financial accounting information. Internal modeling capability can be supplemented by consortiums or outside consultants.
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Managing Outside Consultants Outside consultants have the advantage of drawing on similar problems else- where, and often they have developed specialized tools and solutions that have a demonstrated record of success. They bring additional resources on a short-term basis. If hiring is managed by internal consulting, several factors improve the results.
• The opportunity has been carefully defined and internal options have been explored.
• The data necessary for modeling are understood. • Less expensive solutions, such as collaboratives, have been explored. • The outside contractor has a broadly knowledgeable point of contact. • The contractor is selected based on a record of prior experience and
references from other providers.
The keys to successful use of external consultants are as follows:
1. The assignment should be clearly specified in terms of process, timing, and goal. The clearer the assignment and the more details of the work specified in advance, the better the chances for success. It is sometimes wise to use consultants for general education and to gain fresh insights into vague, ill-defined problems, but such use should be limited to short-term assignments.
2. Internal skills and knowledge should be fully used before external consultants are engaged, and internal experts should work directly with external ones. This minimizes cost and maximizes retention of the external advice.
3. Consultant firms should be selected based on relevant prior experience. In the absence of direct experience with a consultant, opinions of other clients should be solicited prior to any major engagement.
4. Consultant activities should be carefully monitored against the specifications throughout the project. A timetable and monthly interim achievement checkpoints should be used to monitor progress.
5. Each consultant must have an explicitly assigned internal supervisor. Failure to identify a point of contact slows the consultants, adds to their costs, and defeats the possibility of continuous monitoring during the contract period.
Testing Proposed Solutions It is essential that any proposed improvement be fully tested to ensure its safety and effectiveness. In complex process changes, internal consulting should design the trial and recommend the acceptance criteria. The PIT
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should review and approve both the design and the results, ensuring that all involved associates have opportunities to express concerns. The complexity of the test depends on the extent and nature of the process change. Simple changes may require only a week or two of experience and a team meeting to review results. Large process redesigns can require substantial, carefully designed trials. The trial identifies and corrects flaws in the revised process and assures associates of the results. It is critical in convincing associates to adopt the change.
Support Routine Capital Investment Requests Capital investments, such as new programs, facilities, or equipment, represent multiyear commitments to operational processes and programs. Funds for investment are limited. Correct selection of investments is critical to mission achievement. Large HCOs commit tens of millions of dollars annually to capital requests and need a process that is perceived as reliable and equitable. Excellence requires rigorous review, selection, and implementation while promoting innovation, making sure that no reasonable opportunity goes unexamined. Reviews must also be efficient, with no unnecessary delay or demands on associates’ time.
Well-managed HCOs divide capital investments into strategic and programmatic. Strategic opportunities affect several units or service lines. The strategic review process is described in chapter 15. Programmatic pro- posals focus on a single or small group of accountability units.
Examples of programmatic opportunities are shown in exhibit 14.7. Well-managed organizations encourage programmatic proposals because they reflect an alert, flexible work attitude and because they provide OFIs. An abundant supply of programmatic proposals minimizes the danger that the best solution will be overlooked. Hundreds of programmatic concepts origi- nate each year in large HCOs. Dozens survive initial review and are formally documented as proposals.
Checklist for Investment Proposals Any investment concept or opportunity needs to be reviewed against at least five conditions:
1. The expected contribution to mission achievement. This potential is usually measured by changes in unit scorecards and, for large projects, changes in the strategic scorecard. The contribution to mission need not be in dollars, but value must exceed the investment required.
2. Physical constraints. Changes in facilities involve architectural issues such as floor loads, radiation safety, and life-safety code requirements. Equipment must fit space and utility constraints and must meet safety requirements.
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3. Asset control and cost minimization. Purchases must be carefully specified and, if possible, competitively bid. The delivered goods must match the specifications.
4. Implementation. Even relatively small projects can involve several steps of equipment changes, renovation, process redesign, and retraining. Installation must be scheduled and coordinated with ongoing activities. Large projects require months or years of management.
5. The actual contribution to mission achievement. The expected contribution must be built into the appropriate unit’s operational goals, and support must be provided to achieve the improved targets.
Using a formal checklist of questions, such as the one in exhibit 14.8, increases fairness, helps identify impractical projects quickly, and establishes an initial estimate of contribution. Experienced managers soon learn the kinds of projects that gain funding. They drop or modify projects that fall short, reducing the set of proposals to a manageable group. Advice from internal consulting and finance is available to help apply the checklist and identify the contribution.
Programmatic Capital Review The review process for programmatic capital requests is deliberately com- petitive. As shown in exhibit 14.9, the requests are ranked in a single list
Proposal Description Approximate
Cost Possible Contribution
Renovate operating rooms
Enlarge operating suite into adja- cent inpatient unit; modernize
$10,000,000 Increase attractiveness to ambulatory surgery patients; improve post-op infection rate
Replace air- conditioning condensers
Replace aging equipment with something more reliable and more efficient
$ 750,000 More reliable service; lower unit cost; lower carbon production
Purchase robotic surgery equipment
Use machine for several surgery procedures
$ 3,000,000 Match competitor’s investment; improve patient comfort; speed patient recovery
Replace exercise machines
Replace worn, older models of exer- cise machines in physical therapy
$ 150,000 Increase patient comfort and reduce chance of service failure
EXHIBIT 14.7 Examples of
Programmatic
Proposals
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Mission, Vision, and Plan What is the relationship of this proposal to mission and vision? Is this proposal essential to implementing a strategic goal in the long-range
plan? If the proposal arises outside the current strategic goals, can it be designed to
enhance or improve the current plan?
Benefit In the most specific terms possible, what does this project contribute to
mission? If possible, state the nature of the contribution, the probability of success, the associated risk for each individual benefiting, and the kinds and numbers of persons benefiting.
If the organization were unable to adopt the proposal, what would be the impli- cation? Are there alternative sources of care? What costs are associated with using these sources?
If the proposal contributes to some additional or secondary objectives, what are these contributions, and what is their value?
Market and Demand What size and segment of the community will this proposal serve? What frac-
tion of this group is likely to seek care at this organization? What is the trend in the size of this group and its tendency to seek care here?
How will the proposal affect this trend? To what extent is the demand dependent on insurance or financial incentives?
What is the likely trend for these provisions? What are the consequences of this proposal for competing hospitals or health-
care organizations? What impact will the proposal have on the organization’s general market share
or on other specific services? What implications does the project have for the recruitment of physicians and
other key healthcare personnel? What are the promotional requirements of the proposal?
Costs and Resources What are the marginal operating and capital costs of the proposal, including
start-up costs and possible revenue losses from other services? Are there cost implications for other services or overhead activities? Are there special or critical resource requirements? What is the impact of the proposal on other activities? Are there opportunities
that are facilitated by this proposal or opportunities that might be hampered or foreclosed by the proposal?
Finance What are the capital requirements, project life, and finance costs associated
with the proposal? What are the competitive price and the anticipated net revenue? What are the demand elasticity and profit sensitivity? What are the insurance or finance sources of revenue, and what implications do
these sources have? What is the net cash flow associated with the proposal over its life, and what is
the discounted value of that flow?
EXHIBIT 14.8 Checklist for
Evaluating
Improvement
Proposals
(continued)
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for the HCO. Reaching consensus on the ranking is rarely easy, but the process is driven by the planning cycle timelines (see exhibit 3.7). The final list is presented to the governing board, which identifies how far down the list to fund based on its prior analysis of the long-term financial plan and strategic goals (see chapters 4 and 13). Board review of individual program- matic requests is rare and generally unwise. The board may amend its capital investment guideline, voting either to reduce the investment because the last accepted proposal can safely be deferred until next year or to increase the investment because the benefits of the highest-ranking rejected proposal are compelling.
Well-run HCOs emphasize these characteristics:
• The operating unit is clearly responsible for identifying opportunities. • The unit’s senior leaders act as advocates for the opportunities and
coordinate support from units, including internal consulting and clinical internal customers.
• Internal consulting assistance is readily available to develop proposals. It, in turn, calls on other logistic and strategic support. Information technology, human resources, environmental services, finance, and marketing are routinely involved.
• Costs and benefits are quantitatively documented in the proposal, and the unit agrees to the benefits as future operational scorecard goals.
• The HCO’s mission statement and its commitment to evidence-based medicine and evidence-based management are used as the guide for ranking new opportunities.
Other Factors What are the opportunities to enhance this proposal or others by combination? Are there customers or stakeholders with an unusual commitment for or against
the proposal? Are there any specific risks or benefits associated with the proposal not identi-
fied elsewhere? Does the proposal suggest a strategic opportunity, such as a joint venture or
the purchase or sale of a major service? Are there other elements (positive or negative) associated with this proposal,
including intangible considerations such as goodwill or public approval?
Timing, Implementation, and Evaluation What are the critical path components of the installation process, and how long
will they take? What are the problems or advantages associated with deferring or speeding up
the implementation? What are the anticipated changes in the operating budget of the units account-
able for the proposal? What changes are required in supporting units?
EXHIBIT 14.8 Checklist for
Evaluating
Improvement
Proposals
(continued)
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• There is medical and nursing review and ranking of all projects with clinical implications.
• Clinical and nonclinical proposals are judged competitively against one another, in a common review process that includes medical and clinical
} Operating unit has an OFI that requires capital. Unit develops OFI in to a proposal with forecast
improvements to operating scorecard.
Unit’s OFI and PIT processes identify many ideas. The most promising are developed into a proposal that identi�es operational scorecard improvements.
Several levels of review conclude with a list rank-ordered for the whole HCO.
The governing board planning committee takes three actions:
1. Compares the rank-ordered list to the annual �nancial goals. 2. Recommends highest-ranked projects to expend the capital allocation. 3. Reviews the list above and below the acceptance point, and recommends increase or decrease in capital allocation if desirable.
The committee may reorder the list, but doing so is potentially dangerous. Changes should be negotiated with senior management and units involved.
Unit rank-orders all its proposals.
Service line or activity ranks all its unit’s proposals.
Senior leadership and medical staff rank the lists from all service lines and
activities.
Board planning committee compares rank- ordered list with annual goals and recommends adoption or deferral.
Governing board approves capital budget.
Operating unit, internal consulting, and �nance coordinate implementation.
Operating unit includes operational scorecard goals in its next goal setting.
Implementation includes scheduling installation, revising processes, and retraining. The unit’s operating goals will incorporate changes included in the proposal.
EXHIBIT 14.9 Programmatic
Capital Review
Process
Note: HCO = healthcare organization; OFI = opportunity for improvement; PIT = process improvement team.
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support service representation. The result is a process that supports both empowerment and continuous improvement.
• The operating budget is built on a “same store” approach. Units submitting programmatic capital requests prepare two sets of operating goals, including and excluding the proposed investment.
• The evidence supporting the claimed contributions is rigorously evaluated. Multiple reviewers comment on and rank the proposals. Many of the reviewers have proposals of their own and will vigorously criticize competing projects.
• Associates are empowered. The review process not only must identify the best proposals but also must be perceived by associates as predictable and equitable. The approved list is not “what the board said”; it is “what the ranking teams decided.”
• Specific goal changes related to accepted capital proposals are implemented. The unit is committed to achieving the goals claimed for the investment.
The role of internal consulting is to encourage a broad search for promising ideas, assist proposal development teams in preparing proposals for competitive review, ensure accuracy in forecasts and claims, and support fair review. The following procedures encourage managers to seek investment opportunities and evaluate them:
• The continuous improvement culture encourages units to seek imaginative ideas. Ideas are respected even when they are unusual.
• Internal consulting team members are readily available to discuss concepts informally, assist with proposals, explain the evaluation process, and identify potential contributions.
• Internal consulting is a source of knowledge about the plans in existence and the discussion that surrounded related proposals. Partnerships with other units often succeed where freestanding proposals fail.
Over time and with internal consulting’s help, managers learn to recognize the kinds of proposals that will be successful. Many projects are reshaped, sometimes into entirely new and much more complex ideas. Replacements for physical therapy (PT) exercise equipment look simple, but they should prompt a review of PT’s future demand, the clinical outcomes the new machines can achieve, alternative clinical approaches to reach the same outcomes, the desirability of alternative sites for the service, and the possibility of actually expanding PT volume by selling the service to others. The project could move from programmatic to strategic as it raises important
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issues beyond the original replacement. That will rarely happen, but the pos- sibilities will have been explored. Internal consulting plays an important role in understanding the opportunities and building consensus.
Note that planning staff members never judge the proposals them- selves. They provide facts and concepts to PITs and leaders who decide. They protect the process of review itself, discouraging attempts to subvert or avoid it and making proposal preparation as efficient and fair as possible.
Implement and Integrate Recommendations Once new processes or capital investments are recommended for adoption, two further steps are required:
1. Implementation. Many projects require months or years of preparation. Contracts must be let, construction or moving scheduled, installation completed, final reviews passed, and associates trained in new methods before the project is ready for routine use. The benefits of the project are delayed until this work is finished and are impaired if the work is inefficiently managed. Project management is a service in and of itself. It can substantially reduce both costs and delays. The use of Program Evaluation Review Technique software to coordinate multiple contributions can save millions in large projects.10
2. Integration. Proposals are accepted because they promise specific performance improvements. Those promises must be built into the operating goals of the units involved. Progress toward them must be monitored, and assistance must be arranged if difficulties are encountered. Internal consulting should continue to monitor progress until the initial goals have been reached or are no longer applicable.
The implementation of projects that require construction or extensive renovation is commonly assigned to environment-of-care management (dis- cussed in chapter 12). Small projects are often monitored by internal consult- ing. In either case, internal consulting monitors the goal-setting processes to ensure that the claimed benefits are achieved.
Improve Continuously As a major supporter of the HCO’s continuous improvement effort, internal consulting must itself model the concept. It maintains an operational score- card (the Measures section later in the chapter). It makes a systematic effort to benchmark itself and identify best practices. It solicits evaluation by its clients. It identifies, pursues, and implements OFIs in its own operations as it assists others in similar tasks. It sets and achieves improvement goals. In the process, it reviews and improves the role of the performance improvement committee (PIC) and the HCO’s overall continuous improvement effort.
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People
Internal Consulting Team Members Internal consulting requires trained professionals in several fields, including expertise in statistics, operations analysis, and forecasting, plus knowledge management, human resources, environmental services, finance, legal coun- sel, marketing, and strategic analysis. Clinical knowledge is also important. The most critical role of internal consulting is as a clearinghouse. In a small HCO, a single person might be the internal consulting resource. Her success would depend less on her technical knowledge (she could not conceivably master all the technology required) than on her ingenuity in finding knowl- edge resources, linking seekers to them, and encouraging exploration. In a large organization, professionals with a foundation in any of the areas or in general management can succeed as much by helping their clients reach a successful conclusion as by having a mastery of their technical field. The abil- ity to assemble teams of experts is an important element in the creation of HCO systems. The experts improve the HCO’s decisions, and the improve- ment is reflected in financial performance.
Organization The first three functions of internal consulting—support the HCO, support improvement projects, and support capital investment review—have become so important that it is difficult to imagine an HCO succeeding without solid processes. The effectiveness with which they are done is a major driver of strategic success. Small HCOs—such as clinics, doctors’ offices, hospices, and critical access hospitals—have only two choices. One is to affiliate with a larger HCO, pursuing either vertical or horizontal integration. The other is to purchase service from an external consultant.
Large HCOs must fulfill these functions in a way that makes them a distinctive competency. That necessity requires establishing explicit account- ability for each function with operational measures and goals. The functions are closely related to marketing functions (see chapter 15). One successful structure identifies senior leaders for both planning/internal consulting and marketing/strategy. An alternate has a single vice president with deputies in each area. In either structure, success depends not only on close collabora- tion but also on the support of other senior leaders. The commitment to asking and answering evidence-based questions must be universal.
Healthcare systems that operate in several locations frequently cen- tralize some aspects of internal consulting to improve the technical skills of personnel, provide economies of scale, and ensure transfer of best practices. Much of the functions that support the organization as a whole can be cen- tralized. With internet connectivity, it does not matter where the calculations are done, and consistent application across a system provides comparative
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information. Important aspects of the environmental assessment require an established local presence. Small local staffs provide direct support to the line managers, identify important local variations, and rely on the central staff as a consultant resource. On project assistance, the central resource behaves as a favored external consultant, more readily available and at substantially lower cost. The effective use of internal consulting is one of the potential advan- tages of larger systems.
Measures
The internal consulting activity, as every other part of the well-run organiza- tion, has performance measures, short-term goals, and regular reporting of achievement relative to these. A reasonable set is shown in exhibit 14.10. These measures follow the usual operations scorecard dimensions. Requests for service are specifically counted. Some, but not all, become engagements. The term is used by outside consultants to describe a specific project or contract with a client. It is used here to identify an ongoing commitment to a specific unit or project. Internal consulting staff and other associates can assign their hours to specific engagements, and each engagement can be evaluated for cost, quality, and return on the internal consulting investment.
Internal consulting also may be evaluated on technical proficiency, such as the completeness of data, the availability of analytic software, and the use of correct analytic techniques. Such an evaluation would be arranged by senior management using outside consultants.
Building many of the measures around engagements makes it possible to compare internal consulting performance to alternative sources, such as a retainer arrangement with outside consultants. The engagement approach supports a service mentality on the part of the team members. They must keep logs of activities, and individual effort must be transfer priced to show costs. Once this task is done, the project-specific consulting costs, proposal decisions, projected improvements, realized improvements, and client sat- isfaction can be tracked. Although some measurements are estimates, even approximations show the unit’s success at several different levels:
• Proposal approval rates reflect the ability of the unit to steer clients toward effective projects.
• Cost per project compared to projected contribution shows the effectiveness of specific engagements.
• Cost compared to contribution of implemented projects is an indicator of internal consulting’s contribution to mission achievement.
• Total consulting costs compared to the value of all projects implemented is the global measure of the unit’s contribution.
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Benchmarking the exhibit 14.10 data is challenging. Similar units for benchmarking are elusive. Comparing the internal consulting unit of a high-performing HCO to one with a substantial performance challenge is misleading. The different environment means that the two units are doing different things with clients who have different skill sets. Judgment is based on the environmental surveillance itself and is inevitably bound up with the judgment of the chief executive officer. The judgment must ultimately be by the governing board.
Dimension Measures Examples
Demand for services
Counts of user requests Engagements Unfilled or delayed requests
Log of requests and dispositions
Engagements and personnel assignments
Delays in responding to service requests
Cost Total direct costs Hours on assigned engagements External consultant costs Data and information acquisition
costs
Hours of personnel assigned to engagements
External consultant fees Costs of comparative or
benchmark information
Human resources
Satisfaction of internal consult- ing personnel
Vacancy rates and turnover
Surveys; personal and group discussions of work environment
Productivity Total cost as percentage of HCO operating cost
Cost per support request Cost per project completed Total cost as percentage of
improvements implemented
“Contribution”; actual improvements in operational measures from completed engagements
Contribution as a percentage of internal consulting direct costs
Outcomes quality
Forecast accuracy Variation of annual forecasts from actual
Accuracy of epidemiologic planning model forecasts
Timeliness: projects completed on schedule
Counts of engagements completed on time
Improvements achieved Counts of engagements achieving expected goals
Client satisfaction
User satisfaction surveys Overall planning service Engagement-specific service Recognition and resolution of
problems Supportive attitude
Users’ responses to ser- vices: “would rehire,” “would recommend”
Note: HCO = healthcare organization.
EXHIBIT 14.10 Operational
Performance
Measures
for Internal
Consulting
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Managerial Leadership
Three leadership issues are known to be challenging for internal consulting:
1. How does the HCO sustain continuous improvement and the effectiveness of PITs?
2. How can the HCO ensure quality of internal consulting? 3. How much should an HCO spend on internal consulting?
Sustaining Continuous Improvement and the Effectiveness of PITs Continuous improvement, outlined in chapter 3 and referenced in all the following chapters, is an explicit plan for managing HCOs. The purpose of continuous improvement “is simply to help your organization—no matter its size or the types of health care services it offers—answer three questions: Is your organization doing as well as it could? How do you know? What and how should your organization improve or change?”11
Internal consulting supports answers to those three questions. Virtu- ally all process improvement is implemented through PITs. The teams have a dual purpose: (1) to identify and correct root causes and (2) to ensure that all associates’ concerns are heard and addressed. Senior leaders and internal con- sulting leaders act to support five elements: (1) a rich stream of OFIs, (2) a systematic prioritization of the most promising OFIs, (3) effective assistance with root cause analysis, (4) careful design of improved work processes, and (5) trouble-free implementation. Internal consulting contributes indirectly to the first and directly to the remaining four steps.
To ensure a rich stream of OFIs, internal consulting deliberately reinforces empowerment. Empowerment makes workers comfortable with OFIs; their comfort promotes both suggestions and willingness to try new approaches. An empowered worker is entitled to the tools and supplies he needs, knows that he has that entitlement, and uses it effectively to improve his performance. That dynamic is the major component of continuous improvement. Leaders promote empowerment through three known paths:
1. Ensuring prompt, unbiased, and comprehensive support for PITs. The quality of the internal consulting response is sustained by having an appropriately sized internal consulting group, discussed in a later section, but also by balancing the supply of OFIs. The PIC prioritizes OFIs and monitors their completion (see chapter 3). The PIC should identify the support needs of each OFI in its decisions and incorporate internal consulting’s schedule in its decisions. The committee’s ranking and reasoning should both be communicated to the OFI’s sponsor; feedback helps associates understand priorities and encourages submission of more and better OFIs. Each PIT should have a timetable that realistically incorporates analysis, process redesign, and testing.
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Internal consulting must participate in designing the timetable, balancing delay against competing opportunities. Once the timetable is established, internal consulting must meet its deadlines.
2. Sustaining client control. Internal consulting assembles and analyzes a broad range of data that can easily appear arcane and forbidding to clients. With their superior command of the facts, internal consulting associates can easily usurp the operating associates’ right and obligation to make the final decision. Internal consulting’s clients must implement the final process. It is essential that they retain control of the final decision.
The key to client control is careful explanation of the what, why, and how of data and analysis used by internal consulting. Any PIT or operating team member has the right to understand
• what (definition, provenance, and limitations of all the measures that are used in an analysis),
• why (the implications of alternative measures), and • how (the limitations of the analysis and the implications of
alternative interpretations).
Understanding what, why, and how is essential to empowerment and critical in gaining consensus and effective implementation. Making these elements clear to the associates involved in each project is a professional responsibility analogous to the similar obligation of physicians and lawyers. The consultant team must be trained to do that. Leadership monitors both written and oral communication with clients to ensure that the clients remain in control and understand that they make the critical decisions. A question on the client survey, “How often did [internal consulting] explain things in a way you could understand?” will monitor performance, but managers’ ongoing monitoring is more powerful.
3. Preventing evasion and subversion of PITs. The processes of programmatic and strategic review are subject to two different risks that require direct management. One is evasion. Some associates may press to evade the review processes, usually under the guise of emergency or inevitability. The other is subversion. The review process is started, but some associates use delays and obstacles to limit or slow the PIT. Evasion is stopped by effective senior leadership. Leaders make clear that evidence drives decisions; rank has no privileges. Once it is made clear that no capital dollars are spent except through the programmatic or strategic review processes—that special pleading will not work—the problem is usually solved. (There may, of course, be true unforeseeable events. The governing board and the CEO will need to take special action.)
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.a Subversion is a more deliberate action to defeat the review processes. Opponents of a proposal use the need for more study as a device to prevent action. The basic strategy, “paralysis by analysis,” is an ongoing stream of concerns and objections, until the PIT members give up in despair. Like evasion, subversion leads to bad individual decisions, and it also destroys the review process itself. Leaders prevent subversion by enforcing three rules.
The HCO must scrupulously maintain its commitment to evidence, making sure that all analyses are objective by using the best available data without concealment or distortion.
.b The PIC must ensure appropriate representation on each PIT or planning committee (no unit with a stake in the outcome can be omitted) and a level playing field among PIT members.
.c The PIC must enforce the timetable so that when the deadline is reached, the PIT’s findings and conclusions, or lack of conclusions, must be reported. The decision about whether evidence supports a given proposal is always a judgment. Under the programmatic and strategic review processes, the judgment is made and reviewed by a formally sequenced structure—the PIT, the PIC, the board’s planning committee, and the board. While everyone gets a say, no special interest can dominate the decision process.
Ensuring Quality of Work Careless or incomplete work by internal consulting can fatally disable an HCO. Successful internal consulting units excel in four areas: (1) they work consistently to delight their internal customers, (2) they use the best com- parative data and the most objective forecasts they can obtain, (3) they take extra pains to guard against oversights and errors, and (4) they are rigorous in their evaluation of proposal costs and contribution. Leadership has several opportunities to strengthen these areas.
• Encourage open collaboration. Many engagements require a team, often drawing experts from information management, human resources, and accounting. The team should meet frequently for collective discussion of progress. Collaboration provides an informal but ongoing audit that reduces errors and oversights.
• Reward valuable contributions by recognition and celebration. • Maintain active participation by the PIT chair or other client
representatives. • Participate actively in team discussions (the equivalent of rounding to
work sites).
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• Invest in data and benchmarks. The American Hospital Association compiles substantial data on member hospitals. Various consulting companies offer data resources.
• Work closely with managerial accounting (see chapter 13) to develop estimates of costs and revenue.
• Encourage technical training programs for specialized analysts. • Monitor the outcomes quality and customer satisfaction measures on
the operational scorecard (see exhibit 14.10). Although they can rarely be benchmarked, any deterioration is an immediate OFI.
• Use formal internal reviews, where a work product by one analyst or team is critiqued by a second.
• Commission outside reviews to address OFIs that have resisted improvement.
• Conduct individual performance reviews. Excellence can be rewarded with bonuses and promotions.
Sizing Internal Consulting The investment in internal consulting is made to improve mission achieve- ment. The value of the operating improvements from successful proposals must cover the cost of the investment in internal consulting. That value is not simply revenue or profit. It includes contributions to quality, patient satisfac- tion, associate satisfaction, and community health. The key sizing question is not “How much did internal consulting cost?” but “Did the HCO explore and implement all the OFIs that would substantially improve the strategic scorecard?” If promising projects are being delayed or ignored, internal con- sulting is too small. If the projects being proposed have only trivial impact on the scorecard, either the unit is too big or OFIs are being ignored.
The conditions that occur at optimum are indicated by the operational scorecard (see exhibit 14.10):
• The client’s needs are met without excessive delay. • Clients are satisfied with the service received. • Implementation and integration are translated to improved
performance on unit scorecards. • The value of successful completions is substantially higher than the
engagement cost. • On the strategic scorecard, the HCO continues to improve and move
toward benchmark on all measures.
Failure to meet any of these conditions is an OFI, subject to investigation and improvement by the internal consulting unit, the PIC, and the senior leadership team.
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Note that no benchmark exists for the operating cost of internal con- sulting. The optimal cost is not what some other HCO pays but the mini- mum expenditure that yields return on strategic performance. Leadership supports optimal size by doing the following:
• Making unit scorecards universal. • Assisting units in their use of benchmarks, identification of OFIs,
establishment of PITs, and improvement of performance. • Maintaining internal consulting to meet demand from PITs, support
an orderly capital request evaluation, and conduct a comprehensive annual environmental assessment.
• Celebrating achievements of PITs, attributing success to the operating units and noting that internal consulting is available to assist additional teams.
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. Identify a specific community with at least one acute care HCO. Consider the events important to the HCO this year and last year, such as changes in federal or state regulations, health insurance, and the local economy. What should be reported about these events in the HCO’s annual environmental assessment?
2. The operating room (OR) supervisor asks internal consulting what to do about demand that he is unable to meet. What should internal consulting offer as a plan for developing a solution?
3. The OR study in question 2 leads to several equipment changes that will require a programmatic capital request. The OR supervisor asks for internal consulting assistance to prepare the request, which will be competitively reviewed, as shown in exhibit 14.9.
4. If you were planning an initial discussion about capital budgeting for newly appointed first-line supervisors, what topics would you include?
5. An economic recession has increased charity care and bad debts from 4 percent to 6 percent of net revenues. The board asks for “all possible” cost reductions, and one board member notes that the internal consulting activity “consumes more than $1 million a year. Surely we could defer that.” What arguments would you assemble to support continuing this activity? What kinds of data should you prepare?
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Additional Resources
Barry, R., A. C. Smith, and C. E. Brubaker. 2017. High-Reliability Healthcare: Improv- ing Patient Safety and Outcomes with Six Sigma. Chicago: Health Administration Press.
Harrison, J. P. 2016. Essentials of Strategic Planning in Healthcare, 2nd ed. Chicago: Health Administration Press.
Iezzoni, L. I. (ed.). 2012. Risk Adjustment for Measuring Health Care Outcomes, 4th ed. Chicago: Health Administration Press.
Ozcan, Y. A. 2017. Analytics and Decision Support in Health Care Operations Manage- ment. San Francisco: Jossey-Bass.
Harris, J. M. (ed.). 2017. Healthcare Strategic Planning, 4th ed. Chicago: Health Admin- istration Press.
Notes
1. Institute for Healthcare Improvement. 2018. “Collaboratives.” Accessed May 16. www.ihi.org/Engage/collaboratives/Pages/default.aspx.
2. American College of Healthcare Executives. 2018. “Position Description: Chief Compliance Officer.” Accessed May 16. www.ache.org/newclub/career/comploff .cfm.
3. Hester, D. M., and T. Schonfeld (eds.). 2012. Guidance for Healthcare Ethics Com- mittees. New York: Cambridge University Press.
4. Office for Human Research Protection. 2018. “Quality Improvement Activi- ties FAQs.” US Department of Health and Human Services, Accessed May 25. www .hhs.gov/ohrp/regulations-and-policy/guidance/faq/quality-improvement - activities/index.html.
5. US Government Accountability Office (GAO). 1981. “Health Systems Plans: A Poor Framework for Promoting Health Care Improvements.” Report to the Congress by the Controller General of the United States. Washington, DC: GAO.
6. Miller, J. M. 2008. “Competition in Healthcare and Certificates of Need.” Antitrust Division, US Department of Justice. Published March 25. www.usdoj.gov/atr/ public/comments/233821.htm.
7. Institute for Healthcare Improvement. 2018. “IHI Open School.” Accessed May 16. www.ihi.org/education/IHIOpenSchool/Pages/default.aspx.
8. Vest, J. R., and L. D. Gamm. 2009. “A Critical Review of the Research Literature on Six Sigma, Lean and Studer Group’s Hardwiring Excellence in the United States: The Need to Demonstrate and Communicate the Effectiveness of Transformation Strategies in Healthcare.” Implementation Science 4 (1): 35.
9. Kash, B. A., A. Spaulding, C. E. Johnson, L. Gamm, and M. F. Hulefeld. 2014. “Success Factors for Strategic Change Initiatives: A Qualitative Study of Healthcare Administrators’ Perspectives.” Journal of Healthcare Management 59 (1): 65–81.
10. Internet Center for Management and Business Administration. 2018. “PERT.” Accessed May 16. www.netmba.com/operations/project/pert.
11. Baldrige Performance Excellence Program. 2015. 2015–2016 Baldrige Excellence Framework: A Systems Approach to Improving Your Organization’s Performance. Gaithersburg, MD: US Department of Commerce. www.nist.gov/baldrige., p. ii.
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CRITICAL ACTIONS
15 MARKETING AND STRATEGY
1. Using marketing as a broad approach to building exchange relationships:
• Apply the four Ps (product, place, price, promotion) in their listed order.
• Use marketing principles to improve relations with associates and all aspects of the organization’s interfaces with stakeholders.
2. Understanding segmentation of markets:
• Identify segments as subgroups sharing similar characteristics.
• Use specific segments to drive strategy and marketing decisions.
3. Listening as fundamental to both marketing and strategy:
• Identify the perspectives of customers, associates, and suppliers.
• Use both qualitative and quantitative approaches to increase understanding.
4. Framing strategies using the tools of evidence-based management:
• Integrate the results of the environmental assessment and quantitative forecasts to prepare for future needs.
• Promote extensive discussions to enhance stakeholder understanding and agreement.
5. Holding senior leadership responsible for the healthcare organization’s (HCO) progress to excellence:
• Support a long-term commitment to mission, ongoing use of evidence-based management, and systematic development of empowered associates.
• Invest in evidence-based tools in knowledge management, human resources management, and environment management to sustain empowered, committed, and effective associates.
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Purpose
The purpose of marketing and strategy is
to identify, evaluate, and respond to changes in stakeholder needs.
In a free-market society, both customer and associate stakeholders “vote with their feet,” often selecting organizations that meet their needs without fully expressing what those needs are. An organization thrives because it attracts and retains stakeholders better than competing alternatives. Marketing and strategy are closely linked activities in order to make the healthcare organiza- tion (HCO) optimally attractive to stakeholders.
Marketing is the deliberate effort to establish fruitful relationships with all exchange partners and stakeholders. Marketing is not solely focused
on patients, but includes associates, buyers, and oth- ers in the community. Strategy is the selection of the profile of stakeholder needs to be met and related decisions about mission, corporate structure, loca- tion, and partners. In successful HCOs, as in other sectors, marketing and strategy are intertwined, cre- ating a seamless, continuous activity that monitors the basic direction of the enterprise; modifies the direction as conditions change; and, in some cases, redirects the enterprise through merger, acquisition, or closure.
Successful strategy for an HCO depends on fruitful relationships with all stakeholders. Success
and relationships are mutually reinforcing. Successes produce stronger rela- tionships and support further improvement; failures weaken relationships and can start a downward trend. The issues involved in sustaining relationships quickly become complex. Success must meet several different and interre- lated criteria:
• The HCO’s services attract adequate demand and use processes that are competitive on cost, amenities, and quality.
• The work environment attracts and retains associates who are prepared and committed to implementing the strategy.
• The services create and capitalize on a competitive advantage or distinctive competency (reasons customers select them over alternatives).
• The constellation of services attracts and builds patient and associate loyalty and fulfills what patients and associates can realistically expect, including excellence in care.
Marketing The deliberate effort to establish fruitful relationships with exchange partners and stakeholders. Marketing is not solely focused on patients, but includes associates, buyers, and others in the community.
Strategy The selection of the profile of stakeholder needs that the organization will meet and related decisions about mission, corporate structure, location, and partners.
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Each of these criteria presents a risk of failure. All the criteria require atten- tion to the whole environment. The set of solutions is the organization’s strategy—sometimes called the business model.
Functions
The functions of marketing and strategy are summarized in exhibit 15.1.
Marketing Functions
The term marketing has a professional definition that is substantially broader than its common use. Here is one favored by Philip Kotler, a noted profes- sor of marketing: “The analysis, planning, implementation, and control of carefully formulated programs designed to bring about voluntary exchanges of values with target markets for the purpose of achieving organizational objectives.”1
Others use a “four Ps” mnemonic to capture the breadth of the concept:
1. Product. What exactly is the product or service offered in the exchange? (includes benchmarks and competitive operational standards)
2. Place. Where and how does the exchange take place? (includes hours of service, geographic locations, and relations between services)
3. Price. What is the total economic value of the exchange? (not only the price paid the vendor but also collateral costs such as transportation and lost income)
4. Promotion. What activities are necessary to bring the opportunity to the attention of the stakeholders likely to accept it? (includes publicity, advertising, and incentives)
The order of the four Ps is important. The consequences of bad product design or placement cannot be overcome by low prices or extensive promotion. Marketing applies not just to customers but to all exchanges, including those with competitors, employees, and other community agencies.
Marketing is about relationships. Healthcare marketing must over- come several complexities that affect relationships:
• Intimate, life-shaping services about which people have strong and sometimes irrational feelings
• Delivery mechanisms that have high fixed costs (requires careful adjustment of supply and demand and opens the possibility of differential pricing)
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Function Processes Purpose
Marketing
Identify and segment customer and asso- ciate markets
Surveillance, data analy- sis, segmentation of market
Understand stakeholder needs and identify participants whose needs are consistent with the HCO’s mission
Listen to exchange partners’ needs
Surveys, focus groups, monitors, personal contact
Gain a clear and complete under- standing of what the HCO must do to attract exchange partners in sufficient number
Develop brand and media relations
Communication to estab- lish awareness of HCO and its scope of services
Make the HCO as a whole attractive to the community by emphasizing widely shared goals in a variety of communication methods
Convince potential customers to select the HCO’s services
Communication to patient populations with specific needs
Make potential patients aware of the HCO’s services and persuade them to select the HCO over its competitors
Attract and motivate associates
Communication to target associate populations, advertising, incentives
Ensure a steady stream of qualified applicants, even in areas of person- nel shortages
Manage other stake- holder relationships
Surveillance, senior man- agement listening, part- nerships to align other stakeholders
Establish constructive relationships with other organizations, such as insurance intermediaries, employ- ers, and providers of competing or complementary services
Improve continuously Marketing plans, goal setting, evaluating marketing effectiveness
Set goals that move toward bench- marks and values for market share
Strategy
Maintain the mission, vision, and values
Visioning exercise Allow multiple stakeholders to consider and comment on mission, vision, and values
Define the strategic position
Evaluating and selecting alternative approaches to maximizing mission achievement
Position an array of clinical ser- vices geographically to achieve a competitive advantage with an identified population
Document the strategic position
Maintaining and coordinat- ing strategic plans
Integrate multiple strategic and programmatic responses
Implement the strategic position
Managing investments and processes that will achieve strategic goals
Ensure that the HCO responds to opportunities and threats from external events
Improve continuously Establishing goals and opportunities for improvement strategy processes
Continuously improve strategy and strategy formulation
Note: HCO = healthcare organization.
EXHIBIT 15.1 Functions of
Marketing and
Strategy
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• Providers who are divided into a large number of professions, who often compete between and within their specialties
• Large, unpredictable customer expenses that fall disproportionately on a few people (must be financed by health insurance, bringing a third party into the transaction; the insurance mechanism raises the need for agreement about what is appropriate)
• Health insurance that is financed largely through taxes and employer contributions, bringing fourth and fifth parties into the transaction
• Differences of opinion among patients, buyers, providers, and society at large about what is appropriate (even with guidelines, optimal treatment is only imprecisely known; evidence-based conclusions may not be satisfactory to customers; serious disagreements exist about what is necessary or even acceptable)
In such a complex environment, it would be disastrous to think of marketing as a simple or limited activity. Exhibit 15.2 tracks the major functions of mar- keting as they apply to a single project—the Well-Baby Program of care—and to the entire program of a large, established HCO.
Identify and Segment Markets As Kotler implies, specific targets are the key to marketing. Market segmen- tation differentiates exchange partners into particular subgroups on the basis of groups’ exchange needs and the message to which they will respond. It is closely analogous to the statis- tical process of specification (described in chapter 14) and, in fact, often starts with the same taxonomies. Like listening and branding, it underlies the other marketing functions.
Market segmentation makes listening and promotion more efficient. People of different ages and genders have unique healthcare needs and may also carry certain insurance, want certain schedules and amenities, and listen to certain media. To attract a given demographic, the organization should work with that insurance plan, provide those schedules and amenities, and advertise in those media. Efforts that are not targeted are inherently inef- ficient. Segmentation usually goes well beyond demographics and into economic, cultural, and lifestyle issues as the organization attempts to build demand for specific services.
In the Well-Baby Program example, it is immediately obvious that all mothers are not alike. They and, more important, their approaches to child- care differ by education, income, culture, employment, and health insurance coverage. The segments have different needs. Several already have their needs met. Others need specific product and placement—locations, hours,
Segmentation Division of a population into subgroups based on needs, desires, and responsiveness to promotional message.
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and culturally competent caregivers. Several present financial constraints to the HCO, imposed by rates of Medicare compensation. Different segments require different promotions, in their language and through their commu- nity networks and preferred radio stations, newspapers, and websites. Gains in market share come by identifying segments that have unmet needs and designing responses that meet those needs.
Function Well-Baby Program Illustration HCO Illustration
Identify and seg- ment customer and associate markets
Forecast numbers of babies
Segment well-baby market Establish benchmarks
Identify and segment local population
Forecast segment size, age, and disease profile
Listen to stake- holder needs
Use surveys, focus groups, and other listening activi- ties to identify segment- specific needs
Identify OFIs in gaining mothers’ support
Monitor market share, satisfaction, and qualitative concerns by segment
Identify OFIs in market- share growth
Develop brand and media relations
Raise mothers’ awareness of Well-Baby Program services with articles, advertisements, and col- laboration with commu- nity agencies
Make community aware of HCO’s services
Maintain relations with community agencies
Maintain media relations Manage negative media
events
Convince potential customers to select the HCO’s services
Design product, place, price, and promotion to attract and retain mothers in specific market segments
Maintain multiple campaigns for specific HCO services and mar- ket segments
Attract and motivate associates
Design product, place, price, and promotion to attract and retain pedia- tricians, nurses, and other care providers
Maintain multiple campaigns for specific HCO associate needs
Manage other stakeholder relationships
Identify competitors and collaborators
Pursue partnerships to enhance well-baby goal
Monitor competitor performance
Identify collaboration opportunities
Pursue partnerships to enhance mission achievement
Note: HCO = healthcare organization; OFI = opportunity for improvement.
EXHIBIT 15.2 Illustration
of Marketing
Functions for
a Specific
Program and for
the Healthcare
Organization as
a Whole
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Listen to Stakeholder Needs Marketing uses a broad array of listening activities to understand exchange partners’ perspectives. Understanding promotes dialogue, identifies and pri- oritizes needs, suggests paths to improved relationships, and reveals oppor- tunities for improved HCO responsiveness. Excellent HCOs make listening a major part of their activities. They use formal surveys, electronic health record (EHR)–based measures, focus groups, and a wide variety of personal contact devices that involve hundreds of patients and potential patients. Many of these yield qualitative rather than quantitative information. The marketing unit plays a critical role in assembling and interpreting these data.
The major listening approaches for customer and associate stakehold- ers are summarized in exhibit 15.3.
Formal Surveys Surveys provide the most reliable quantitative information about relation- ships and attitudes and are widely used in marketing, journalism, and poli- tics. Sampling techniques allow inference from a relatively small number of contacts, and samples can be stratified to reflect specific population segments. Patients and associates are 100 percent sampled, providing regular reports on both summary attitudes toward the organization and its services and insight into perceptions about specific processes. As discussed in chapter 5, the Cen- ters for Medicare & Medicaid Services (CMS) mandates and publishes results of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), a 27-item survey of communication with doctors, communica- tion with nurses, responsiveness, pain control, follow-up care, cleanliness, and noise.2 A similar set—the ambulatory CAHPS—is available from the Agency for Healthcare Research and Quality.3 Household surveys are also commonly used; they provide data on community residents as opposed to populations of people affiliated with the organization.
Surveys have become highly sophisticated instruments. The questions, timing, method of contact, response rate, and specification of the population can all affect the results so that professional design and analysis are almost always necessary. Many kinds of surveys for patients and associates are pro- vided by commercial companies that handle application issues and also pro- vide trend, comparative, and benchmarking data.
Patient-Based Measures Useful measures of quality outcomes, length of stay, and costs can be con- structed from health records. Several are reported on the web for Medicare hospital patients at Hospital Compare4 and WhyNotTheBest.org. Patient satisfaction surveys are from samples. Most other data are universal for the patient population. They cover a limited set of events, but ones that can be benchmarked and trended. Similar data can be obtained for inpatients with
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Activity Description Application
Formal Surveys
Patient satisfaction
Telephone, web, or mail survey
Assesses patient satisfaction with both amenities and perceived quality of care; usually provided by a national survey firm using HCAHPS (chapter 5) questions and others and rigorously sampling various patient categories. Forms the basis for the loyal patient estimates.
Associate satisfaction
Telephone, web, or mail survey
Offered to various categories of associates; usually provided by a national survey firm, which supplies comparative data and evaluates reliability; forms the basis for the loyal associate estimates.
Community Telephone or mail survey
Estimates market share, prevalence of insur- ance, travel patterns, and other charac- teristics not in the decennial census; can be used to update census data; can be focused on specific population segments.
Monitors
Patient- based measures
Patient results from EHR
Unexpected event reports
Service recovery reports
Complaints Written, oral, or electronic reports from patients or associates
Patients are offered “bounce-back” cards, and both patients and associates are encouraged to communicate directly with organizational authorities.
“Caught in the act”
Written reports of exceptional behavior by associates
Cards for catching someone in the act of doing good are publicly available; the events reported are judged by a panel, and prizes are awarded.
Statistical process control
Counts of untoward events docu- mented in the patient record
The electronic record can be surveyed for evidence such as diagnoses, specific drug orders, progress notes, or treatments reflecting adverse events such as infec- tions, falls, treatment errors, and compli- cations. These can be tracked and moni- tored either as sentinel events—all cases investigated—or using statistical process control (chapter 14).
EXHIBIT 15.3 Major Listening
Activities
(continued)
Chapter 15: Market ing and Strategy 479
other payment sources and outpatients seeking treatment. Benchmarking is difficult beyond the Medicare population. As EHRs grow, “big data” opportunities may arise, identifying marketing and patient response factors contributing to successful care.
Unexpected event and service recovery reports (see chapter 2) can be useful for revealing marketing OFIs. The trigger in each of these is the subjective sense that a reportable event, or near miss, has occurred. Under- reporting is a serious issue, but the reports universally reflect marketing fail- ures. While EHR and unexpected events can be useful, the populations are limited to those already seeking care. Marketing’s focus is often on those not currently seeking care.
Activity Description Application
Personal Contact
Focus groups Small groups of current or potential customers meeting face-to-face
Focus groups are encouraged to speak candidly about existing services and explore what is important about proposed services; they provide insight into specific process opportunities that do not arise in surveys.
“On-call” managers
Designated contact offi- cials available around the clock
Commentary on events arising can reveal OFIs for marketing.
Walking rounds
Regularly scheduled senior visits
Managers and leaders maintain personal contact through visits to actual work sites. They encourage questions, explain positions, reward efforts, validate public pronouncements, and recognize values in action.
Shadowing and walk- throughs
Observation of a single patient through a complex process
Shadowing allows associates to under- stand both the process and its impact on patients; walkthroughs actually duplicate patient activity.
Mystery shopping
Observation of a competi- tor’s process
Mystery shoppers were initially used to dis- cover competitors’ prices. In healthcare, they reveal competitors’ processes and competitive advantages.
Note: HCAHPS = Hospital Consumer Assessment of Healthcare Providers and Systems; EHR =
electronic health record; OFI = opportunity for improvement.
EXHIBIT 15.3 Major Listening
Activities
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Personal Contact Strong marketing efforts supplement survey, EHR, and clinical encounter data with deliberate personal contact. They encourage senior leadership to be highly visible in the community. They systematically review information from rounds and on-call responses. They encourage process improvement teams to seek customer perspectives. They sometimes hire agents to observe and report on competitors’ processes. They assemble focus groups—small groups of actual or potential cus- tomers who are encouraged to discuss factors in product, placement, and price that are important to them. These personal-contact activities yield only qualitative and highly subjective information, but they accomplish three important goals:
1. They put a human face on policies and work requirements. 2. They improve leaders’ empathy with team members in their work
environment. 3. They provide detailed information that is often valuable in resolving
specific situations.
Personal-contact programs have some important limitations. Lead- ers must be trained to avoid blame in their responses and to stress process analysis and improvement. Personal contact works best when the organiza- tion has developed sound work processes and uses the contact to supplement measurement, process analysis, and goal setting. It cannot be effective in situations where the basic work processes are inadequate. A high volume of requests to solve specific problems is evidence that issues must be addressed systematically rather than episodically.
Develop Brand and Media Relations Marketing deliberately works to improve the HCO’s image—people’s impression of it—through branding activities and media relations.
Branding The branding function maintains the overall reputation or image of the organization so that it remains attractive to potential associates and members
of the community at large. Branding usually begins as a community-wide communications effort to con- vey the mission and the competitive advantages of the organization. Branding activities include public and community relations, image advertising and pro- motion, maintenance of an attractive website, and
media relations. A deliberate program includes descriptive information for various media, relationships with other influential community agencies such as schools and the faith community, and sponsorship of community events
Branding A community-wide communication effort to convey the mission and the competitive ad- vantage of the organization.
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such as health fairs and athletic teams. It also includes personal appearances by management and caregivers, deliberate contacts with influentials and opinion leaders, and damage control for negative media events.
Obviously, success begins with having a good story to tell. An increas- ing number of HCOs release specific information about finances, service, and quality to the public. Image promotion is far from a panacea. It takes a large number of exposures to increase name recognition, and changing the HCO’s attractiveness is hard, although increases in quality may be linked to improved branding.5 Community surveys allow the organization to monitor two dimensions of branding. Familiarity is measured by consumers’ ability to recall the name without prompting or to recognize it in a list. Attractive- ness uses survey questions to assess how the HCO compares to competitors and which attributes are most attractive. An established reputation—being among the first two or three names people independently recall for health- care—is an asset, hard to replace, and well worth protecting.
Media Relations Most associates are acutely aware of what is said about the organization in the media, but the evidence suggests that the public at large is quite resistant to media statements. Nonetheless, the media can portray the organization favorably or unfavorably, and the result often depends on the quality of infor- mation supplied by the organization. Media communication is initiated by either the HCO or the media. HCO-initiated communication is the planned release of information as part of branding. Attractive and thorough press releases, strong visual elements (e.g., photos, videos), knowledgeable and articulate spokespersons, and newsworthy information all assist in improv- ing the coverage. A deliberate program of regular information releases and efforts to draw media attention to favorable events promote a positive image. The more information released, the more likely the community’s familiarity with and attraction to the HCO will increase.
Media-initiated communication is often related to major news events, such as healthcare to prominent individuals or a healthcare crisis. A crisis is anything that suddenly or unexpectedly has adverse effects on an HCO or its patients, associates, or community. In the worst case, media-initiated com- munication arises from unfavorable events, such as lowered bond ratings, civil lawsuits, or criminal behavior by associates. Investigative journalism is an aggressive effort to dig out all the public might want to know, with emphasis on what the HCO might want to hide. Effective handling of media initiatives begins with preventing events that will draw investigation. It is supported by a strong branding program that releases positive, newsworthy information about the HCO. When unfortunate issues arise, the HCO should anticipate reporters’ questions and prepare detailed, candid responses. Spokespersons should be identified and equipped with thorough, convincing replies to
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questions. The organization should have a plan in place for communicating when a media crisis occurs.6
Convince Potential Customers HCOs are a respected source of information on health matters, and they communicate often with patients and others in their community. Leading organizations work hard to retain respect, tying their branding activities to specific communications about three principal goals:
1. Convince patients to select this provider and services. 2. Encourage wellness and disease prevention. 3. Adjust patient expectations about care.
Reaching the public effectively is challenging. Healthcare messages are often on topics people would rather avoid. Commercial retailers spend far larger sums than not-for-profit organizations are comfortable with. “Clut- ter”—the sheer volume of consumer messages—makes registering the HCO on the customers’ minds difficult. Despite this, communications programs can reinforce branding and build demand for effective healthcare.
Influence Patient Selection of Providers and Services Effective strategic decisions and associate marketing—recruiting the right people to implement the strategy—are more important than brand- name promotion in building customer loyalty and market share. Loyal or delighted patients—those who will return when necessary and refer oth- ers—are obtained by maintaining service and quality. The most effective way to manage patient satisfaction is to identify service OFIs and meet them through continuous improvement. Service recovery can supplement but not replace continuous improvement. Beyond performance and recov- ery, explicit promotion activities play a small role. An HCO may explicitly promote a new or expanded service or a service where a portion of the mar- ket could realistically be shifted to or from a competitor. Such a campaign would include website postings, press releases, advertising, and incentives such as giveaways and performance events. Customer reactions would be carefully monitored.
Influence Healthy Behavior HCOs with a community health mission join in wellness promotion to encourage healthy lifestyles and cost-effective prevention behaviors. Health- promotion campaigns to the well members of the population are an important branding opportunity. They use all media, including print and video material, usually in schools and work sites. More important, the healthcare experience often becomes a teachable moment—a window of increased receptivity to messages from healthcare professionals. Messages must overcome complex
Chapter 15: Market ing and Strategy 483
motivations to affect the unhealthy behavior. Campaigns repeat the message over and over and use a variety of vehicles to convey and reinforce it. Wellness promotion becomes an ongoing activity that consumes a specific budget and is constantly studied for opportunities to improve cost-effectiveness.
Manage Patient Expectations One aspect of patient satisfaction relates to initial expectations about care. These can be unrealistic. Media reports frequently emphasize dramatic, cura- tive medical intervention and may overstate the power and value of high- tech care. Drug companies hype branded prescriptions of dubious worth.7 Countering these and restoring realistic expectations are important. In real- ity, treatment of symptoms in a holistic way is effective in many conditions. In the case of life-limiting disease at the end of life, curative treatment may not be an option, although palliative care and treatment of uncomfortable symptoms may add quality to the days of life.
Similarly, the appropriate use of professionals, such as nurse practitio- ners in place of physicians or generalists in place of specialists, offers advan- tages in quality, cost, and effectiveness. The marketing approach begins with recruiting associates who can provide attractive lower-cost service. Promo- tion helps build awareness of alternatives and provides reassurance to make people comfortable with them, such as reassurance about the availability of technologically advanced care when needed. HCOs promote the use of walk-in clinics in place of emergency departments (EDs); ambulatory instead of inpatient care; generic instead of brand-name drugs and equally effective substitutes for high-cost intervention; and improved management at the end of life. All of these can reduce the cost of care while sustaining or improving the quality.
Sophisticated targeting can focus directly on specific patient expecta- tions. For example, advance description of elective surgical procedures can identify many common complications or variations in the recovery pattern and provide instructions or reassurance about them. It can prepare the patient to accept the usual outcomes and, in some cases, convince patients that the rewards of the procedure are not worth the pain, risks, and cost. The HCO may deliberately emphasize activities that are designed to provide symptomatic relief, such as the deliberate use of chiropractic services in place of back surgery in certain cases of low-back pain.8 Many elements of health- care—prostatectomies, breast cancer examinations, and high-cost drugs are notorious examples—have been oversold. HCOs with a community health mission have an obligation to counter with sound explanations of the effec- tiveness of less costly care.
Improve Patient Communication Successful patient communication is a sophisticated combination of advertis- ing, persuasion, and education. Three approaches improve its effectiveness:
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1. Messages should be carefully targeted to specific population segments where change is desired. The logic used in prevention and diagnostic testing applies to promotion as well—funds spent communicating to populations who are not involved or are nonresponsive are wasted. While branding usually aims to reach a broad spectrum of the community, patient communication should almost always be targeted to specific groups.
2. Advance plans for promotional campaigns should specify reach (the focal audience for the campaign), frequency (how often individuals in the focal audience are contacted), media, cost, and measures of expected outcome. Quantifying the campaign in advance establishes explicit goals and encourages careful review of alternatives.
3. Campaigns should explicitly involve community partnerships and coalitions. Building networks to improve health and healthcare offers several advantages. Some costs can be shared. Collaboration also
builds on the respect these organizations have, bringing familiar faces to the target audiences. The use of sites and agencies other than healthcare allows more complete and candid discussion of the complex issues. For example, on issues of prevention and end-of-life care, churches, congregate-living centers, and senior recreational facilities can hold educational discussions. On other issues, schools and employers can strengthen communication. The collaboration has listening
aspects as well. Specific needs can be identified and addressed. The HCO’s own associates can participate as partners. Promotion that reaches both patients and staff will improve staff understanding and acceptance as well.
Attract and Motivate Associates Although much of the communication to associates is managed by the accountability structure and human resources, many promotional activities also reach the associates. Websites and signage are seen more by associates than customers. Publicity and advertising attract associate attention. The service excellence program (discussed in chapter 2) can be described as col- laboration with associates to realize the mission and vision of the HCO.
Most large HCOs promote themselves directly to clinical professionals in short supply. Programs to attract physicians who seek locations to practice primary care medicine are commonplace; considerable care and expense is justified because of the importance of the decision on both sides. Many organizations advertise routinely in nursing, physical therapy, and pharmacy journals to attract new professionals.
Reach In advertising, an estimate of the number of people who will see or hear a specific advertisement.
Frequency In advertising, the average number of times each person is reached by a specific advertisement.
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Strategic affiliations to recruit personnel are also common. Affiliation with teaching programs enhances recruitment and retention of graduat- ing students. Programs to assist students with summer and part-time work affect not only the students directly involved but also their classmates, who learn by word of mouth. Working with inner-city high schools to encourage young people to enter healing professions is popular. Like many promotional activities, it reaches two audiences—the students and the community at large. North Mississippi Medical Center operates a program, beginning with “Let’s Pretend Hospital, a tool to educate first graders in health care careers.”9 Cur- rent nonprofessional associates are also an important source for more skilled positions. Scholarships and scheduling assistance to permit further education are common.
Manage Collaborative and Competitive Stakeholder Relationships One aspect of marketing is the deliberate management of relationships with other organizations. To understand the issues, it is useful to consider healthcare as a large set of component functions and services. These include inpatient and outpatient service lines, primary care sites, and long-term care facilities. They also include support activities, such as pharmacies and meals-on-wheels, and preventive activities, such as exercise programs, health education, immunization, and screening. A cottage model of healthcare has all of these activities operating as independent units that deal directly with the patient and relate to each other as competitors or independents, with occasional brief contracts. Several vendors compete in each function. The growth of healthcare systems is moving healthcare away from the cot- tage model toward comprehensive care. All services can be provided under a single corporate umbrella. Some large healthcare systems, such as Kaiser Permanente, Intermountain Healthcare, Catholic Health Initiatives, and the New York City Health and Hospitals Corporation, have incorporated large parts of the array.
An HCO must consider both horizontal (integrating competing or similar services) and vertical integration (integrating complementary ser- vices). With which services does it collaborate, with which does it compete, and on what terms? The optimal arrangement provides the community with safe, efficient, patient-centered, timely, efficient, and equitable care, but find- ing that arrangement can be a substantial challenge.
Many contract suppliers, such as emergency physicians, information services, and housekeeping companies, are effective horizontal collaboration examples. The hospital system movement through 2012 was largely hori- zontal. Many of the smaller systems are formerly competing acute hospitals. Significant and largely untapped opportunities also lie in vertical integration. Most primary and acute physician care is delivered by small group practices that are independent private corporations, although a growing trend is for
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physicians to be employed by health systems. Although many systems include long-term care facilities, hospices, and home care, most long-term care is delivered by horizontally integrated or independent organizations.
Exhibit 15.4 shows some important healthcare components. It sug- gests that the question about each is “Would this service be improved if it were
1. moved to a tighter ownership–management relationship? or 2. moved to a more independent relationship in direct exposure to
market forces?”
The improvement must lie in mission achievement. Closer affiliations may offer an opportunity. The HCO’s logistic and strategic support services, its culture as “the best place to give care,” and its ability to coordinate care across
a spectrum of patient need are valuable resources that can be efficiently shared. But transaction costs—loss of flexibility, reduced incentives, and conflicting val- ues among participants—differ with each structure and must be carefully evaluated as well.
Large organizations succeed because they invent collaborative mechanisms that are more effec-
tive than alternatives. The goal-setting and performance terms, agreements for sharing information, sharing of capital investment, and market exclusivity define the collaboration. One implication of the pair of questions referred to in the last paragraph is that any component of the existing organization can be sold to or merged with another organization or replaced by a contract relationship. Conceptually, an HCO could be a governing board that man- ages a large set of relationships with independent companies just as easily as it could be a corporation that owns the full array of services. When the benefits of collaboration exceed the transaction costs, closer affiliation is in order, and vice versa.
Most modern HCOs now collaborate on several major services, of which physician organizations may be the most important. The networks they have created require constant relationship management. Exhibit 15.5 suggests the range of levels of collaborative activity:
• Strategic partnerships include health insurance participation agreements, physician–hospital privileging, supplier contracts, or outsourcing contracts. The contract attempts to specify performance characteristics, including continuous improvement and incentives, and is written for a year or more. The standards are negotiated regularly, as with owned units. The intent is to keep the partnership in place. The arrangement can be abrogated, however, if desired by either partner.
Transaction costs The costs of maintaining a relationship, in- cluding the costs of communication, negotia- tion, and loss of flexibility.
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• Joint ventures involve capital investment by both partners, such as ambulatory treatment centers or shared high-cost, low-volume equipment. Joint ventures usually have joint governance or management teams. The capital investment makes them more difficult to terminate, and they are usually expected to be permanent.
• Mergers replace the capital, governance, and management of prior corporate entities with a new combined entity. Mergers are generally irreversible.
• Acquisitions are where one existing entity totally acquires another. The acquiring company owns the capital and continues governance and management. Acquisitions are generally irreversible.
Service or Function Common Current Arrangement
Possible Alternative Structure
Primary care Independent physician groups
Joint venture with physician owners
Employed physician groups
Ambulatory services (e.g., oncology, specialty surgery, urgent care)
Independent or horizontally integrated provider
Owned or joint venture with physicians
Joint venture with competing provider
Contract or strategic partnership with horizontally integrated provider
Logistic and strate- gic support (e.g., finance, human resources, knowledge management)
Owned Contract with strategic partners
Centralize in multihospital healthcare organization
Clinical support services Owned Strategic partnership with horizontally integrated provider
Health promotion and preventive activity
Independent or not offered
Strategic partnership with community agencies
Long-term services (e.g., home, hospice, nursing home care)
Independent or horizontally inte- grated providers
Owned Joint venture with competing
acute care provider Strategic partnership with
specialty provider
Low-volume specialty care (e.g., mental health, long-term acute care)
Independent or horizontally integrated providers
Joint venture with competing acute care provider
Contract or joint venture with current provider
EXHIBIT 15.4 Examples of
Alternative
Collaborative
Structures for
Healthcare
Organization
Services
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Improve Marketing Continuously Marketing functions are difficult to evaluate, but annual review, identifica- tion of opportunities for improvement, and deliberate improvement plans are still critical. Specific promotional campaigns for branding, influencing patient behavior, or specific communication to associates can be quantita- tively assessed (see the Measures section later in the chapter). More general activities, such as external relations and ongoing associate relations, must be measured by the strategic scorecard. Market share and satisfaction data mea- sure performance. The epidemiologic planning model is useful to compare an HCO’s market share with competitor HCOs to analyze the effectiveness of the marketing strategy and to revise the strategy as needed. Qualitative indicators from listening are important.
Strategic Functions
Strategy—the placement of the organization in its environment—can be said to pick up where marketing leaves off, but more accurately, the two are seam- lessly connected. If marketing is about relationships, strategy is the selection and prioritization of relationships. The organization identifies its strategy through its planning cycle (see exhibit 3.7) and its governance processes (discussed in chapter 4) and implements that strategy through its operations. The strategic functions (see exhibit 15.1) are the specific activities that help the organization maintain effective relationships in a dynamic environment.
Health promotion or care unit
(e.g., service line, primary care office, health
promotion program, hospice, hospital)
Potential Relationship to HCO None: arms-length negotiation of each
encounter Agreement to collaborate: expression of
shared elements of mission Contracts: prearranged processes for
patients with certain needs Strategic partnership: longer term and
broader commitment, usually including negotiation of issues that arise
Joint venture: strategic partnership plus shared capital investment
Wholly owned subsidiary: separate corpo- ration with defined mission
Unit of parent corporation: participates in annual goal setting and all appropriate programs
EXHIBIT 15.5 Spectrum
of Potential
Relationships
with
Organizations
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Maintain the Mission, Vision, and Values The mission, vision, and values represent the most central desires of the own- ers and stakeholders and, as such, become the cornerstone for all subsequent planning decisions. To fulfill that function, they should be as permanent as possible, but even the most carefully set mission may lose its relevance in a dynamic environment. Even though major change is infrequent in the mis- sion and even rarer in the vision, well-run organizations review the need for change annually. Periodically, the organization should undertake a broad- scale review called visioning. Actual revisions are developed by extensive listening and discussion among large numbers of stakeholders. Several task forces (often involving hundreds of people) are established to attract repre- sentation from most of the organization’s stakeholders in the debate about possible revisions. The review process not only develops consensus positions but also increases stakeholder understanding of others’ viewpoints and the reasons for specific wording. Marketing must manage the task forces, keep track of proposed changes, and arrange for the resolution of serious disagree- ments. The final changes require formal governing board adoption.
Define the Strategic Position As discussed in chapter 1, the mission, vision, ownership, scope of services, location, and partners of the organization define its strategic position. Stra- tegic positioning establishes broad understanding—what service lines our HCO is operating, where, and on what affiliation terms—so that the leader- ship team can implement effectively and respond to external challenges and opportunities. Successful strategic positions are constructed by identifying alternatives (what-ifs), testing the alternatives extensively with simulations and pilots, and evaluating the tests in task forces or committees of the most knowledgeable stakeholders.
Identify Strategic Opportunities Strategic alternatives are identified through an ongoing review directed by the senior management team and presented to the governing board for dis- cussion, amendment, and approval. The governing board reviews strategy whenever necessary, but always at the annual environmental review. The fact- finding and analysis are done by marketing, internal consulting, and finance associates, often with assistance from other units.
The review begins by assessing performance on each of the major dimensions of the strategic scorecard—financial, operational, customer, and learning (see exhibit 3.4). Achievements are compared to the prior year’s expectations, benchmarks, competitor achievements, and examples from the literature or other communities. Changes in external conditions are noted in the environmental assessment and often flagged as “threats” or “oppor- tunities.” Specific areas of each dimension are often categorized as strengths or OFIs, creating a profile that tests both the organization’s goals and its
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performance. The resulting display (called a SWOT [strength, weakness, opportunity, threat] analysis) is checked against the mission and vision and used to identify what the organization could be.
A key part of the review is the study of overall patterns and identifica- tion of the interrelationship between the performance dimensions. Study of high-performing organizations is helpful. Innovative thinking that transcends traditional boundaries helps identify truly creative opportunities. Porter’s framework for evaluating strategy is useful to identify important questions. The framework expands SWOT, raising questions from “five forces” or exter- nal domains:10
1. Buyers and customers. What are the needs of the buyers, the patients, and the community? How well are they met? Are there OFIs revealed by the profile of quality, cost, access, and satisfaction performance? Are there emerging economic or epidemiologic characteristics that suggest specific strategic responses?
2. New technology and substitutes. What are the implications of new diagnostic and treatment technology? What are other leading HCOs doing? What opportunities exist to reduce the cost of technology, such as by merger or acquisition, or by substituting less expensive protocols or changing processes to use less skilled personnel? What opportunities for improvement are presented by new operational technology, such as the EHR?
3. Resource availability. What funds are available for investment in expansion or renovation? How will market and regulatory forces change future revenues? What human resources are required, and how will they be acquired? What opportunities exist to improve retention and service excellence? What land is required? What additional knowledge management?
4. Competitor activity. What actions are competitors taking, and what are the implications of those actions for our strategy? What opportunities exist to advance stakeholder goals by collaborating with competitors? By merger or acquisition?
5. Potential competitors and regulatory impact. What new models of healthcare delivery are being developed elsewhere? Which stakeholder groups might start competing organizations, and why? What changes are likely in regulatory protections and constraints? What incentives are offered to encourage innovation? What actions might the organization take to forestall competition?
The strategic review is not secret; all of the leadership team is expected to participate. It helps them understand the organization’s profile of needs and achievements and the possible improvements. The result is that the
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strategic position is not secret. In the words of Intermountain Healthcare planner Greg Poulsen, “It’s in our competitors’ portfolio tomorrow morn- ing.”11 The Intermountain approach is to win not on secrecy but on sound selection and effective implementation. Timeliness and thoroughness are both important.
Evaluate Strategic Opportunities The opportunities determined by the review are identified and roughly pri- oritized. Various ways to improve the institution’s position—usually called scenarios—are proposed and evaluated against the agenda of opportunities. Some die quickly, as major flaws appear. Others receive detailed and quan- titative review, and models of their implications are constructed. Models— also called business plans—consist of a narrative that describes the alternative as clearly as possible and identifies how it differs from current practice; they also include a quantitative simulation that forecasts the changes in key strategic scorecard measures. The models and their results are evaluated by teams of associates and stakeholders for contribution to mission, synergy with existing programs, risk of failure, fit with the environment, and fit with accessible resources.
Various devices can be used to stimulate discussion and understand- ing of alternatives. A matrix that allows two dimensions of desirability to be considered is sometimes useful. There are several alternatives for defining the axes. The versions by the Boston Consulting Group12 and by General Electric13 are popular. Both lead to a display such as that illustrated in exhibit 15.6, where the axes are market attractiveness (opportunities for growth or profit) and organizational advantage (internal resources, some- times called competencies).
Expanding an existing competency is generally easier than developing new competencies, but ignoring the market is perilous. The display is useful to focus attention on these trade-offs. For example, expanded ambulatory services such as accountable care organizations are very “attractive” as a result of changes in Medicare and private insurance. An HCO might find itself with strong resources in primary care delivery, forming a solid joint venture with most of its primary care practitioners (situation A in exhibit 15.6). Expanding its primary care activities would be a strong strategic pri- ority, because expansion is both attractive and resource supported. Another HCO, in situation B, would work to strengthen its ambulatory care resources but would inevitably be a step behind. A high-tech service, only infrequently needed and requiring specialists who are difficult to recruit (situation C), would be avoided. A service operating near benchmark across its scorecard but with falling demand, such as a well-managed emergency department (situation D), would not be expanded but might provide the organizational foundation for developing urgent care centers.
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Strategic Theories Theories for corporate strategy are common, but they do not transfer easily to the complexities of healthcare. Eastaugh14 has modified four corporate archetypes designed by Miles and Snow15—prospector, analyzer, reactor, and defender—to fit hospitals. The differences between the archetypes are shown in exhibit 15.7. One dimension—willingness to seek innovation outside the traditional parameters—is external and tends toward higher risk. The other dimension—concentration on meeting quality and cost standards in the core business—is internal, analytic, and risk averse. The evidence suggests that prospectors and defenders do badly; too much risk and too little action are both dangerous. Analyzers do best; carefully selected innovation is better than sticking too closely to established models. Reactors do worst.
Other strategic philosophies have been built around the concept of distinctive competencies—market success depends on excelling in some char- acteristic that is attractive to customers.16 They reflect various approaches to
A tt
ra ct
iv en
es s
High B A
Medium
Low C D
Low Medium High
Advantage
Situation A, where the market is attractive and the hospital has a strong advantage, is one that would be selected for further investment.
Situation B, where the market is attractive, but the hospital faces a large or difficult investment, would be judged on its importance to overall market share. Ways to manage or reduce the investment, such as joint ventures, would be considered.
Situation C, where both market and advantage are low, would be phased out or avoided.
Situation D, where the attractiveness is low but the hospital has an advantage, would be supported but expanded only to the extent market support could be foreseen.
EXHIBIT 15.6 Matrix of Market
Attractiveness
and Advantage
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defining the competency. Porter’s “cost leadership versus [quality] differenti- ation”17 is blunted in healthcare by the insurance mechanism, which protects both patients and providers from cost differences, but quality and service are important differentiators. Not surprisingly, Baldrige-winning HCOs are significantly superior to average HCOs on HCAHPS scores—four standard deviations.18 Miller and Friesen’s “adaptive, dominant, giant, conglomerate, and niche innovator” philosophy describes different approaches to strategic opportunities as well as different corporate cultures.19 Niche strategies delib- erately seek highly specialized services that include factors that are difficult for competitors to copy. Specialty hospitals that serve children, the mentally ill, cancer patients, and the like are following niche strategies. Small, rural HCOs that offer primary care and limited hospitalization are also niche strat- egists, and so are independent home care and hospice organizations.
The high-performing HCOs used as models by The Well-Managed Healthcare Organization have pursued comprehensive rather than niche strategies. They have used transformational management, evidence-based management, and the service excellence model to build community-wide customer and provider brand loyalty. They have countered niche competi- tion with service lines and joint ventures that offer niche services in inte- grated settings. Those with community health missions explicitly pursue
Ex te
rn al
F oc
us
High diversification (beyond healthcare)
Prospectors
Moderate diversification
(selective targets) Analyzers
Rare diversification (“stick to knitting”)
Reactors* Defenders
Low Medium High
Focus on productivity and quality
Internal Focus
EXHIBIT 15.7 Miles and Snow
Typology of
Strategic Types
*Reactors do not have a strong strategy in either direction. They respond passively to competitors.
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a “conglomerate” strategy; they seek comprehensive coverage of market needs and are willing to explore multiple corporate and collaborative struc- tures. They have been growing rapidly, often by acquisition of smaller sur- rounding HCOs.20
Document the Strategy Many strategy elements take several years to implement. Implementation processes and new strategies must be coordinated with those in preparation as well as those in place. The decisions that result from the strategic analysis process are incorporated in a set of documents sometimes called the long- range or strategic plans. The documentation includes the following parts:
• Environmental forecasts. These describe the likely development of the community. They are derived from the environmental assessment, cover about five years, and identify potential directions of change for a second five years. They are updated annually but serve as a central resource and database for the planning activities of all units.
• Services plan. This specifies the clinical services and other major activities in which the institution will engage, with annual forecasts of the expected volume and goals for cost, quality, worker satisfaction, and customer satisfaction for each service.
• Long-range financial plan. This summarizes the expected financial impact on income statements, cash flow, long-term debt, and balance sheets (see chapter 13).
• Information services plan. This describes the future capability and hardware array of information service, including plans for collection, standardization, communication, and archiving of data (discussed in chapter 10).
• Human resources plan. This shows the expected personnel needs, terminations, recruitment requirements, and succession plans (see chapter 11).
• Clinical staff plan. This is a part of the human resources plan that focuses on physician and related caregiver replacement and recruitment (see chapter 6).
• Facilities master plan. This details the construction and renovation activities (discussed in chapter 12).
Although the plans may be separate documents, the processes that generate the decisions must be integrated. In general, mission and vision drive services and finances, and these, in turn, drive facilities, human resources, and information needs. Thus, the plans have a hierarchical relationship. Internal consulting is responsible for coordinating the strategic plans. The other technical and logistic support services are responsible for their components.
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Implement the Strategic Position The consensus that emerges from the review of scenarios and the govern- ing board’s actions is a set of approved projects to be implemented, with timetables and specific strategic scorecard goals for the next several years. Implementation involves many activities that must be coordinated. The changing environment may open important opportunities or threats. Thus, a critical part of implementation is rechecking the basic strategy against the environment and making adjustments. Implementation is managed by senior management, internal consulting, and the operating teams involved. Most projects have management teams that meet regularly to monitor progress and adapt to changes. Major projects have direct senior management participa- tion, and progress is reported to the board.
Improve Continuously The strategic process is a recurring annual cycle, as exhibit 3.7 describes. The 12th month finalizes the operational plan for the coming year; the first (or 13th) starts annual strategic review. The cycle does not automatically review the review process itself. Wise leaders of marketing and strategy seek out OFIs for the process and join other senior leadership in considering three areas:
1. Where stress was highest in the cycle, and how it might be reduced 2. OFIs arising from the unit scorecards of the units mentioned in exhibit
15.8 3. Concerns expressed about the HCO’s strategic process by governance
or any stakeholders, including associates
People
Associates Marketing processes are increasingly sophisticated. A master’s degree in business or health administration is a useful beginning, but neither degree emphasizes the details of advertising or public relations. Experience with a commercial agency or a successful healthcare marketing team is highly desir- able for the senior marketing team.
Consultants are available for most marketing functions. Advertising is purchased from agencies with experience in design, campaign development, and media contracts. Market studies and customer surveys are often con- tracted to consultants. The consultant should be able to achieve better results and lower costs than if the HCO did the surveys itself. Consultants can assist in strategic marketing by providing data collection and by undertaking sensitive inquiries. Senior staff, consultants, and trustees can be as effective
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as negotiators, intermediaries, or mediators in sensitive negotiations. Final approval can be reserved for the CEO or governing board. The database that results from continuing study of a market is a valuable proprietary resource. Even if much of the data collection is delegated to consultants, the organiza- tion should make an effort to retain the data in their entirety.
Strategy is learned by practice. A master’s-level degree in business or health management is a sound beginning. Experience in marketing, finance, or internal consulting are helpful to improve judgment. Several years’ partici- pation with an excellent team is important.
Organization Large HCOs and healthcare systems have a formal hierarchy for marketing activities with employees or contracts for each function, as shown in exhibit 15.8. Linking marketing, strategy, and internal consulting is common. In exhibit 15.8, internal consulting is organized by the functions described in chapter 14. The dividing lines between marketing, planning, and internal
Community relations
Promotion
CEO
Senior vice president, marketing, planning,
and internal consulting
VP, marketing and planning
VP, internal consulting
Environmental analysis
Statistical analysis, benchmarking, and
epidemiologic planning
Publications and website
Promotions and public relations
Customer relations
Media relations
Surveys and monitoring reports PIT and capital
request support
EXHIBIT 15.8 Formal Hierarchy for a Large Marketing and Internal Consulting Operation
Note: PIT = process improvement team; VP = vice president.
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consulting are flexible; the activities can be combined in various ways, includ- ing a single unit. Many real projects call for teams from several of the mar- keting, planning, and consulting areas. In multihospital systems, a central unit can offer an in-house consultant service, another potential advantage to large-scale HCOs. In smaller organizations, most of the specific accountabil- ity centers disappear and consultants are used extensively.
Strategic support is an activity of the entire senior leadership team. Plan- ning, marketing, and internal consulting units generally provide technical assis- tance, and outside consultants are frequently used. A permanent voice in senior leadership is essential. In exhibit 15.8, it is provided by the senior vice president. The role includes monitoring progress on the various marketing and strategic planning activities and keeping the strategic opportunities before the team.
Measures
Measurement of marketing and strategy is challenging but useful. Strate- gic strength itself can be assessed inferentially from the strategic scorecard; improvement is success. Operational goals can be established for marketing teams and strategic teams. Specific promotions can be measured and compared to goals. Audits by outsiders can often identify specific OFIs. Operational suc- cess does not guarantee strategic success, although it certainly contributes to it.
Strategic Measures Strategic success is measured by the strategic scorecard (exhibits 1.10 and 4.2). Repeated failure to meet scorecard goals is a serious danger signal. These key indicators from the scorecard apply to the HCO as a whole and to individual service lines:
• Quality of care. Any HCO consistently and substantially below benchmark on outcomes quality measures should be merged or closed. The publicly available numbers provide an immediate indicator; HCOs failing to improve should be acquired by ones that can.
• Market share. Market share should be stable or growing. Although growth is desirable in many situations, it should not be a universal goal. When stable, high-performing HCOs compete, individual growth cannot reasonably improve community-wide performance. Declining market share is a critical signal; if it is not reversed, it suggests that the HCO should be closed, merged, or substantially restructured.
• Financing. Most HCOs should operate profitably most of the time. The long-term expectation must be for sufficient cash flow (profits plus depreciation) to manage debt and meet replacement needs. An HCO that cannot meet that expectation requires substantial restructuring,
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merger, or closure. The business cycle or other unusual situation may temporarily impair financial performance. Safety-net HCOs and others that operate in impaired economies must work to control costs but also to improve revenue.
• Investment in human capital and associate satisfaction. The service excellence model depends on associate satisfaction—“a good place to give care.” Failure to provide adequate staffing levels and attract and retain qualified associates is a signal that requires prompt correction. Chronic failure should lead to closure.
• Overall HCO goal achievement. A medium-sized HCO sets several thousand specific goals each year. Its service lines have several hundred each. Not all are improvements, but none should be retreats. The expectation is that all the goals will be achieved. A failure rate of more than 5 percent is an important signal, and one that is more than 10 percent threatens survival. If multiple failures persist, the HCO should be closed or merged with an effectively managed one.
• Surprises. One purpose of strategy is to protect the organization by foreseeing external change in time to adapt to it. Thus, a goal of the strategic activity should be “no surprises”—no unforeseen foreseeable events. Certainly, each major surprise is a sentinel event that is worthy of critical review to understand whether it could have been prevented and how.
While interpreting these measures is not as straightforward as many other performance evaluations, the senior management team is accountable. The member of senior management charged with marketing and strategic services is obligated to monitor performance and report routinely, keeping the strategic scorecard prominent in all discussions.
Operational Measures The units shown in exhibit 15.8 should have unit scorecards. Client sat- isfaction, error rates, unfinished assignments, and service delays are useful measures. Benchmarking is difficult; HCOs that are superficially similar have different histories and different strategic opportunities.
Promotional campaigns for branding or for specific services should have built-in pre- and postcampaign evaluations. Campaigns identify specific goals, such as market share or behavior change in population segments. Their costs can be estimated, expectations about outcomes established, and actual results compared to expectations. Expectations can be set about exposures (reach times frequency), response rates (demand), costs, costs per exposure and per response, process quality, timeliness, and changes in customer satis- faction and target market share.
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Surveys and statistical analysis of customer and associate behavior can evaluate the impact of the promotion. For example, an organization might identify several strategies to expand market share using service line promo- tions, centers of excellence in certain referral specialties, and an expanded availability of primary care physicians. Each of these has specific measures that can be evaluated by surveying the community to gauge recognition of the promotional material and responses and by analyzing trends in new registrants for the various services. Expectations for improvement in these measures can be established and performance evaluated, as shown in exhibit 15.9. Campaigns may take several years, but interim progress can be evalu- ated annually.
Establishing Strategic, Marketing, and Internal Consulting Expenditure Goals Senior management must recommend expenditure goals for strategic, mar- keting, and consulting activities and defend them to the board and to ques- tioning associates. The judgment of what’s “enough” investment in strategy and marketing is challenging. Benchmarking of strategic expenditures is not appropriate; each HCO’s needs are different and expenditures are not com- parable. Senior management and governance should be convinced that an adequate environmental assessment is being performed and that progress on major strategic agendas is appropriate to long-term market needs. The test is answering the question “How would additional expenditure (or a reduction) affect our strategic scorecard over the next several years?” Answering it is not easy, and the stakes are high. The operational measures for consulting, mar- keting, and strategy are often helpful in revealing OFIs, where added invest- ment will pay off. The evidence from Baldrige recipients suggests that they do not stint. Their core strategy always optimizes associate satisfaction and associate performance. When opportunities arise, funds and human resources are available to meet them.
Auditing—systematic review by an outside observer team—can supplement these measures, both with increased understanding of account- abilities and evaluation of more subjective marketing activities. An audit performed by an outside consultant might review quantitative results, point- ing out successful processes from other organizations. A consultant can conduct or validate surveys or analyses that show results. A consultant can review practices, goals, and organization structures and can suggest OFIs. An internal 360-degree review process can accomplish many of the same objectives by systematically surveying associates in the unit and users of the service. Periodic supplementation by an independent outsider improves the reliability of internal review.
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Managerial Leadership
Success in strategy is an ability to identify and implement the right changes at the right time. It requires technical and cultural skills and effective senior leadership. Success feeds on itself. Because it meets needs, it attracts sup- port, and the support provides resources for further expansion.21 On the other hand, studies of the failures of HCOs usually reveal that strategic errors were made several years before the ultimate crisis, often repeatedly.22
Campaign Actions Measures
Centers of excellence in orthopedics, cardiology
Preparation of data on cost per case and quality of results
Publication of original research in peer-reviewed journals, distribution of reprints
Direct sales to managers of local HMOs, PPOs
Competitive bid for Medicare, Medicaid contracts
Presentations to primary care physicians
Feature stories in local media Media promotion
Increase in listings or con- tracts with intermediaries
Change in total demand, market share
Change in cost per case Change in profit per case Cost of campaign per new
case Number of public relations
appearances, audience size Number of exposures, expo-
sures per target audience member, cost per exposure by medium
Survey of awareness and attractiveness
Number of subscribers, percent of total market, cost per subscriber
Surveys of patient satisfaction
Increased primary care access
Direct mailing to physicians in primary care fellowships
Coordination with presently affiliated physicians
Meetings with local physicians affiliated with competitors
Program of practice acquisi- tion, expansion
Introduction of nurse practitioners
Media advertising and public relations
Program of office support Number of new responses
Number of new physicians recruited
Number of nurse practitio- ners placed, demand for nurse practitioner services
Patient visits per physician Delays for emergency, routine,
and preventive office visits Patient satisfaction Program cost per new physi-
cian, per new visit
Note: HMO = health maintenance organization; PPO = preferred provider organization.
EXHIBIT 15.9 Measures
for Specific
Marketing
Campaigns
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Unfortunately, excellence is extremely rare.23 Hospitals and their associated physicians fall alarmingly short on safety,24 quality,25 effectiveness,26 patient satisfaction,27 and cost.28 Studies of trends in available national measures of performance suggest that the typical hospital is not strategically managed; it is simply drifting.29
There are numerous exceptions. Intermountain Healthcare, Kaiser- Permanente, Mayo Clinic, various Baldrige award–winning HCOs, and many others pursue excellence as their core strategy. The central leadership question is how to build and sustain consensus committed to an ongoing system of supporting associates and improving results. The system itself is not simple, as the preceding 500 pages have documented. The leadership actions that support it are not as complicated, but they are easily obscured by issue- specific details. All the known paths to excellence build on the following four commitments, which are the core strategies for excellence.
Commitment to Respect Healthcare is uniquely people intensive. Only human hands deliver care. The core of excellence is making sure that caregivers have everything they need—knowledge, skills, tools, and motivation. Transformational leader- ship emphasizes listening activities that identify associates’ needs. Training for first-line leaders is probably the most critical necessity, because they are the face of the HCO to every associate. Rounding and scorecard monitor- ing help individual leaders maintain their focus on meeting associate needs. Communication and goal negotiation convey respect. Job training and infor- mation access equip associates. Fail-safe supply systems give them the tools they need. The systems of intangible and tangible rewards are supplementary incentives for individuals.
Leaders understand the centrality and complexity of associates’ needs. They round, listen, and monitor to reinforce transformational behavior. They are alert to OFIs that may help associates, and they prioritize such OFIs. They use PITs consistently as a way to hear and meet associate concerns. They negotiate goals rather than imposing them. They protect associates’ employment, using the “analyzer” strategy to minimize risk.
Commitment to Strategic Listening Surprise is a measure of strategic failure. “No surprises” is an important goal of strategic planning. It is unattainable, but excellent HCOs are excellent because they have identified major change faster than their competitors. Oversight and bias are two human factors that impair the strategic process. They blind leadership, directing the strategy away from real opportunities.
Oversight is failure to spot trends early enough. It is caused by lack of diligence or lack of imagination. Bias is a mind-set that obscures or denies the facts. For example, gender bias in the workplace tends to dismiss the concerns of women. Awareness of this bias dramatically increased with the
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#MeToo movement, which took off on social media in 2018. Prior to the movement, a commonly held mind-set was that male leaders were unlikely to be held accountable for sexual harassment. When a large number of victims spoke out about their experiences with harassment in the workplace, women began to shift the national perspective.
Excellent HCOs had identified the core problem—gender discrimina- tion—much earlier. They had enforced respect as a value and used objective measures to establish fair compensation and to identify promotable associates regardless of gender. Their solutions were imperfect, but stronger than their competitors’.
Bias is widespread in American society, raising barriers that impair health. People of color, followers of non-Christian religions, and people with diverse gender expressions are frequently subject to its effects. Strategic planning and specific opportunities should be reviewed for their impact on these groups.
Leaders enforce rigor in strategic listening by maintaining diverse viewpoints on the governing board, deliberately monitoring and reporting strategic developments in similar communities, bringing in speakers who can educate trustees and senior leaders, and hiring consultants to gain out- side expert opinion. Leaders work to encourage innovative solutions. They remind each other of the need to recognize bias and overcome it.
Commitment to Fact Fact is the common ground of stakeholders. The stakeholder model assumes beliefs and interests will conflict, and that the purpose of corporate strategy is to find the solution at least minimally acceptable to all. Conflict is resolved by analysis of the possible. Resolution is measured by achievement of the common goal: care that is safe, effective, patient-centered, timely, efficient, and equitable. Specific measures can be found for most contributing goals. They are incorporated into unit scorecards; the measures sections of the 15 chapters provide detail.
Excellence assumes that the HCO will seek the best-justified measures, will note and accommodate the limitations of those measures, and will base all decisions on a factual foundation. Adhering to this goal is challenging. There is always pressure to ignore, suppress, or distort the facts.
Managers sustain fact by widespread display and by making facts the focus of most decisions. The strategic and unit scorecards are core commit- ments to fact. PITs emphasize fact. Strategic planning starts with factual analysis. To the extent possible, training and employee evaluation are fact based. Managers remind each other and all associates of the facts and their importance. They challenge opinions that are contrary to fact and deny the legitimacy of untrue claims. They support audits to ensure accuracy and make distortion of fact a cause for termination.
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Commitment to Excellence Commitment to excellence is clearly more challenging than acceptance of the status quo. Finding measures, forecasting them, analyzing OFIs, and understanding complex issues are all harder than doing today what we did yesterday. Individual leaders must make a personal effort; HCOs must invest substantial funds. “Why should we make the effort to commit to excellence?” is a core question every professional must address, and every leader must be ready to explain.
Leaders offer these reasons, drawing on a history of several centuries:
• It is a calling from God to help the sick and the disadvantaged. The instruction appears not only in the Judeo-Christian and Muslim traditions, but in almost all of the world’s religions.
• In a nonreligious context, people should do to others what they would wish if their roles were reversed. You should work to provide the same healthcare to others as you would want for yourself and your family.
• Professionalism is defined exactly by a commitment to serving others. The rewards that professionals receive are generous, and they are offered because professionals accept that commitment.
Practice Applications
These questions are about applying the chapter content. It is often helpful to dis- cuss them with classmates or mentors, gaining different perspectives on the issues.
1. What sorts of questions would the four Ps (i.e., product, place, price, pro- motion) prompt for implementing the new Well-Baby Program suggested in exhibit 15.2? How would you answer those questions in a real HCO?
2. A planning team is designing a $20 million renovation and expansion of a patient service. Focus groups and surveys of patient needs will cost nearly $200,000. The governing board has authorized exploration but has explicitly stated that it will make a final decision based on further analysis. How will you justify the $200,000 investment for inclusion in the upcoming budget?
3. Your HCO has focused on hospital and rehabilitative care but is now con- sidering investment in primary care, health promotion, and palliative care. Successful efforts could mean less income for the hospital and its doctors and even reduced employment. Identify the stakeholder segments that must be sold on the concept, and propose the best arguments for each.
4. A group of practitioners has proposed that your HCO join the Mayo Clinic Care Network, “a network of like-minded organizations that share a common commitment to improving the delivery of health care in their
The Wel l -Managed Healthcare Organizat ion504
communities through high-quality, data-driven, evidence-based medical care” (www.mayoclinic.org/about-mayo-clinic/care-network/about). The CEO asks your team to outline the questions that need to be answered to evaluate this opportunity.
5. Summarize the arguments you would make in favor of a merger with a larger healthcare system to a trustee of a small not-for-profit HCO. What questions would you expect from the trustee? How would you approach answering the questions?
Additional Resources
Berkowitz, E. N. 2016. Essentials of Health Care Marketing, 4th ed. Jones & Bartlett Learning.
Ginter, P. M., and W. J. Duncan. 2018. The Strategic Management of Health Care Orga- nizations, 8th ed. San Francisco: Jossey-Bass.
Kotler, P., and G. Armstrong. 2017. Principles of Marketing, 17th ed. Englewood Cliffs, NJ: Prentice-Hall.
Thomas, R. K. 2015. Marketing Health Services, 3rd ed. Chicago: Health Administration Press.
Notes
1. Kotler, P., and R. N. Clarke. 1987. Marketing for Health Care Organizations. Englewood Cliffs, NJ: Prentice-Hall, 5.
2. Centers for Medicare & Medicaid Services. 2018. “HCAHPS.” Accessed May 15. www.hcahpsonline.org/en/.
3. Agency for Healthcare Research and Quality. 2018. “CAHPS.” Accessed May 15. https://cahps.ahrq.gov/.
4. Centers for Medicare & Medicaid Services. 2018. “Find a Hospital.” Accessed May 15. www.medicare.gov/hospitalcompare/search.html.
5. Snihurowych, R. R., F. Cornelius, and V. E. Amelung. 2009. “Can Branding by Health Care Provider Organizations Drive the Delivery of Higher Technical and Service Quality?” Quality Management in Health Care 18 (2): 126–34.
6. Society for Healthcare Strategy and Market Development (SHSMD). 2002. Crisis Communications in Healthcare: Managing Difficult Times Effectively. Chicago: SHSMD, 7.
7. Conrad, P., and V. Leiter. 2004. “Medicalization, Markets and Consumers.” Jour- nal of Health and Social Behavior 45 (Suppl.): 158–76.
8. Curtis, P., and G. Bove. 1992. “Family Physicians, Chiropractors, and Back Pain.” Journal of Family Practice 35 (5): 551–55.
9. North Mississippi Medical Center. 2006. “Malcolm Baldrige National Quality Award Application.” Accessed May 15. https://www.nist.gov/sites/default/files/ documents/2017/10/11/NMMC_Application_Summary.pdf.
10. Porter, M. E. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press, 4.
Chapter 15: Market ing and Strategy 505
11. Griffith, J. R., V. Sahney, and R. Mohr. 1995. Reengineering Healthcare. Chicago: Health Administration Press, chapter. 4.
12. Abell, D. F., and J. S. Hammond. 1979. Strategic Market Planning: Problems and Analytic Approaches. Englewood Cliffs, NJ: Prentice-Hall.
13. Thomas, H., and D. Gardner. 1985. Strategic Marketing and Management. New York: Wiley.
14. Eastaugh, S. R. 1992. “Hospital Strategy and Financial Performance.” Health Care Management Review 17 (3): 19–31.
15. Miles, R. E., and C. C. Snow. 1978. Organizational Strategy, Structure and Process. New York: McGraw-Hill.
16. Mintzberg, H., and J. B. Quinn. 1995. The Strategy Process: Concepts, Contexts, and Cases, 3rd ed. Englewood Cliffs, NJ: Prentice-Hall.
17. Porter, M. E. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press.
18. Griffith, J. R. 2015. “Understanding High-Reliability Organizations: Are Baldrige Recipients Models?” Journal of Healthcare Management 60 (1): 44–61.
19. Miller, D., and P. H. Friesen. 1984. Organizations: A Quantum View. Englewood Cliffs, NJ: Prentice-Hall.
20. North Mississippi Health Services. 2012. “North Mississippi Health Services Appli- cation for the Malcolm Baldrige National Quality Award.” Accessed October 4, 2018. http://petapsco.nist.gov/Award _Recipients/PDF_Files/2012_North_MS _Application _Summary.pdf, p. i.
21. Griffith, J. R., and K. R. White. 2005. “The Revolution in Hospital Management.” Journal of Healthcare Management 50 (3): 170.
22. See, for example, Burns, L. R., J. Cacciamani, J. Clement, and W. Aquino. 2000. “The Fall of the House of AHERF.” Health Affairs 19 (1): 7–41. See also Walshe, K., and S. M. Shortell. 2004. “When Things Go Wrong: How Health Care Organi- zations Deal with Major Failures.” Health Affairs 23 (3): 101–11. See also Weber, T., C. Ornstein, M. Landsberg, and S. Hymon. 2004. “The Troubles at King/ Drew.” Los Angeles Times, December. Accessed October 21, 2005. http://www .latimes.com/nation/la-kingdrewpulitzer-sg-storygallery.html.
23. Griffith, J. R., and J. A. Alexander. 2002. “Measuring Comparative Hospital Per- formance.” Journal of Healthcare Management 47 (1): 41–57.
24. Leape, L. L., and D. M. Berwick. 2005. “Five Years After ‘To Err Is Human’: What Have We Learned?” Journal of the American Medical Association 293 (19): 2384.
25. Jha, A. K., Z. Li, E. J. Orav, and A. M. Epstein. 2005. “Care in U.S. Hospitals— the Hospital Quality Alliance Program.” New England Journal of Medicine 353: 265–74.
26. Casalino, L., R. R. Gillies, S. M. Shortell, J. A. Schmittdiel, T. Bodenheimer, J. C. Robinson, T. Rundall, N. Oswald, H. Schauffler, and M. C. Wang. 2003. “External Incentives, Information Technology, and Organized Processes to Improve Health Care Quality for Patients with Chronic Diseases.” Journal of the American Medical Association 289 (4): 434–41. See also McGlynn, E. A., S. M. Asch, J. Adams, J. Keesey, J. Hicks, A. DeCristofaro, and E. A. Kerr. 2003. “The Quality of Health Care Delivered to Adults in the United States.” New England Journal of Medicine 348 (26): 2635–45.
27. Sofaer, S., and K. Firminger. 2005. “Patient Perceptions of the Quality of Health Services.” Annual Review of Public Health 26: 513–59.
28. Reid, P. P., W. D. Compton, J. H. Grossman, and G. Fanjiang (eds.). 2005. Building a Better Delivery System: A New Engineering/Health Care Partnership. Washington,
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DC: National Academies Press. See also Jha, A. K., E. J. Orav, A. Dobson, R. A. Book, and A. M. Epstein. 2009. “Measuring Efficiency: The Association of Hospital Costs and Quality of Care.” Health Affairs 28 (3): 897–906.
29. Griffith, J. R., J. A. Alexander, and D. A. Foster. 2006. “Is Anybody Managing the Store? National Trends in Hospital Performance.” Journal of Healthcare Manage- ment 51 (6): 392–406. See also Ryan, A. M., B. K. Nallamothu, and J. B. Dimick. 2012. “Medicare’s Public Reporting Initiative on Hospital Quality Had Modest or No Impact on Mortality from Three Key Conditions.” Health Affairs 31 (3): 585–92. See also Fung, C. H., Y.-W. Lim, S. Mattke, C. Damberg, and P. G. Shekelle. 2008. “Systematic Review: The Evidence That Publishing Patient Care Performance Data Improves Quality of Care.” Annals of Internal Medicine 148 (2): 111–23.
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GLOSSARY
Accountable care organization (ACO). Group of healthcare providers that works collaboratively and accepts collective accountability for cost and quality of care for a specific population. The patient-centered medical home is an accepted model for becoming an ACO.
Adjustment. A statistical technique to aggregate values from specified popula- tion subsets, allowing comparison of samples from populations with differences in the relative size of subset populations.
Agency or accountability. The notion that an individual or team commits to fulfill a specific, prearranged expectation or, conversely, that the organization can rely on their commitment.
Associates. People (employees, trustees and other volunteers, medical staff members, and agents of contract suppliers) who give their time and energy to the HCO and its activities.
Bad debt. Cost for patients who were expected to pay for care but did not.
Benchmark. The best performance on a specific measure of which the organiza- tion is aware.
Best practices. Work processes that have been proven to achieve benchmark.
Big data. Large and complex data sets that may be analyzed for patterns.
Branding. A community-wide communication effort to convey the mission and the competitive advantage of the organization.
Case manager. A health professional who advocates for the patient to receive the most appropriate treatment, with acceptable quality, in the most effective manner and appropriate setting, at the best price.
Certificate of need. Approval for new services and construction, expansion, or renovation of hospitals or related facilities; issued in many states.
Chief executive officer (CEO). The agent of the governing board who holds formal accountability for the entire organization
Clinical staff bylaws. A formal document establishing the contract between the HCO and its licensed independent practitioners, including the requirements for accepting individual practitioners, the procedures for review of performance and discipline, and the obligations of practitioners to participate in quality improvement.
Glossar y508
Clinical staff organization. The organization of an HCO’s LIPs that imple- ments evidence-based medicine, establishes expectations for quality of individual LIP performance, conducts peer review, and facilitates communication from LIPs to the governing body.
Communication and resolution. A program investigating all unexpected events involving patient or guest harm. Events are carefully studied to identify causes. If the HCO is liable, victims are offered appropriate compensation and court trial is avoided. The organization then identified and corrects process weaknesses.
Community benefit. Services provided gratis by HCOs to their surrounding communities. Current law requires hospitals to satisfy a community benefit stan- dard to qualify as tax-exempt charities under section 501(c)(3) of the Internal Revenue Service code. The standard addresses charitable care, educational services, and other benefits.
Community needs assessment. A process for identifying and quantifying op- portunities for improvement in a community.
Compliance programs. Programs designed to meet statutory and regula- tory requirements; may be based on legislation or voluntary efforts such as accreditation.
Continuous improvement. An ongoing organizational system that identifies improvement opportunities, rank orders them, and systematically analyzes and improves work processes to move team performance closer to benchmark.
Credentials. “Documented evidence of licensure, education, training, experi- ence, or other qualifications; used to assign specific care privileges to an LIP, consistent with the scope of their license and assigned clinical responsibilities” (chap. 1; The Joint Commission 2018).
Credentialing. The process of validating a professional care provider’s eligibility for clinical staff membership and for privileges to be granted based on academic preparation, licensing, training, certifications, and performance.
Critical access hospitals. HCOs with 25 beds or fewer, and without nearby competition, established to provide support for rural communities.
Cultural competence. A set of complementary behaviors, practices, and policies that enables a system, an agency, or individuals to work and effectively serve pluralistic, multiethnic, and linguistically diverse communities.
Data management system. A system for aggregating and disaggregating elec- tronic data designed to facilitate recovery and use.
Emergency Treatment and Labor Act. Federal act requiring all HCOs that provide emergency care to accept all patients, regardless of ability to pay, until the patients are stabilized and can be safely moved.
Empowerment. The practice of encouraging associates to speak out about op- portunities to increase mission achievement, giving them the ability to change the workplace. Associates are empowered when they believe they can change the workplace. Empowerment is sustained by managers’ constructive responses.
Glossar y 509
Epidemiologic planning model. A system to forecast specific health needs for the HCO’s service community, based on unbiased population forecasts, multi- variate analysis of disease trends, and judgements of planning teams.
Evidence-based management. Management that incorporates well-established scientific findings regarding critical thinking, human judgment, decision-mak- ing, and learning to aid managers in acquiring quality information and putting it to use. The set of practices that make up evidence-based management achieve better-quality results in organizations by improving the practitioner’s knowl- edge, judgment, and competencies.
Evidence-based medicine. “The conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients” (chap. 1; Sackett 1997). The central concept of judicious use is that what is justi- fiable or reasonable to believe depends on the trustworthiness of the evidence.
External auditor. A firm certified to review corporate financial statements and attest to their accuracy.
Facilities master plan. A document that begins with an estimate of the space needs of each service or activity proposed in the services plan.
Federally qualified health center. Services for underserved areas or popula- tions, that offer a sliding fee scale, provide comprehensive services, have an on- going quality program, and have a board of directors; funded with grants under Section 330 of the Public Health Service Act.
Fellows. Residents who pursue advanced study, usually in a subspecialty.
Frequency. In advertising, the average number of times each person is reached by a specific advertisement.
Funds flow budget. Estimates of cash income and outgo by period, developed by finance and used in cash and debt management.
General ledger. Technically, the record of all the firm’s transactions; the term often refers to the fixed and collective assets, such as depreciation, that must be allocated to operational units.
Governance bylaws. The set of procedural rules adopted by the board and followed in discussions and actions. The rules establish procedures that protect individual members from liability.
Gross revenue. An entry to the patient ledger of the charge for a specific healthcare service; no longer a meaningful measure.
Group purchasing. Cooperatives that use the collective buying power of sev- eral organizations to leverage prices downward.
Healthcare organization (HCO). A corporation providing the services of multiple patient care teams, such as a hospital or clinic, supporting care provid- ers with clinical, logistic, and strategic services.
Health Insurance Portability and Accountability Act. Federal law that ad- dresses issues of health insurance but also requires HCOs and their workers to protect patient information and confidentiality diligently.
Glossar y510
Health system. A set of HCOs in several geographic sites, under central strate- gic leadership.
Homeostasis. A state of equilibrium with one’s environment.
Incidence. “Incidence is the number of newly diagnosed cases of a disease. An incidence rate is the number of new cases of a disease divided by the number of persons at risk for the disease. If, over the course of one year, five women are diagnosed with breast cancer out of a total female study population of 200 who do not have breast cancer at the beginning of the study period, then we would say the incidence of breast cancer in this population was 0.025 (or 2,500 per 100,000 women-years of study)” (chap. 1; New York State Department of Health 1999).
Internal customers. Associates and teams who rely on other associates and teams in the HCO.
Inurement. Distribution of nonprofit assets to an individual or corporation. Although individuals and corporations can be compensated for their services, compensation that exceeds fair market constitutes inurement. Inurement jeopar- dizes tax exemption (see IRS.gov).
Joint Commission (TJC). A voluntary consortium of professional provider organizations that evaluates and accredits a wide range of HCOs.
Leaders. Associates who accept responsibility for achieving and maintaining ex- cellence by supporting team efforts and team coordination. Many leaders were historically called “managers.”
Leadership hierarchy. Reporting and communication system that links each associate and each operating unit to the governing board, usually by grouping similar centers together under coordinating leadership.
Lean and Six Sigma. Formal methodologies for analyzing work, designing pro- cess improvements, and ensuring that new methods are appropriately tested.
Legacy system. Outdated computer software that lacks the features found in more current versions.
Licensed independent practitioner (LIP). “Any practitioner permitted by law and by the [HCO] to provide care and services, without direction or supervi- sion” (chap. 1; The Joint Commission 2015).
Long-range financial plan (LRFP). An ongoing projection of financial posi- tion showing earnings, debt, and capitalization for at least the next seven years.
Management letter. Comments of external auditors to the governing board that accompany the audited financial report.
Managerial accounting. A process of restructuring transaction data to support monitoring, planning, setting expectations, and improving performance of ac- countability centers.
Marketing. The deliberate effort to establish fruitful relationships with ex- change partners and stakeholders. Marketing is not solely focused on patients, but includes associates, buyers, and others in the community.
Glossar y 511
Meaningful use. Measurement thresholds that range from recording patient information as structured data in the EHR to integrating the information across care providers and demonstrating value in exchange for incentive payments from the Centers for Medicare and Medicaid (CMS).
Medicare Access and CHIP Reauthorization Act (MACRA). A CMS incentive program that rewards clinicians’ use of certified health information technology.
Mission. The central purpose of an organization; its reason for existence.
National Incident Management System (NIMS). A systematic, proactive ap- proach to guide departments and agencies at all levels of government, nongov- ernmental organizations, and the private sector to work seamlessly to prevent, protect against, respond to, recover from, and mitigate the effects of incidents, regardless of cause, size, location, or complexity, in order to reduce the loss of life and property and harm to the environment.
Net revenue. Actual revenue received, as opposed to that initially posted; equal to gross revenue minus adjustments for bad debts, charity, and discounts to third parties (“contractual allowance”).
New programs and capital budget. Expected capital expenditures and new programs accepted by the governing board, with their implications for the oper- ating and cash budgets by period and accountability center
Nonoperating revenue. Income generated from non-patient-care activities, including investments in securities and earnings from unrelated businesses.
Nurse anesthetist. A registered nurse who has advanced education and certifi- cation to administer anesthesia without direct physician supervision.
Nurse midwife. A registered nurse who has advanced education and certifica- tion to practice uncomplicated obstetrical care, including normal spontaneous vaginal delivery, without direct physician supervision.
Nurse practitioner (NP). A registered nurse who has advanced education and certification to carry out expanded healthcare evaluation and decision-making regarding patient care. Boundaries of her independent practice are set by state laws. Nurse practitioners are licensed and certified in primary care or acute and specialty care.
Nursing diagnosis. A standardized statement about the health of a client for the purpose of providing nursing care; identified from a master list of nursing diagnosis terminology.
Nursing process. A system of assessing patients, diagnosing individual nursing care needs, planning care, implementing plans, and evaluating care.
Operating budget. A forecast of expected income and expenses developed by finance and used to assess corporate or major service line performance.
Operational scorecard (also known as balanced scorecard). A monthly quantitative report of activity and goals for a single team or work unit. Measures are specific to each team’s needs. There is at least one reliable measure for each input dimension (e.g., demand, associates, cost) and each output dimension (e.g., quality, customer satisfaction, productivity). Each measure has a goal.
Glossar y512
Opportunities for improvement (OFIs) (usually pronounced “oh-fees”). Any situation where current performance is inferior to benchmark. Excellent HCOs seek and resolve OFIs, creating an environment where improvement is a central part of the culture.
Patient-centered care. Care that is respectful and responsive to individual pa- tient preferences, needs, and values.
Patient-centered medical home. “Mechanisms for organizing primary care to provide high-quality care across the full range of individuals’ health care needs” (chap. 1; Jackson et al. 2013).
Patient ledger. Account of the charges rendered to an individual patient.
Patient management guidelines. Formally established expectations that define the normal steps or processes in the care of a clinically related group of patients, including “recommendations intended to optimize patient care that are in- formed by a systematic review of evidence and an assessment of the benefits and harms of alternative care options” (chap. 5; Graham et al. 2011).
Performance improvement council (PIC). A selected group of leaders, always including senior leadership and representatives of all exhibit 1.2 teams, charged with reviewing and ranking OFIs, pursuing the most promising by forming and supervising PITs, providing analytic support, and identifying achievable im- provement goals.
Population health. The health of a defined group of individuals, such as a state or civil division, or insured group, measured by the incidence and prevalence of disease or infirmity.
Position control. A system of payroll control that identifies specific positions created and filled.
Prevalence. Prevalence is “the total number of cases of disease existing in a population. A prevalence rate is the total number of cases of a disease existing in a population divided by the total population. So, if a measurement of cancer is taken in a population of 40,000 people and the result is that 1,200 were re- cently diagnosed with cancer and 3,500 are living with cancer, then the preva- lence of cancer” is
(1,200 + 3,500) ÷ 40,000 = 0.118 (or 11,750 per 100,000 persons) (chap. 1; New York State Department of Health 1999)
Prevention. A direct intervention to avoid or reduce disease or disability.
Preventive maintenance. Care and servicing by personnel for the purpose of maintaining equipment and facilities in satisfactory operating condition by pro- viding for systematic inspection, detection, and correction of incipient failures either before they occur or before they develop into major defects.
Primary prevention. Activities that take place before the disease occurs to eliminate or reduce its occurrence.
Privileges. The contract between the HCO and each LIP, authorizing the LIP to provide specific kinds of care to patients.
Process analysis and improvement. A rigorous system of opportunity identifi- cation, analysis, process improvement, and implementation.
Glossar y 513
Pro forma. A forecast of financial statements establishing the future financial position of the organization for a given set of operating conditions or decisions.
Programmatic proposals. Proposals for new or replacement capital equipment or major revisions of service.
Rapid response team. Care providers with advanced training in critical care management and emergency treatment protocols; deployed when a patient’s condition suddenly worsens.
Reach. In advertising, an estimate of the number of people who will see or hear a specific advertisement.
Reserved powers. Decisions in HCO systems that require approval of central governance.
Residents. Licensed physicians who pursue postgraduate education in a medical specialty.
Reward. Any leadership action that is favorably received by recipients and that is offered for the achievement of or attempt at a desired result. Rewards include comment, encouragement, and recognition. They can also include payment or gifts.
Rounding. Face-to-face contact and a deliberate effort to communicate at the work site. Clinical rounding is an important part of ongoing care of patients; it occurs at the patient’s bedside. Administrative rounding occurs when leaders meet associates at the associates’ work site.
Safety net hospitals. Hospitals with a disproportionate share of low income, uninsured patients (as defined by Medicare and Medicaid).
Secondary prevention. Activities that reduce the consequences of existing disease, often by early detection and treatment.
Segmentation. Division of a population into subgroups based on needs, de- sires, and responsiveness to promotional message.
Sensitivity analysis. Analysis of the impact of alternative forecasts, usually developing most favorable, expected, and least favorable scenarios to show the robustness of a proposal and to indicate the degree of risk involved.
Service excellence. Consistently meeting and managing patient expectations through several means: using evidence as the guiding principle, strengthen- ing empowerment, and focusing leadership on supporting and improving team achievement. Alternately stated, doing the right thing, at the right time, for the right person, with the best possible outcome.
Service line. Patient care teams organized and coordinated around a set of simi- lar diseases or patient needs.
Service recovery. A program authorizing frontline associates to make small payments to patients or guests who have been inconvenienced. An unexpected event report must record the event, the individuals involved, and the payment.
Shared governance. An organization model that ensures nursing leadership and staff nurse participation in practice decisions and other activities that influence their work environment.
Glossar y514
Specification. A statistical analysis that identifies values for a measure by defined subsets of a population, to allow accurate comparisons for each specified group.
Stakeholder. Individuals or groups who have a direct interest in the organiza- tion’s success.
Statistical process control. A method of identifying significant changes in mea- sures subject to random variation.
Strategic scorecard. Measures of overall enterprise performance grouped in major dimensions—operations (quality and cost), customers, associates and suppliers, and finance. The strategic scorecard provides quantitative mission achievement for the governing board, senior leadership, major subsidiaries, and service lines.
Strategy. The selection of the profile of stakeholder needs that the organization will meet and related decisions about mission, corporate structure, location, and partners.
Sustainability. The quality of not being harmful to the environment or deplet- ing natural resources, thereby supporting long-term ecological balance.
Telemedicine. The use of medical information exchanged from one site to an- other via electronic communications to improve a patient’s clinical health status.
Tertiary prevention. Activities that reduce or avoid complications or sequelae (aftereffects) in existing disease or disability.
Transaction costs. The costs of maintaining a relationship, including the costs of communication, negotiation, and loss of flexibility.
Transfer price. Imputed price for an item of goods or service transferred between two units of the same organization, such as housekeeping services pro- vided to nursing units. The transfer price is based on cost of individual units.
Transformational culture. An environment of relationships between associ- ates and between associates and leadership that emphasizes every associate’s right to question or criticize a work-related process or decision and that requires every leader to respond constructively to concerns or questions raised by any associate.
Triage. A method of sorting patients according to the urgency of their need for care.
Trustees. Members of the governing board of not-for-profit HCOs who volun- teer their time to the organization (typically, without remuneration). The title reflects their acceptance of the obligation to manage the HCO assets in trust for the community. They may also be called directors
Unexpected event report. Written documentation of any unusual event that caused, or might have caused, failure, injury, loss, or property damage. The report comprises a brief description naming associates, patients, and guests involved, identifying what happened and whether injury actually occurred. It is signed and dated.
Value-based insurance design. Linking financial incentives to the quality and efficiency of care provided.
515
INDEX
Note: Italicized page locators refer to figures or tables in exhibits.
AARP, 16 ABC. See Activity-based costing
(ABC) ABMS. See American Board of Medi-
cal Specialties (ABMS) Absenteeism, 53, 163; associate, trans-
formational culture and, 55; at Bal- drige Award-recipient HCOs, 28; reducing, 348; scheduling system and, 222
ACA. See Patient Protection and Affordable Care Act
Academic medical centers: clinical education at, 191; graduate medi- cal education at, 193
Academy of Medicine: goals of, 6, 24 Accountability, 100; definition of, 41;
of leadership hierarchies, 81–82; nurse teams and, 231; tests of, 82
Accountable care organizations (ACOs), 20, 219–20, 299, 412
Accountants, 54 Accounting: certification in, 428;
managerial, 408–10, 434–35; mul- ticorporate, 421–23; operational measures of, 431; revenue, 406; standardization of terms in, 317; transaction, 402, 404–5
Accounting system: using for evi- dence-based culture, 401
Accreditation: of clinical laboratories, 253; of healthcare organizations, 14; of hospices, 281; of hospitals, 19; by The Joint Commission, 14
Accreditation Council for Graduate Medical Education (ACGME), 227; graduate medical education coordinated through, 193; on mas- tery of six competencies in patient care, 175–76
Accreditation organizations/agencies: board selection of, 112; model of stakeholder–HCO interaction and, 11; principle concerns of, 13–14
Accreditors: board and acceptance of reports from, 111, 112–13
Accuracy of information: ensuring, 71, 73
ACGME. See Accreditation Council for Graduate Medical Education (ACGME)
ACHE. See American College of Healthcare Executives (ACHE)
ACOs. See Accountable care organiza- tions (ACOs)
Acquisitions, 108, 113, 487 Activity-based costing (ABC): objec-
tives of, 410–11 Acute care: relationship to population
health, 287 Acute care hospitals: accreditation of,
112; environmental support in, 376; value-based purchasing and, 163
Acute care services: managing impact of population health on, 300
Ad hoc committees, 85, 122, 130 Adjustment: definition of, 319
Index516
Administrators: service lines headed by, in excellent HCOs, 230
Advance care planning: nurses and, 219
Advance directives, 211, 297 Advanced practice nurses (APRNs),
197; core competencies for, 227; education and certification/exami- nation required for, 226; licensure of, 227; types of specialization and, 225–26
Advertising, frequency and reach in, 484
Advocacy: in community health, 283, 284–88, 291–92; for nurses, 93–94
Affirmative action, 104, 118, 342 Affordable Care Act. See Patient Pro-
tection and Affordable Care Act (ACA)
Agency: definition of, 41 Agency for Healthcare Research and
Quality (AHRQ), 153; ambula- tory CAHPS, 477; emergency pre- paredness website, 387–88
Agendas: focused, successful boards and, 129–30
Aging population: care shortages and, 203
AHA. See American Hospital Associa- tion (AHA)
AHRQ. See Agency for Healthcare Research and Quality (AHRQ)
Airway management: nursing process example for, 214
Allied health professionals: in inter- professional care teams, 7
Alternative payment models (APMs), 195
Ambulatory care, 17; nursing plan of care and, 215
Ambulatory care project: implications of alternative funding sources for, 419
Ambulatory care settings: health edu- cation in, 219
Ambulatory patient classifications (APCs), 313
American Association of Blood Banks, 253
American Board of Internal Medicine, 158
American Board of Medical Specialties (ABMS): Standards for Mainte- nance of Certification (MOC), 181
American College of Clinical Engi- neering, 390
American College of Healthcare Exec- utives (ACHE): Code of Ethics, 24
American Hospital Association (AHA), 16, 317, 360; certificates in facilities services, 389; materials management benchmarks, 394
American National Standards Insti- tute, 318
American Nurses Association, 221 American Nurses Credentialing Cen-
ter (ANCC): Magnet Recognition Program, 216, 220, 228
American Organization of Nurse Executives, 228
American Society for Healthcare Engi- neering, 389
American Society for Healthcare Human Resources Administration, 360
American Society for Healthcare Risk Management, 158
Americans with Disabilities Act, 350 Analyzer archetype, 492, 493 ANCC. See American Nurses Creden-
tialing Center (ANCC) Annual improvement goals: negotiat-
ing, 39 Annual planning calendar, 78–79 Antitrust laws: collusion of restraint
of trade and, 190; multicorporate accounting and, 421; physician board representation and, 121
Antivirus software, 323 APCs. See Ambulatory patient classifi-
cations (APCs)
Index 517
APMs. See Alternative payment mod- els (APMs)
APRNs. See Advanced practice nurses (APRNs)
Assessment: nursing, 211, 214 Assets of HCOs: protecting, 35, 38,
50–53 Assignment: nursing organization and,
222–23 Associate engagement: patient satisfac-
tion and, 163 Associate engagement surveys: for
tracking transformational culture, 55
Associates, 381; attracting and moti- vating, 484–85; credentialing of, 261; definition of, 12; empowered, 338; knowledge management training for, 313; loyalty of, mea- suring and improving, 337; in mar- keting, 495; minimizing error and, 316–17; for multiteam HCOs, 81; nurse training and, 234; percep- tions of fairness, 363–64; personal services for, 348–49; principle concerns of, 12; rounding by, 235; safety of, 343–44. See also Workforce
Associate satisfaction surveys, 478 Association for Healthcare Resources
& Materials Management, 390 Association for Professionals in Infec-
tion Control and Epidemiology, 158
Association of American Medical Col- leges, 203
Audit committee, 112 Auditing/audits, 14, 94, 95; exter-
nal, 401, 426, 433; financial, 405; internal, 50, 52, 73, 401, 423, 424, 425, 433; of knowledge man- agement activities, 321, 331; of marketing, 499; reliability of infor- mation and, 73; types of, 50
Auditors: board and acceptance of reports from, 111, 112–13;
external, 112; internal, 112; select- ing and instructing, 426
Authority: in transactional manage- ment, 54
Autonomy: of nurses, 211, 220, 227; of patients, 153
Baccalaureate-prepared nurses, 225 Backgrounding: well-managed boards
and, 129 Bad debt: definition of, 406 Balanced Budget Act, 16 Balanced scorecards, 68, 114. See also
Strategic scorecards Balance sheet, 404 Baldrige Performance Excellence
Model, 7, 21 Bar charts, 452 Benchmarking/benchmarks, 3;
challenges with, 55–56; clinical staff–HCO relations and, 200; for clinical support services, 267; clinical support services goal set- ting and, 253–54; definition of, 5; for environment of care, 369, 389, 394; for evaluating current performance and opportunity to improve, 110–11; forecasting future need for clinical staff and, 188; hierarchical ranking of, 446; identifying, 23; for internal con- sulting, 443, 446, 464; national standardization and, 73; strate- gic teams and, 25; strategies for addressing burnout and, 200
Benefits administration/management, 340, 345, 350–57
Bereavement: nursing support for, 219 Best practices: accountability and,
82; at Baldrige Award–recipient HCOs, 28; definition of, 7; iden- tifying, 23; for internal consulting, 443, 446; for knowledge manage- ment, 74
Bias: definition of, 501; ubiquity of, 502
Index518
Big data, 316, 479 Biometric identification, 323 Blame-free culture, 145, 157 Blood banking and transfusion ser-
vices, 253 Blood-borne pathogens, 383 Bond-rating agencies, 113 Bon Secours St. Francis Medical Cen-
ter (Virginia): facilities design ele- ments in, 373
Boston Consulting Group, 491 Branding, 474, 480–81, 498 Breast cancer screening: US Preven-
tive Services Task Force recom- mendations, 188
Broadcasting: transformational culture and, 43
Bronson Methodist Hospital (Michi- gan): facilities design elements in, 373
Budgets/budgeting: board monitor- ing of performance against, 111– 13; capital budgets, 111, 257, 452; goal setting in, 407, 408; operating budgets, 414, 415; relationship to strategic goals, 415; supply costs and, 384
Buffalo County Community Partners, 2020 Vision, 285, 286, 294, 299
Bundled payments, 404, 416 Bundled revenue, 404 Bureau of Labor Statistics, 343 Burnout: definition of, 200; nurses,
workload peaks, and, 222; preva- lence of, 27; preventing in front- line providers, 93; strategies for addressing, 200–202
Business model, 473 Business plans, 491; strategic, 108 Buyer-oriented networks, 16 Bylaws: credentials committee review
and, 184; governance, 122; medical staff executive committee and, 198; privilege review process and, 182; privileging agreement, 179–80; reserved powers and, 124
California: minimum nurse staffing levels in, 221
CAP. See College of American Pathol- ogists (CAP)
Capital budgets, 111, 257, 452 Capital expenditures: programmatic,
110 Capital financing, 418–20 Capital investments, 439; clinical
support services and, 253; imple- mentation of, 461; large-scale, 108; in population health, 289–90; proposals, checklist for, 455–56; review of, 456, 458–61, 459
Capitation, 417 Cardiovascular care guidelines, 156 Caregivers: at Baldrige Award–recipi-
ent HCOs, 28 Caregiving teams: supporting, 291 Care providers: selection and training
of, 151. See also Nurses; Physicians Case management, 154–55, 216–17,
228 Cash: bonuses, 49; diversion, 52; han-
dling processes, 50; management of, 418; reserves, 419
Catheter-associated urinary tract infec- tions: checklists and, 151
Catholic Health Initiatives, 485; board member orientation subjects, 127
“Caught in the act” reports, 478 CDC. See Centers for Disease Control
and Prevention (CDC) Census management: reducing varia-
tion in nurse staffing requirement and, 222–23
Center for Health Care Strategies, 280
Centers for Disease Control and Pre- vention (CDC), 295, 383, 387; Community Guide, 281, 282; com- munity health documents, 292; Developing an Evidence-Based Guide to Community Preventive Services program, 294; Task Force on Community Preventive Ser- vices, 278, 282
Index 519
Centers for Medicare & Medicaid Ser- vices (CMS), 295; Clinical Labora- tory Improvement Amendments regulated by, 253; hospital accredi- tation, 19; Hospital Compare data, 446; Hospital Consumer Assess- ment of Healthcare Providers and Systems (HCAHPS), 477; hospital quality rankings, 162; Hospital Value-Based Purchasing Program, 163, 164; ICD coding require- ments, 317; mandated HCO per- formance reviews and, 14; Program for All-Inclusive Care of the Elderly (PACE), 282; quality assessment measures, 281; quality goals com- pensation for hospitals and, 106
CEO-board relationship: sustaining, elements in, 104–5
Certificate of need (CON), 13, 451 Certification: of advanced practice
registered nurses, 226, 226; of chief financial officers, 427; of chief information officers, 326; of clini- cal professionals, 159; in facilities services, 389–90; graduate medical education and, 193; of hospitals, 19; of infection preventionists, 158; in knowledge management, 326; for managerial accounting, 428; of nurses, 226; of physicians, 158; of specialists, 151. See also Specialty certification
Certified nurse midwife (CNM), 226, 226
Certified nursing assistants, 225 Certified registered nurse anesthetists
(CRNAs), 226, 226 CGE. See Continuing governance
education Change: continuous improvement
and, 328 Charge nurse (or shift leader), 230 Charitable organization: original con-
cept of, 101 Charity care, 14, 416 Charleston Area Medical Center (West
Virginia): senior leader communi- cation model, 43, 44–45; transfor- mational culture additions at, 92
Chassin, Mark R., 140 Checklists: capital investment propos-
als, 455–56; definition of, 151. See also Functional protocols
Chief executive officers (CEOs): for board, selection and support of, 103–5; board membership and, 120–21; board’s evaluation of, 116; at excellent HCOs, 46; focused board agendas and, 129
Chief financial officers (CFOs): responsibilities and credentials of, 427–28
Chief information officers (CIOs), 330; in knowledge management, 326, 327
Chief medical officers (CMOs), 198 Chief nursing officers (CNOs), 230 Chief of staff, 198 Childcare, 348, 349 Chronic care, 20; facilities or nursing
homes, 21; nursing plan of care and, 215
Chronic disease/illness: management of, 156; population health pro- grams and, 297; primary care team and, 144
CIOs. See Chief information officers (CIOs)
Civil Rights Act of 1964: Title VII of, 350
Cleveland Clinic, 194 Client control: sustaining, internal
consulting and, 466 Clinical care: ensuring, board and
quality of, 105–7 Clinical care teams: meeting needs of,
27–28 Clinical data: expanding use of, 331–32 Clinical education, providing, 176,
191–93; continuing medical edu- cation, 191–92; education of HCO associates, 192; graduate medical education, 192–93
Index520
Clinical engineering: role of, 379 Clinical engineers: educational back-
ground of, 390 Clinical errors, 152 Clinical excellence: critical actions in,
139–40; foundations of, 139–67; managerial leadership and, 164–67; measures of, 160–64, 161; people and, 157–60; requirements of, 140
Clinical laboratories: accreditation for, 253
Clinical Laboratory Improvement Amendments, 253
Clinical nurse leaders (CNLs): educa- tion and certification/examination required for, 226
Clinical nurse specialists: education and certification/examination required for, 226
Clinical organization, functions of, 141, 142, 143–47, 150–57; ensure accurate diagnosis, 141, 142, 143– 45; improve clinical performance, 156–57; improve community health, 142, 155–56; individualize patient care planning and treat- ment, 142, 153–55; provide excel- lent care, 142, 145–47, 150–53
Clinical performance, improving, 142, 156–57
Clinical services: organization of, 158, 159; scorecards for, 160–63
Clinical specialists: nursing organiza- tion and, 223
Clinical staff: compensation for, 176, 193–95; complex financial relation- ship with, 193; credentialing of, 173, 174, 183; definition and role of, 174; ensuring adequate supply of, 203; expectations of, as clinical team leaders, 175–77; forecasting future need for, 187–90; impaired, credentials committee and, 186; leadership, 199; organization of, 198, 198–99; planning and recruit- ing, 173; recruitment of, 190–91; representation of, on decision
process, 196; representing on gov- erning board, 202–3; satisfaction issues and, 203; scaling size of, to community served, 186–87; time issues for, 197
Clinical staff bylaws: approving, board and, 106; definition of, 106
Clinical staff organization, 173–203; critical actions in, 173; definition of, 107; managerial leadership in, 200–203; operational measures of, 199; people within, 197–99; performance measures for, 199; purpose of, 174–75
Clinical staff organization, functions of, 175–97, 176; achieve excel- lent care, 175–79, 176; deter- mine, and recruit for, clinical staff need, 175, 176, 186–91; improve continuously, 175, 176, 195–97; negotiate compensation arrange- ments, 175, 176, 193–95; pro- vide clinical education, 175, 176, 191–93; review credentials and recommend privileges, 175, 176, 179–86
Clinical staff plan, as part of human resources plan, 494
Clinical staff recruitment plan, inte- grating with other HCO plans, 190
Clinical staff supply planning: advan- tages of, 190
Clinical support services (CSSs), 223, 233, 241–69; accreditation stan- dards for, 267; activities correctly assigned to professional/non- professional associates, 268–69; continuous improvement in, 244, 253–55, 256, 257–60, 267; coor- dination needs of, 268; critical actions in, 241; functional proto- cols, 223; HCO–CSS relationships, 263; HCO manager’s duties and, 261–62; in a large HCO, 243; managerial leadership in, 261, 264–69; meeting support needs of,
Index 521
255; optimal contractual form for HCO–CSS relationship, 267–68; organization of, 262–63, 263; out- sourcing and contracting for, 241; patient transportation and, 218; performance measures for, 263–64, 264; planning and sizing, 250–51; programmatic proposals from, 257; purpose of, 242; sequencing and scheduling, nurses and, 217; size of, 262, 266; team members in, 260–61; trends and implications for, 269
Clinical support services, functions of, 243–60, 244; improve continu- ously, 244, 253–55, 256, 257–60; maintain consultative relationships, 244, 247–49; maintain patient rela- tionships, 244, 245–47; plan and manage operations, 244, 249–53; provide excellent care, 243–45, 244
Clinical support teams, 8, 10; evi- dence-based processes and, 41; excellence and, 9
Clinical units: organizing, 158 CMOs. See Chief medical officers
(CMOs) CMS. See Centers for Medicare &
Medicaid Services (CMS) CNLs. See Clinical nurse leaders
(CNLs) CNM. See Certified nurse midwife
(CNM) CNOs. See Chief nursing officers
(CNOs) Coaching, 39; clinical staff leadership
and, 199; in nursing, 234; trans- formational culture and, 54; on transformational leadership, 166
Coalition building, 290 Code of Ethics: American College of
Healthcare Executives, 24 Collaboration: in community health,
284–86; joint ventures and, 126; rewarding, 194; in transforma- tional culture, 54
Collaborative development: reinforc- ing transformational values with, 48, 48
Collections: revenue and, 421 Collective bargaining, 12, 340, 358 College of American Pathologists
(CAP), 253, 265 Collegial relationships: creating, 201 Command-and-control culture, 36 Command-and-control perspective:
Mercy program approach vs., 42 Comment cards: listening opportuni-
ties and, 45 Committees: governing board, 121–
23, 123, 130 Commonwealth Fund, 298 Communicating culture: building,
195 Communication: messaging, 43; with
patients, 483–84; repetition and reinforcement in, 43, 45; training and, 45–46; transformational lead- ership and, 38
Communication and resolution: defi- nition of, 51
Communications and software sup- port: maintaining, 309, 320–21
Communications network: for multiteam HCOs, 81; safeguard- ing, 73
Community, religious healthcare orga- nizations and, 46
Community-based epidemiologic planning: internal consulting and, 441, 445
Community benefit: as defined by IRS, 101, 107; definition of, 14
Community boards: reasons for, 117 Community groups: model of stake-
holder–HCO interaction and, 11; principle concerns of, 14–15
Community health: improving, 142, 155–56; promotion of, 283–84. See also Population health
Community health centers, 20 Community health nurses: health
management and, 219
Index522
Community health sites: high-per- forming, elements in, 293
Community hospitals, 18 Community needs assessment: defini-
tion of, 277 Community nursing, 230; perfor-
mance measures for, 232 Community surveys, 478 Compassion: religious healthcare
organizations and, 46 Compensation: for board CEOs, 104;
classification and, 342; for clinical staff, 173; design, guidelines for, 194; fair, criteria for, 352; govern- ing boards, 120; growing com- plexity of, 351; incentive-based, 105, 353; for licensed independent practitioners, 195; management of, 340, 350–57; negotiating arrange- ments for, 176, 193–95; underly- ing philosophy of, 187
Competencies, 491; ACGME, in patient care, 175–76; for advanced practice nurses, 227
Competition: joint venture boards and, 126
Compliance: board and promotion of, 111–13; board effectiveness and, 115; in environment of care, 371, 381–84; maintaining, clinical sup- port services and, 253; regulatory, 350
Compliance management: internal consulting and, 450
Compliance officers, 425, 450 Compliance programs: definition of,
113; purpose of, 112–13 Comprehensiveness: privileging and,
182 Comprehensive service: providing,
241 Computerized order entry, 150 Computer scheduling systems, 218 CON. See Certificate-of-need (CON) Condom use, 156 Confidentiality, of healthcare informa-
tion, 323
Conflict resolution, 502; clinical staff representation on governing boards and, 202; process for, 78; process improvement and, 87–88. See also Negotiation
Conflicts of interest: board effective- ness and, 115, 116, 119; board membership and, 131; CEO board membership and, 120–21; com- pensation design and, 194; physi- cian board membership and, 121
“Conglomerate” strategy, 494 Consensus building: successful boards
and, 129 Consent agenda, 129–30 Consolidation: board membership
and, 131 Construction and renovation, 374–75 Constructive answers: judging, 36 Constructive responses: empowering
associates and, 37 Consultants/consulting: clinical units
and, 158; external, 442, 443, 454, 499; internal, 439–69; in market- ing, 495
Consultative relationships: maintain- ing, clinical support services and, 244, 247–49
Consumer-oriented networks, 16 Consumer protection laws, 13 Consumer rights movement, 17 Continuing education: for care team
professionals, 151; for chief infor- mation officers, 326; for clinical professionals, 159; for clinical staff, 191–92; for clinical support ser- vices staff, 260; specialty certifica- tion and, 181
Continuing governance education (CGE), 115
Continuous improvement, 141, 145, 165, 363; avoiding failures in, strategies for, 93; building, 63–95; clinical, maintaining, 166–67; in clinical care, 139; clinical education and, 191; of clinical support ser- vices, 244, 253–55, 256, 257–60,
Index 523
267; core concepts in, 64; criti- cal actions for, 63; definition of, 21; effective boards and, 113–14, 128; empowerment of clinical staff and, 195; engaged workforce and, 158; enhancing, 93–95; for envi- ronment-of-care services, 388–89; evidence-based, 95; excellence in HCOs and, 21, 23; in financial management, 427, 433; as human resources responsibility, 340, 359, 359; internal consulting and, 461; in knowledge management, 307, 309, 324–26; leadership and, 89–90; leadership consistency and, 167; making the case for, 92–93; managerial leadership and, 92–95; in marketing, 474, 488; measures of, 90–91, 91; in nursing, 212, 223–25, 235; in population health, 276, 292; privileging contract and, 180; promoting, 39; purpose of, 64, 465; satisfied nursing staff and, 233; strategic teams and, 24; strat- egy and, 495; supporting, 28–29; training and, 345; in transparent culture, 38, 53
Continuous improvement, functions of, 64, 65, 66–71, 73–89; design corporate structure, 65, 79–83; improve continuously, 65, 88–89, 89; monitor stakeholder needs and identify strategic goals, 65, 66–68; plan coordinated goals, logistics, and support, 65, 78–79; provide evidence-based information, 65, 68–71, 72, 73–74; provide long- and short-term forecasts, 65, 74–78; support HCO-wide process analysis, 65, 83–88
Contracts: for board CEOs, 104; collective bargaining, 358; for environment-of-care services, 369, 374, 378, 390–91, 396; govern- ing board’s approval of, 113, 374; healthcare, pricing structures for, 417; for healthcare facilities
services, 378; for security services, 382
Contractual relationships: building, clinical support services and, 252; in community health, 283
Control charts, 449, 449, 453 Controllership: financial accounting
component, 433–34; financial planning component, 435; goal- setting and budgeting component, 435; managerial accounting com- ponent, 434–35
Conversions, 372; board membership and, 131; protecting corporate assets against, 423
Coordination: of clinical support ser- vices, 268
Corporate assets: protecting, against loss, distortion, or conversion, 423–26
Corporate governance committee, 116
Corporate (or managerial) perspective of governance, 100–101
Corporate strategies: setting, 107–8 Corporate structure: designing, for
continuous improvement, 65, 79–83
Correction program: beginning, 52; steps in, 53
Cosgrove, Toby, 194 Cost accounting: implications of, on
environmental services, 394 Cost–benefit evaluation, of population
health programs, 288–90 Cost-data archive, 409 Cost-effectiveness: in population
health, 281 Cost ledgers, 404 Cost-related benefits, of improvement,
258–59 Cost(s): CSS performance measures
and, 264; nursing performance measures and, 232; transaction, 486
Counseling, 94 Court settlements, 52
Index524
Credentials and credentialing: of clini- cal staff, 173, 174, 183; of clinical support services staff, 260–61; definition of, 9, 151; high perfor- mance and, 145; reviewing, for clinical staff, 176, 179
Credentials committees: bylaws and, 184; clinical staff impairment and, 186; ideal members of, 183–84; privilege review process and, 183–84; standards for granting and renewing privileges, 185, 186
Crime control, 155 Critical access hospitals: definition of,
16 Critical care: patient requirements in,
221 Critical care patient management:
rapid response team and, 216 CRNAs. See Certified registered nurse
anesthetists CSSs. See Clinical support services
(CSSs) Cultural competency, 88, 348 Culture: blame-free, 145, 157; of
clinical excellence, supporting, 158; communicating, building, 195; definition of, 22; of high reli- ability, creating, 140–41; strength- ening, aligning values and, 201; of teamwork and respect, sustaining, 165–66. See also Transactional cul- ture; Transformational culture
Customer-listening activities, 66 Customers: internal, 40; potential,
482 Customer stakeholders: demands of,
100 Cybersecurity, 322
Dartmouth Atlas, 295 Data: appropriate use and security of,
ensuring, 309, 321–23; big, 316, 479; internal, 312; loss of, pro- tecting against, 322–23; nursing performance measures, 231–32; promoting effective use of, 307;
reliability and validity of, 309, 316–20
Data capture: consistent, 318 Data management systems: definition
of, 311 Data sources: for epidemiologic plan-
ning model, 75–76 Data warehouses, 308, 312, 321, 328,
423, 446; internal data feeding, examples of, 310; using, 311–12
DaVita, 20 Days in accounts receivable, 406 Death: nursing care plan and accep-
tance of, 216 Debt capitalization, 418–21 Debt financing, 419–20 Decision making: clinical staff rep-
resentation and, 196; fact testing and, 41; nurses and, 221
Decorating, in healthcare facilities, 378
Deemed status, 14 Deep venous thrombosis: checklists
and, 151 Defender archetype, 492, 493 Demand: CSS performance measures
and, 264; nursing performance measures and, 232; scorecards for clinical services and, 160
Demand forecasting: annual, 78; of community health needs, 277–80; for privileging decisions, 189
Deming, W. Edwards, 84 Dentists and dentistry: preventive care
and, 156; specialists in, 17, 174 Depreciation cost, 404 Depression: clinical staff and, 186 Design: performance improvement
and, 373–74 Designing HCO systems: building
continuous improvement and, 82–83
Diabetic care guidelines, 156 Diagnosis: accurate, 141, 142,
143–45, 421; definition of, 141; differential, 143, 144; failures in, costliness of, 145; function of, 8;
Index 525
nursing, 144, 154, 210, 214–15; patient management guidelines classified by, 146; simplified diag- nostic process, 143
Diagnosis-related groups (DRGs): financial management and, 404; knowledge management and, 313, 319
Diagnostic coding, 313, 317; upcod- ing, 433
Diagnostic services: common, 242 Diagnostic testing, 143 Dialogue: transformational culture
and, 67 Differential diagnosis, 143, 144 Direct care providers: common con-
cerns of, leadership responses to, 165–66
Directors, 101 Disadvantaged areas: clinical staff
shortages in, 197 Disadvantaged populations: preventive
health services for, 281 Disaster: definition of, 386 Disaster management, 369, 386–88 Disease: classification of, 141; inci-
dence of, 6, 9; prevalence of, 6, 7, 9
Disease prevention: in population health strategy, 155
Disease risk/prevalence forecasts, 75, 278–79
Distinctive competency, 472 Distributional equity, 100 Diversity: commitment to, 7; of gov-
erning board, 105; recruiting and supporting, 3; of workforce, 337, 344–45
Domestic violence, 156 DRGs. See Diagnosis-related groups
(DRGs) Drug administration: procedure
improvements in, 150 Drug Enforcement Administration,
253 Duality of interest: board membership
and, 131
Due diligence, 129 Due process: credentials committee
review and, 184; protection for clinical staff, bylaws and, 180
Durable power of attorney for health- care, 211
Economic monopolies: clinical profes- sionals and, 159
Economy-oriented business approach, 281
Education: for board members, 127– 28; for chief information officers, 326; for clinical professionals, 159; for clinical support services staff, 260; for HCO associates, 192; nursing, 225; programs in envi- ronment-of-care, 389–90; pro- vided by nurses, 209, 210, 211, 212, 219–20; transformational culture and, 54. See also Clinical education; Continuing education; Training
Effective care: clinical staff and, 175; clinical support services and, 243; conflict resolution and, 502; ele- ments and measures in, 6; func- tions fundamental to, 145; nursing and IOM goal of, 211; nursing role and examples of, 213; nurs- ing workforce essential to, 233; optimum stakeholder relationships and, 485; population health and, 281; using functional protocols in, 139
Efficient care: clinical staff and, 175; clinical support services and, 243; conflict resolution and, 502; ele- ments and measures in, 6; func- tions fundamental to, 145; nursing and IOM goal of, 211; nursing role and examples of, 213; nurs- ing workforce essential to, 233; optimum stakeholder relationships and, 485; population health and, 281; using functional protocols in, 139
Index526
Electronic health records (EHRs), 151, 165, 308, 328, 479; expand- ing use of, 331–32; IPOC and, 217; “meaningful use” and, 314– 16; performance measures in nurs- ing and, 231; prompt and useful access to, 314
Embezzlement: discouraging, 50 Emergency departments: patient
requirements in, 221 Emergency preparedness, 386, 386–88 Emergency Treatment and Labor Act
(EMTALA), 13 Emergency treatment protocols: rapid
response team and, 216 Employee assistance programs, 348,
349 Employee services, 348–49 Employment contract: for board
CEOs, 104 Empowerment, 57, 89; agency or
accountability and, 41; of associ- ates, 338; of clinical staff, 195, 196, 197; of clinical teams, 158; com- munication and, 43; definition of, 36; failure reduction and, 145; of HCO associates, transformational leadership and, 37, 38, 39; manage- rial leadership and, 56; of nurses, 220, 233, 234–35; servant leader- ship and, 41, 234; transformational culture and, 54; values and, 46
EMTALA. See Emergency Treatment and Labor Act (EMTALA)
End-of-life care, 20–21, 273, 297 Endowments, 423 End-user satisfaction, 384–86 Engaged workforce: building, 157–58 Engagements: in internal consulting,
463 Engineers, clinical, 379, 390 Environmental assessments/forecasts,
494; annual, board and, 105; effec- tive board and, 113; internal con- sulting and, 443, 444–45
Environmental management: internal consulting and, 450
Environmental Protection Agency (EPA), 377
Environment-of-care management, 369–97; critical actions in, 369; integration with other activities, 397; managerial leadership, 394– 97; organization, 391–92, 392; performance measures for, 392–94; personnel in, 389–91; purpose of, 370; safety and regulatory compli- ance, 381–84
Environment-of-care management, functions in, 370, 371, 372–89; comply with regulatory and safety requirements, 371, 381–84; design and plan facilities and allocate space, 370, 371, 372, 372–76; improve continuously, 371, 388– 89; maintain facilities and provide guest services, 371, 376–80, 377, 380; manage supply chain and end user satisfaction, 371, 384–88
EPA. See Environmental Protection Agency (EPA)
Epidemiologic planning models, 160, 258; basic estimating equations for, 77; for community health, 295; data sources for, 75–76; definition of, 75; demand forecasting func- tion of, 277; elements of, 76; fore- casting future need for clinical staff and, 187–88; importance of, 78; internal consulting and, 443, 445
Episodic care: nursing plan of care and, 215
Equal Employment Opportunity Commission, 342
Equipment maintenance, 378 Equitable care: clinical staff and, 175;
clinical support services and, 243; conflict resolution and, 502; ele- ments and measures in, 6; func- tions fundamental to, 145; nursing and IOM goal of, 211; nursing role and examples of, 213; nursing workforce essential to, 233; opti- mum stakeholder relationships and,
Index 527
485; population health and, 281; using functional protocols in, 139
Equity capitalization, 418–21 Equity in workforce: commitment to,
7 Errors. See Medical errors Estimates: reporting variability and
reliability of, 319–20 Ethical issues: of board membership,
130–32 Ethics committees, 242, 450 Ethics consult services, 242 “Evaluate, identify, analyze, and test”
cycle, 86, 90 Evaluation: key questions for, 90–91 Evidence: commitment to, excellence
in HCOs and, 23 Evidence-based conversations: pro-
moting, 94 Evidence-based information: for con-
tinuous improvement, providing, 65, 68–71, 72, 73–74
Evidence-based management, 23, 41, 54, 68, 164, 453, 471, 493; board and reinforcement for, 110–11; definition of, 23; empowered cul- ture of, supporting, 139; factual and quantitative nature of, 68; interrelationship with evidence- based medicine, 23; supporting, 41; transformational culture and, 54
Evidence-based medicine, 174, 231; clinical staff–HCO relations and, 200; definition of, 23; empow- ered culture of, supporting, 139; interrelationship with evidence- based management, 23; support- ing, 41; transformational culture and, 54
Evidence-based nursing, 231 Evidence-based patient care: clinical
support services and, 241 Evidence-based patient management
guidelines: supporting, 139 Excellence in care: achieving, clini-
cal staff and, 173, 175–79, 176;
achieving in HCOs, 21–25; commitment to evidence, 23; continuous improvement, 21, 23; leaders, 24; strategic teams and, 25; with team structure, 21; transformational culture, 21, 22–23; clinical support services and, 243–45, 244; commitment to, 503; defining, 5–7; deliver- ing, nursing and, 209; difficulty in achieving, 174; improve- ment in population health and, 141; investments in, defending, 92; nursing and delivering of, 211, 212, 214–17; nursing and goals of, 213; nursing team sup- port structure and, 231, 231; in patient care, 5, 6; in population health, 6; providing, 142, 145– 47, 150–53; patient management guidelines, 145–47; rarity of, 501; religious healthcare organi- zations and, 46; requirements for, 140
Excellent healthcare organizations: clinical staff satisfaction and, 203; criteria beyond specialization recognized by, 181–82; failure avoided by, strategies for, 93; func- tional protocols maintained by, 147; improvement in population health and, 141; improving con- tinuously in, 88–89; low turnover in, 233; managing and leading, 25–29; support systems for failure reduction in, 145; taxonomy of rewards used in, 49; values empha- sized in, 46
Executive search firms, 104 Executive sessions: purpose of, 114 Exit interviews: for tracking transfor-
mational culture, 55 Expense transactions, 402, 404 External auditors: definition of, 14, 112 External reviews and oversight, 50, 52 Extra effort: recognizing and reward-
ing, 39
Index528
Facilities: maintenance of, 376–78, 377; master plans for, 370, 494; planning requirements for, 370, 371, 372, 372–73, 395–96; requirements forecast for epide- miologic planning model, 76
Fact-finding: annual planning calendar and, 79; supporting, 87
Fact(s): commitment to, 502; testing, 41
Failures: epidemiologic analysis of, 383; functional protocols and prevention of, 147; strategies for avoiding, excellent HCOs and, 93
Families of patients: model of stake- holder–HCO interaction and, 11; principle concerns of, 11–12
Family and Medical Leave Act, 350, 354
FASB. See Financial Accounting Stan- dards Board (FASB)
Federal hospitals, 18–19 Federally qualified health centers: defi-
nition of, 20 Federal prison hospitals, 18 Fee-for-service pricing structure, 417 Fellows: definition of, 192 Field Guide (National Quality
Forum), 162 Finance department: real estate trans-
actions and, 374 Finance system: organization of,
428–30, 429 Financial accounting, 433–34 Financial Accounting Standards Board
(FASB), 317, 405, 424, 428, 434 Financial audits, 14 Financial budgets. See Budgets/
budgeting Financial contracts: licensed indepen-
dent practitioners and, 106 Financial incentives: patient satisfac-
tion scores and, 219 Financial management, 401–35; col-
legial culture of, maintaining, 433; critical actions in, 401; manage- rial leadership, 432; organization
in, 428–30, 429; performance measures for, 430–31; personnel, 427–28; purpose of, 402
Financial management, functions of, 402, 403, 404–27; assist opera- tions in setting and achieving performance improvements, 403, 407–11; improve continuously, 403, 427; manage cash, financing, and debt, 403, 418–23; manage future financial status, 403, 411– 18; protect corporate assets against loss, distortion, or conversion, 403, 423–26; record/report transac- tions that change the value of the firm, 402, 403, 404–7
Financial planning, 345, 435; tests and adjustments in, 413. See also Long- range financial plans (LRFPs)
Financial reporting/statements, 405– 6; pro forma, 405
Financial resources: adequate, 401 Financial terms: standardization of,
317 Financing: strategic measures of, 497 Financing agencies: model of stake-
holder–HCO interaction and, 11; principle concerns of, 15
Firearms legislation, 155 Fire safety, 376, 383–84 Fiscal intermediaries, 12 Fishbone diagrams, 453 Fixed staffing, 221 Flexibility in work hours: promoting,
201 Float pools, 221 Florida: for-profit hospitals in, 18 Flow process charting, 452–53 Focused agendas: purpose of, 130;
successful boards and, 129–30 Focus groups, 163, 479; listening
opportunities and, 45 Food and Drug Administration, 253 Food services, 380 Forecasts/forecasting: annual
demand, 78; in budgeting, 407, 408; in financial planning, 435;
Index 529
future need for clinical staff, 187–90; internal consulting and, 440; long- and short-term, con- tinuous improvement and, 65, 74–78; models, 447–48; popula- tion health needs, 276, 277–80; realistic, to create plan for mission achievement, 99. See also Demand forecasting
For-profit boards: stock ownership requirement and, 120
For-profit healthcare organizations: for-profit hospitals, 18, 19; owner- ship of, 14
Fraud and abuse, 423, 425; detecting, 35; protecting against, 52
Frequency charts, 452 Frequency in advertising, definition
of, 484 Functional protocols, 139, 145,
147, 150; checklists, 151; clini- cal support services and, 244–45; components of, 150; definition of, 147; electronic access to, 151–52; flow process design in, 150; interrelated, 150; mechanisms for preventing failures, 147; for medication order and fulfillment, 147, 149; modifying, 150; nursing organization and improvement in, 224; prevention and health promo- tion and, 156; refinements to, 150; sustaining platform of, 164–65
Fundamental fairness duty: credentials committee review and, 184
Funding: in human resources, 364 Funds flow budget, 414 Future of Nursing: Leading Change,
Advancing Health (IOM), 225
GAAP. See Generally Accepted Accounting Principles (GAAP)
Gain-sharing incentive system, 353 GASB. See Government Accounting
Standards Board (GASB) Gemba (place where work is done):
Lean and, 85
Gender bias: awareness of, 501–2 General Electric, 491 General ledgers, 404 Generally Accepted Accounting Prin-
ciples (GAAP), 405, 424 Geographically oriented HCOs, 82,
83 Goal(s)/goal setting, 3; Academy of
Medicine, 6, 24; annual, board and setting of, 110–11; annual, negotiations in, 63, 167; at Bald- rige Award–recipient HCOs, 28; in budgeting, 452; CEO–board relationship and, 104; clinical sup- port services and, 253–55, 257; conditions related to, 69; continu- ous improvement and, 167; coor- dinated, planning for continuous improvement, 65, 78–79; engaged workforce and, 158; for excellent care, nursing and, 213; guidelines for, 435; operational, 407, 408; for operational scorecards, 68, 69, 70; realistic, 54; responsive, identify- ing for continuous improvement, 66–68; rewards and, 49; strategic/ operational, 498; for strategic score- cards, 70; “stretch,” 28, 49, 69; in transformational culture, 22–23, 36
Governance: continuous improvement responsibilities of, 66; control of compliance with ethical and legal standards and, 111; corpo- rate or managerial perspective of, 100–101; internal consulting and support of, 443; legal and ethical issues in, 130–32; for multiteam HCOs, 81; resource distribution perspective of, 100; shared, 220; strategic, critical actions in, 99; strategic, establishing, 99–132. See also Governing board
Governance body, role of, 24 Governance bylaws: definition of, 122 Governance committees, 122 Governing board, 14; actions of, mini-
mum criteria for, 114; assessing
Index530
performance of, 114; audit com- mittee of, 426; CEO selection and support by, 103–5; clinical staff members appointed by, 199; clini- cal staff represented on, 202–3; clinical support services and accountability to, 261; credentials committee review and, 184; educa- tion and information support for members, 127, 127–28; as effec- tive forum for meeting stakeholder needs, 99; evaluation carried out by, 91; fact finding and, 41; finance committee, 413, 429, 430; imple- mentation of continuous improve- ment and, 95; legal and ethical issues of membership, 130–32; managerial functions of, 123–24; managerial leadership of, 128–32; membership of, 114, 116; mem- bership qualifications for, 117–18; nonprofit, 101; original concept of, 123; programming requests review by, 458; purpose of, 100–101; quality-of-care obligations of, 106– 7; real estate transactions and, 374; relation of finance to, 428–30; rep- resentation criteria for members, 118; reserved powers of, 124; self- perpetuating, 119; skill and charac- ter criteria for members, 117–18; stakeholder needs monitored by, 66; ten measures of effectiveness of, 115–16
Governing board, functions of, 101– 14, 102; approve corporate strategy and annual implementation, 102, 107–11; ensure quality of clinical care, 102, 105–7; establish mis- sion, vision, and values, 102, 105; maintain leadership capability, 102, 103–5; monitor performance against plans and goals, 102, 111–13
Governing board, organization of, 121–25; committees, 121–23, 123; joint venture boards, 126;
multicorporate governance struc- tures, 123–25
Governing board, selection of, 119– 21; appointment to membership and office, 119; CEO member- ship, 120–21; compensation, 120; physician membership, 121; role of the nominating committee, 119; size, eligibility, and length of terms, 120
Government: as healthcare stake- holder, 16
Government Accounting Standards Board (GASB), 405
Governmental regulation: good inten- tions and, 16
Government payment agencies: model of stakeholder–HCO interaction and, 11; principle concerns of, 12–13
Graduate medical education, 192–93 Grief: nursing support for, 219 Grievance administration, 349–50 Gross domestic product: healthcare
expenditures as percentage of, 17 Gross revenue, 406 Groundskeeping, 378 Group purchasing: definition of, 385 Guest relations programs/services,
345, 371, 379–80, 380 Guidelines. See Patient management
guidelines Gynecology: detailed privileges and,
182
Handwashing protocols, 147, 382 Harassment-free environment, 344 Hazardous materials and waste man-
agement, 343, 382–83 HCA. See Hospital Corporation of
America (HCA) HCAHPS. See Hospital Consumer
Assessment of Healthcare Provid- ers and Systems (HCAHPS)
HCOs. See Healthcare organizations (HCOs)
HCR Manor Care, 20
Index 531
Healthcare: cottage model of, 485; professional certifications in, 159; service excellence chain in, 39, 40
Healthcare contracts: pricing struc- tures for, 417
Healthcare delivery: as team activity, 7 Healthcare disparities: addressing, 5 Healthcare expenditures, 18; growth
of, 17; influence of HCOs on, 21 Healthcare facilities: design, 370,
372–76; forecasting of need for, 76; maintenance, 376–78; plan- ning of, 372–73, 395–96; renova- tion, construction, and acquisition, 374–75. See also Hospital(s)
Healthcare Financial Management Association, 428
Healthcare Information and Manage- ment Systems Society (HIMSS), 326, 331
Healthcare marketplace: CEO com- pensation package and, 104; cur- rent American, 17–18; hospital sector in, 18–20; origin and devel- opment of HCOs, 16–17; other sectors of the healthcare economy, 21; physician and other health ser- vices, 20; post-acute and specialty care in, 20–21; stakeholder power and, 15–16
Healthcare organizations (HCOs): alternative collaborative struc- tures for services, examples of, 487; boundary-spanning activities of, 67; clinical education at, 191; components of, 8; critical actions for, 3; definition of, 4; exchange partners of, 15; first purpose of, 140; income share of, 100; influ- ence on expenditures, 21; licensure of, 13; local governments and, 14; mission of, 4–5; nursing practice specialties in, 228–30, 229; origin and development of, 16–17; with population health–focused mis- sion, 5; prevention and population health provided by, reasons for,
155; protecting assets of, 35, 38, 50–53; regulation of, 13; spectrum of potential relationships with, 488; stakeholder–HCO interac- tion, model of, 10, 11; strategic scenario implications for, 108, 109; well-managed, foundations of, 3–29. See also Excellent healthcare organizations; Healthcare facilities; Hospital(s)
Healthcare organization systems: organization structures for, 84
Health Care Quality Improvement Act: credentialing and reporting mandates of, 184–85
Healthcare quality management pro- fessionals: special training for, 158
Healthcare reform: vertical and hori- zontal integration and, 19
Healthcare systems: definition of, 17; growth of, 485
Health equity, 285 HealthGrades, 12 Health insurance: employer-provided,
355 Health Insurance Portability and
Accountability Act (HIPAA), 13, 73, 113, 313, 317, 402
Health insurance premiums: regional variations in, 26
Health insurers: model of stakeholder– HCO interaction and, 11; principle concerns of, 12–13
Health IT Standards Committee, 318 Health management: nursing and
educational responsibilities for, 219–20
Health promotion: community nurs- ing and, 219, 230; nursing and role in, 210; in population health strategy, 155
Health systems: definition of, 17 Healthy People Consortium, 285 Healthy People 2030, 295; goals for,
4, 5 Henry Ford Health System (HFHS),
342; board structure of, 124–25,
Index532
125; Careers for Life Center, 347; education investments by, 192; Leadership Competency Model, 346–47; service excellence model and, 338
Heuristics: in diagnostic process, 143, 143, 144; nursing plan of care and, 216
HFHS University, 346 High reliability: clinical staff and pur-
suit of, 178–79 High-reliability culture: creating,
140–41 High-reliability organizations: nurses
managing the unexpected in, 218 HIMSS. See Healthcare Information
and Management Systems Society (HIMSS)
HIPAA. See Health Insurance Por- tability and Accountability Act (HIPAA)
Hippocrates, 192 Hippocratic Oath, 24, 39, 175 Holidays, 354 Home care, 17, 21, 156 Homeostasis: definition of, 210 Honesty: establishing culture of, 99;
supporting atmosphere of, 432 Horizontal integration, 19, 485 Hospices and hospice care, 20, 21,
297, 298; accreditation and, 281; nursing care plan and, 216
Hospital-acquired infections, 156 Hospital Compare data, 477 Hospital Consumer Assessment of
Healthcare Providers and Sys- tems (HCAHPS), 163, 164, 477, 493
Hospital Corporation of America (HCA), 79
Hospital(s): accreditation and certi- fication of, 19; acute care, 112, 163, 376; community, 18; critical access, 16–17; disaster response and, 387; federal, 18–19, 19; fed- eral prison, 18; for-profit, 18, 19, 19; licensure of, 16; not-for-profit,
18, 19, 21; ownership and special- ization of, 2016, 19; performance- based building practices and, 374; safety net, 17; size of, 19; spe- cialty, 20, 493; teaching, 19, 192; work-related injuries and illnesses in, 343. See also names of specific hospitals
Hospital sector: in healthcare market- place, 18–20
Hospitals in Pursuit of Excellence: case studies in, 446
Hospital Value-Based Purchasing (VBP) Program, 163–64
Housekeeping, 378 House officers: stipends paid to, 193 HR. See Human resources (HR) Huddles, 158 Human capital: investment in, 498 Human research: patient rights in,
451 Human resources (HR), 337–65;
adequate funding in, 364; clini- cal support services performance measures and, 264; continuous improvement in, 340, 359, 359; critical actions in, 337; internal consulting and, 450; managerial leadership in, 363–65; nursing performance measures and, 232; operational scorecard for, 362, 362, 363; organization in, 360, 360–61; performance measures for, 361, 361–63; personnel/ professionals in, 359–60; program design and administration and, 355–56; purpose of, 338; treating as an investment, 337, 338
Human resources, functions of, 339, 340, 341–59; conduct collective bargaining, 340, 358; develop workforce contribution, 340, 341–48; ensure empowerment, transformation, and service excel- lence, 340; improve continuously, 340, 359; manage compensation and benefits, 340, 350–57; plan
Index 533
workforce needs, 340, 341; provide workforce services, 340, 348–50
Human resources plan, 494 Hurricane Katrina, 388
ICD codes. See International Classifi- cation of Diseases (ICD) codes
ICSI. See Institute for Clinical Systems Improvement (ICSI)
Immunization, 151, 155, 156, 210 Incentives: compensation as, 105,
353; in environment-of-care man- agement, 373, 391; wise use of, 201
Incidence of disease, 6, 9 Inclusion, 337; board leadership
development, succession planning, and, 105
Inclusive workforce, 2, 7, 33 Income statement, 404 Indian Health Services: federal hospi-
tals and, 18 Individualized care plan, 210 Infection prevention, 343 Infection preventionists: certification
of, 158 Infectious Diseases Society of Amer-
ica, 158 Information: common uses of, in
high-performing HCOs, 311; con- fidentiality of, maintaining, 323
Information assets: protecting, 423–24
Information management: improving accuracy of information in, 71, 73
Information services plan, 494 Information technology (IT), 321;
nursing plan of care and, 216. See also Electronic health records (EHRs)
Informed consent, 150 Infrastructure: for population health,
maintaining, 299 Infrastructure functions: performance
measures for, 90, 91 Injuries/illnesses: documenting, 51;
work-related, 343–44
Inpatient support service scheduling: nurses and, 218
Input measures: for operational score- cards, 69
Institute for Clinical Systems Improve- ment (ICSI): guidelines developed by, 146–47; Pain Treatment Plan Algorithm, 148
Institute for Healthcare Improvement: clinical laboratories run by, 446
Institute of Internal Auditors, 428 Institute of Medicine (IOM), 211;
Future of Nursing: Leading Change, Advancing Health, 225
Institutional clinical organization: structure of, 198
Institutional review boards (IRBs), 450, 451
Insurance sector: of healthcare econ- omy, 21
Intangible rewards, 49, 49, 50 Integrity: religious healthcare organi-
zations and, 46 Interdisciplinary care teams. See Inter-
professional (or interdisciplinary) care teams
Interdisciplinary plan of care (IPOC), 159, 165; case management and, 155, 216; clinical staff members and, 175; critical aspects of, 154; elements addressed by, 154; mana- gerial leadership and, 164; nurses and maintaining progress of, 217– 18; nursing plan of care and, 215; patient management guidelines and, 146, 154; sustaining platform of, 164–65; training for nurses and, 234
Interdisciplinary team-based care: nurses and coordination of, 211
Intermediate leadership: for multiteam HCOs, 81
Intermountain Healthcare, 331, 485, 501; education investments by, 192; meaningful use efforts at, 315–16
Internal auditor, 112
Index534
Internal audits, 50, 52, 73 Internal consultants: nursing unit per-
formance and, 223 Internal consulting, 439–69; as a
clearinghouse, 443, 462; critical actions in, 439; major vehicles of, for helping clients, 441, 442; managerial leadership and, 465–68; organization in, 462–63; performance measures in, 463–64, 464; personnel and team members in, 462; purpose of, 440; sizing, 468–69
Internal consulting, functions of, 440, 441, 442–61; benchmarking and identifying best practices, 441, 446; community-based epidemiologic planning, 441, 445; environmental assessment, 441, 444–45; evaluat- ing and testing proposed solu- tions, 441, 454–55; implement and integrate recommendations, 441, 461; improve continuously, 441, 461; increase effectiveness of process improvement teams, 441, 452–53; legal, regulatory, and ethical review, 441, 450–51; manage outside consultants, 441, 454; process modeling, 441, 453; programmatic capital review, 456, 458–61, 459; responding to other factual concerns, 441, 451–52; sta- tistical analysis, 441, 446–49; sup- porting organization as a whole, 441, 443–52; supporting process improvement teams, 441, 452–55; supporting routine capital invest- ment requests, 441, 455–61
Internal customers: definition of, 40 Internal Revenue Code: subsidiary
boards and, 124 Internal Revenue Service (IRS), 121;
board compensation regulations, 104; community benefit defined by, 101, 107; Form 990 Schedule H, 101, 354–55, 405, 406; inure- ment rules and, 131
Internal specialists, in quality manage- ment, 158
International Classification of Diseases (ICD), version 10, 141; CM (Clin- ical Modification), 317
International Classification of Diseases (ICD) codes, 313, 317, 421
International Standards Organization, 385
Interpersonal and communication skills: ACGME competencies in, 176–77
Interprofessional care: nursing and coordination of, 212, 217–19
Interprofessional (or interdisciplinary) care teams, 7–9, 8, 157; clinical support services ordered by, 242; guiding coordinated action of, 3; hospitals organized around, 19; improving quality and efficiency of care with, 99; major duties of, 8; service line organization and, 17, 80
Interprofessional conflicts, 159–60 Intervention opportunities: identify-
ing, 280–82 Inurement: board membership and,
131; definition of, 101, 425; phy- sician board representation and, 121; protecting against, 425
Investments: strategic, evaluating, 416, 418
IOM. See Institute of Medicine (IOM) IPOC. See Interdisciplinary plan of
care (IPOC) IRBs. See Institutional review boards
(IRBs) IRS. See Internal Revenue Service
(IRS)
Job applicants: value-driven transfor- mational culture and, 45–46
Job descriptions, 341 Johns Hopkins Hospital: high reliabil-
ity achieved at, 178 Joint Commission, The (TJC),
14, 16, 105–6, 140, 253, 267,
Index 535
384; Center for Transforming Healthcare, 179; cultural compe- tency standards, 348; education specifications, 192; high-reliability accountability measures, 178; hospice accreditation by, 281; National Patient Safety Goals, 162; physician board membership recommendation, 121; privilege agreement standardized by, 179; standard definitions, 317; work- place safety responsibility, 343
Joint operations, 252 Joint venture corporations, 193, 252 Joint ventures, 21, 108, 290, 422,
487, 488, 493; board approval of, 113; boards for, 126; subsidiary boards and, 124
Judgment incorporated into examina- tions: specialty certification and, 181
Just-in-time support: internal consult- ing and, 442
Kaiser Permanente, 10, 422, 485, 501; education investments by, 192; Southern California, imple- mentation of Complete Care at, 178
Kansas University Work Group for Community Health and Develop- ment: Community Tool Box, 285
Kant, Immanuel, 39 Knowledge management (KM), 307–
32; accountability structure for communications function in, 328; best practices in, 74; critical actions in, 307; managerial leadership, 328, 330–32; nursing and, 211; nursing unit performance and, 223; organization, 327; perfor- mance measures for, 327–28, 329; personnel in, 323, 326–27; plan- ning committees, 324, 327, 328, 330–31; planning process, 324–26, 325; purpose of, 308; training and supporting users, 312–14
Knowledge management, functions of, 309, 309–26; ensure appropriate use and security of data, 309, 321– 23; ensure reliability and validity of data, 309, 316–20; improve con- tinuously, 307, 309, 324–26; main- tain communications and software support, 309, 320–21; provide prompt and useful access to EHR, 309, 314–16; provide prompt and useful access to management infor- mation, 309, 310–14
Knowledge resource: essential parts in, 308
Kotler, Philip, 473, 475
Labor unions, 12, 358 Landscaping, 378 Lawsuits, 14; credentialing-related,
184; against governing board members, 131
Lawyers, 54 Leaders: definition of, 24; excel-
lence in HCOs and, 24. See also Managers
Leadership: addressing burnout and harnessing power of, 200–201; clinical staff, 199; clinical sup- port services, 261; consistent, 364–65; continuous improve- ment and, 89–90; development programs, 346–47; diversity in, 345; education obligations and, 192; in environment-of-care man- agement, 389–90; in excellent healthcare organizations, 25–29; internal consulting and support of, 443; maintaining continuous clinical improvement and role of, 166–67; service excellence and role of, 41–42; stakeholder model and obligation of, 10–11; succession plans, 105, 346–47; training, 54; values strengthened by, 48. See also Managerial leadership; Senior lead- ership; Servant leadership; Trans- formational leadership
Index536
Leadership hierarchy(ies): and com- munications network for multiteam HCOs, 81; creating, continuous improvement and, 80–81; defini- tion of, 80; implementing, 81–82
Leadership impressions: for tracking transformational culture, 55
Leadership in Energy and Environ- mental Design (LEED), 374
Lean management, 87, 158, 439, 453; continuous improvement and, 23; definition of, 84; transforma- tional culture and, 37; value stream of actions in, 85
Leapfrog Group, 162 Learning: ongoing, 145; from unex-
pected events, 152–53 Learning organization: creating and
sustaining, 63 Ledgers: patient/general, 404 Lee, Thomas H., 194 LEED. See Leadership in Energy and
Environmental Design (LEED) Legacy systems: definition of, 321 Legal and ethical reviews: internal
consulting and, 443 Legal consultation: internal consulting
and, 450 Legal counsel: credentials committee
review and, 184; for financial con- tracts with physicians, 195
Legal issues: of board membership, 130–32
Length of stay (LOS), 319 Liability insurance: board members
and, 131 Licensed independent practitioners
(LIPs), 10, 21, 174, 177; board and appointments/reappointments of, 106; building good support for, 93; compensation for, 195; definition of, 8; financial contracts and, 106; granting clinical staff privileges to, 179; licensure of, 13; privileges contract and, 106; privi- leges for, 9; standards for granting and renewing privileges for, 185
Licensed practical nurses (LPNs), 225 Licensure: of advanced practice
nurses, 227; of clinical profession- als, 159; of clinical support services staff, 260; continuing medical education and, 191; of healthcare organizations, 13; of hospitals, 16; in nursing, 225; of nursing homes, 17
Linguistic competence, 348 LIPs. See Licensed independent practi-
tioners (LIPs) Liquid assets, 406–7, 421 Listening, 471; to clinical support ser-
vice associates, 251; collaborative activities and, 282–83; effective, nurse managers and, 220; major activities in, 478–79; responsive, 261; to stakeholder needs, 474, 477, 478–79, 479–80; strategic, commitment to, 501; systematic, continuous improvement and, 88; transformational culture and, 45, 67
Living will, 211 Local governments: HCO interaction
with, 14; hospitals owned by, 18, 19
Local market information: evaluating, 90
Logistic capabilities: strengthening, 94
Logistics: coordinated, planning for continuous improvement, 65, 78–79
Logistic support teams, 8, 9–10 Long-range financial plans (LRFPs),
108, 411–14, 416, 418, 420, 430, 435
Long-range (or strategic) plans, docu- mentation parts within, 494
Long-term care: patient requirements in, 221
Long-term forecasts: providing, con- tinuous improvement and, 65, 74–78
Long-term planning, 108
Index 537
LOS. See Length of stay (LOS) Low-hanging fruit, 85 Loyalty: sincere commitment to trans-
formational culture and, 94 LPNs. See Licensed practical nurses
(LPNs) LRFPs. See Long-range financial plans
(LRFPs)
MACRA. See Medicare Access and CHIP Reauthorization Act (MACRA)
Magnetic resonance imaging, 152 Magnet Recognition Program: HCOs,
nurse empowerment and, 220; hospitals, required nursing educa- tional levels in, 225; transforma- tional culture and, 37
Maintenance: of healthcare facili- ties, 371, 376–78, 377; of medical equipment, 378–79; preventive, 377–78
Make-or-buy decisions, 409 Malcolm Baldrige National Quality
Award recipients: Bronson Meth- odist Hospital, 373; caregivers at, 28; Charleston Area Medical Center, 92; core strategy of, 499; documentation by, 7; excellence as core strategy for, 501; maintaining continuous clinical improvement, 166; Memorial Hermann Sugar Land, 312; Mercyhealth, 41–42; Poudre Valley Health System, 74; Saint Luke’s Hospital, 70; Sharp HealthCare, 67–68, 317; South- central Foundation, 83; St. David’s HealthCare, 79; transformational culture at, 37
“Malpractice crisis,” eliminating, steps in, 152
Malpractice lawsuits/claims manage- ment, 14
Mammography screenings, 156 Management information: provide
prompt and useful access to, 309, 310–14
Management letter, 112, 426 Managerial accounting, 408–10,
434–35 Managerial leadership: clinical excel-
lence and, 164–67; in clinical staff organizations, 200–202; for clinical support services, 264–69; continuous improvement and, 92–95; of environmental care services, 394–97; in finance, 432; in human resources, 363–65; for internal consulting, 465–69; in marketing and strategy, 500–503; in population health, 295–300; situational examples faced by, 57–59; in transformational cul- ture, 56–57
Managerial leadership in nursing, 233, 234–35; delivering continuous improvement, 233, 235; provid- ing adequate training, 233, 234; supporting empowerment, 233, 234–35; sustaining the nurse sup- ply, 233, 234
Managerial leadership of board, 128– 32; legal and ethical issues, 130– 32; operating discipline, 128–30
Managers: clinical support services and duties of, 261–62; leaders as, 24; leadership competencies for continuous improvement and, 89–90; “on-call,” 479. See also Leaders
Mandatory insurance, 354 Market attractiveness and advantage:
matrix of, 491, 492 Marketing, 471–503; associates in,
495; critical actions in, 471; defini- tions of, 472, 473; formal hierar- chy in, 496; interrelationship with strategy, 472, 488; managerial issues in, 500–503; organization, 496–97; performance measures, 497–99; product, place, price, and promotion (“four Ps”) of, 471, 473; purpose of, 472–73; relation- ships and, 473, 475
Index538
Marketing, functions of, 473, 474, 475–77, 479–88; attract and motivate associates, 474, 484–85; convince potential customers, 474, 482–84; develop brand and media relations, 474, 480–82; identify and segment markets, 474, 475– 76; improve continuously, 474, 488; listen to stakeholder needs, 474, 477, 478–79, 479–80; man- age other stakeholder relationships, 474, 485–87
Marketing campaigns: measures for, 500
Marketing surveys, 66 Market segmentation, 447, 471, 474,
475, 476 Market share, 497; of clinical support
services, 259–60; forecasts for epi- demiologic planning model, 75–76
Materials management, 378, 384 Mayo Clinic, 194, 202, 203, 501;
Program on Physician Well-being, 202; strategies for addressing burn- out, 200–202
Meals-on-wheels, 293 Meaningful use: definition of, 315;
electronic health record and, 314–16
Measurement review committees, 73 Measures. See Performance measures Media relations, 474, 481–82 Medicaid, 12–13, 411, 416; popula-
tion health and, 274; safety net hospitals distinguished under, 17
Medical equipment: maintenance of, 378–79
Medical errors, 9; catching, transpar- ency and, 50; in data sets, reduc- ing, 319; eliminating, improved teamwork and, 40; functional protocols and prevention of, 147; minimizing, 316–17; service recov- ery and, 51. See also Unexpected events
Medical homes, patient-centered, 20, 219, 298, 299
Medical knowledge: ACGME compe- tencies in, 175
Medical records: interdisciplinary plan of care and, 217. See also Elec- tronic health records (EHRs)
Medical staff executive committee: bylaws and, 198
Medical students: clinical training of, 192
Medicare, 12, 13, 411, 416; audit- ing reports as condition of par- ticipation in, 405, 426; benefits, 354; certification requirements, 384; EHR Incentive Program, 315; fraud and abuse provisions, 113, 195, 423; licensure of hos- pitals and, 16; population health measures, 274, 295; prospective payment system, 319; safety net hospitals distinguished under, 17
Medicare Access and CHIP Reautho- rization Act (MACRA): definition of, 315; Quality Payment Program and, 195
Medicare Payment Advisory Commis- sion, 416
Medication order and fulfillment: functional protocol for, 149
Memorial Hermann Health System (MHHS), 332; reliable hand- hygiene behaviors established at, 179
Memorial Hermann Sugar Land (MHSL), 332; data management use at, 312; data security processes at, 322
Mental health, 17 Mentors and mentoring, 94, 158,
199. See also Coaching Mercyhealth: community health pro-
grams, 286, 294; community needs assessment plan, 277; servant lead- ership implementation at, 41–42
Mergers, 108, 113, 487 Merit-based Incentive Payments Sys-
tem (MIPS), 195, 315 Merit raises, 352
Index 539
Messaging: transformational culture and, 43
#MeToo movement, 502 mHealth, 324 MHHS. See Memorial Hermann
Health System (MHHS) MHSL. See Memorial Hermann Sugar
Land (MHSL) Microbiologists, 54 Middle management: nurses in, 228 MIPS. See Merit-based Incentive Pay-
ments System (MIPS) Mission: clinical support services and,
242; collaborative development and, 48, 48; definition of, 4; goals consistent with, 69; governing board and establishment of, 105; of healthcare organizations, 4–5; maintaining, 489; repetition and, 43; sustaining culture of teamwork and respect and, 165
Mission, vision, and values (MVV): emphasizing, 3
Modeling: reinforcing transforma- tional values with, 48
Monopoly-pricing power, 416 Moral foundation, 39 Multicorporate accounting, 421–23 Multicorporate governance structures,
123–25 Multihospital systems: benchmarks
for, 446; internal consultants and, 462–63
Multi-rater leadership surveys: for track- ing transformational culture, 55
Multispecialty physician corporations, 193
Multiteam healthcare organizations: leadership hierarchy and communi- cations network for, 81
MVV. See Mission, vision, and values (MVV)
Mystery shopping, 479
NACHC. See National Association of Community Health Centers (NACHC)
NANDA International, 214–15, 216, 231
National Academy of Medicine, 167; clinical support services and goals of, 243–45; diagnostic process milestones, 144
National Association for Healthcare Quality, 158
National Association of Community Health Centers (NACHC), 280
National Business Group on Health, 16
National Civic League, 285 National Committee for Quality
Assurance (NCQA), 14, 179, 298
National Database of Nursing Quality Indicators (NDNQI), 233
National Fire Protection Association, Life Safety Code, 384
National Guideline Clearinghouse (NGC), 146, 155, 282
National Incident Management Sys- tem (NIMS), 369, 386
National Institutes of Health, 21 National Labor Relations Board
(NLRB), 12, 358 National Library of Medicine, 312 National Patient Safety Goals (The
Joint Commission), 162 National Practitioner Data Bank, 184,
342 National Quality Forum, 16, 318;
Field Guide, 162 National Quality Measures Clearing-
house, 318 NCLEX, 226 NCQA. See National Committee for
Quality Assurance (NCQA) NDNQI. See National Database
of Nursing Quality Indicators (NDNQI)
NEA. See Nurse Executive Advanced (NEA)
Near misses of serious events: report- ing, 152
Needle sticks, 383
Index540
Needs assessment. See Community needs assessment
Negligence: healthcare organizations sued for, 14
Negotiated fees/charges pricing struc- ture, 417
Negotiation: in annual goal setting, 63, 167; annual planning and, 78–79; of clinical support services goals, 255, 257; empowerment-based, 43; by governing boards, 110, 128–29, 130; with stakeholders, 10; in trans- formational management, 70
Net revenue, 406 New Brunswick, NJ: variability in
HCO performance in, 26, 26 New clinical developments: education
about, 192 New programs and capital budget,
414 New Urbanism, 373 New York City Health and Hospitals
Corporation, 485 NGC. See National Guideline Clear-
inghouse (NGC) NIC. See Nursing Interventions Clas-
sification (NIC) Niche strategies, 493 Nightingale, Florence, 210 NIMS. See National Incident Manage-
ment System (NIMS) 90-day plan, 3 NLRB. See National Labor Relations
Board (NLRB) NMHS. See North Mississippi Health
Services (NMHS) NOC. See Nursing Outcomes Classifi-
cation (NOC) Nominal group technique, 88 Nominating committee: boards and
role of, 119 Nonoperating revenue: definition of,
406 North Mississippi Health Services
(NMHS), 342; human resources strategy at, 339; service excellence model and, 338
North Mississippi Medical Center, 286; “Let’s Pretend Hospital” pro- gram, 485
Not-for-profit corporate structure: long-term survival emphasis and, 66
Not-for-profit corporations: board members of, 114; inurement rules and, 131; physician board repre- sentation and, 121
Not-for-profit healthcare organiza- tions, 13–14
Not-for-profit hospitals, 18, 19, 21 Not-for-profit status: designing
healthcare organization systems and, 82–83
Nuclear Regulatory Commission, 253 Nurse anesthetists: definition of, 227;
education and certification/exami- nation required for, 226; practice doctorate degree in, 260
Nurse doctorate: education and certi- fication/examination required for, 226
Nurse Executive Advanced (NEA), 226
Nurse executives, 228 Nurse manager/leaders: education
and certification/examination required for, 226; role of, in trans- formational culture, 220; training and, 234
Nurse midwives: definition of, 227; education and certification/exami- nation required for, 226
Nurse practitioners (NPs), 141, 174; definition of, 227; education and certification/examination required for, 226
Nurses, 53; building good support for, 93; burnout and, 27; career diver- sity for, 225; educational levels and certification/examination require- ments for, 226; in interprofessional care teams, 7; projected shortages of, 233; rating of, by Americans, 210; service lines headed by, in
Index 541
excellent healthcare organizations, 230; sustaining supply of, 209, 233, 234; transfers of, 223
Nurse specialists: patient management guidelines and, 223–24
Nursing, 209–35; assessment, 211, 214; critical actions in, 209; edu- cational levels in, 225; evidence- based, 216, 231; goals of excellent care and, 213; managerial leader- ship in, 233, 234–35; performance measures for, 231–32; practice set- tings in, 228–30; purposes of, 210; specialization in, 225–28
Nursing, functions of, 211, 212, 214– 25; coordinate interprofessional care, 212, 217–19; deliver excellent care, 211, 212, 214–17; educate patients, families, and communi- ties, 212, 219–20; improve contin- uously, 212, 223–25; maintain the nursing organization, 212, 220–23
Nursing accountability centers, 231 Nursing diagnosis, 144, 210; defini-
tion of, 214; identifying, 214–15; interdisciplinary plan of care and, 154
Nursing homes, 20; licensure of, 17; ownership of, 21
Nursing Interventions Classification (NIC), 215, 216, 231
Nursing organization, maintaining, 212, 220–23; assignment, 222–23; scheduling, 222; staffing, 221–22; sustaining the transformational cul- ture, 220–21
Nursing Outcomes Classification (NOC), 215, 216, 231
Nursing plan of care, 215–16; func- tions of, 215; implementation and evaluation of, 216
Nursing process: airway management example, 214; definition of, 211; implementation of, 211
Nursing teams: assistance available to, 223, 224; support structure for, 231, 231
Nursing unit leaders: improvement goals and, 223
Obstetrics: detailed privileges and, 182
Occupational Safety and Health Act, 343
Occupational Safety and Health Administration (OSHA), 344, 377
Occupational therapy: practice doctor- ate degree in, 260
Office of the National Coordinator for Health Information Technology (ONC), 314, 315, 318
OFIs. See Opportunities for improve- ment (OFIs)
ONC. See Office of the National Coordinator for Health Informa- tion Technology (ONC)
Open-access information strategy, 73 Operating budgets, 414, 415 Operating costs: nursing workforce as
percentage of, 233 Operational goals: for budgeting, 407,
408 Operational measures: of clinical staff
organization performance, 199; for community health, 294; for finance and accounting, 431; for internal consulting, 464; for mar- keting and strategy, 498–99; for population health programs, 289, 290–92
Operational scorecards, 68–70, 90; accountability and, 82; annual review of, 78; in community health, 294; definition of, 68; dimensions of, and common mea- sures for, 69; for environment of care, 392; for human resource management, 362, 362, 363; for internal consulting, 468; for ser- vice lines, 160, 161
Operations management: clinical sup- port services and, 244, 249–53
Opioid management: ICSI Pain Treat- ment Plan Algorithm, 148
Index542
Opportunities for improvement (OFIs), 3, 24, 37, 84, 163, 165, 230; board performance measures and, 128; burnout and, 201; candi- dates recruited for team leadership and, 58–59; clinical performance improvement and, 156; clinical support services and, 253; in com- munity health, 295; continuous improvement and, 23, 53; defini- tion of, 11; environment of care and, 381; external reviews and over- sight and, 52; HCO leadership and, 27; for human resources depart- ments, 359, 359; identifying and rank ordering, 66; internal consult- ing and, 440; interviewing potential new hire and, 57–58; knowledge management and, 324; managerial leadership and, 164; nurses’ needs as, 233; nursing unit performance and, 223; operational measures of clinical staff organization perfor- mance and, 199; performance mea- sures for infrastructure functions and, 91; qualitative indicators of, for maintaining continuous improve- ment, 89; ranking, by performance improvement council, 85; reward- associated contributions and, 48; seeking root causes of, 56; strategic teams and, 24; transformational management and, 235; translat- ing to improved performance, 86; unexpected event reporting and, 51
Organizational science: facilitating and funding, 202
Orientation, 343, 345 OSHA. See Occupational Safety and
Health Administration (OSHA) Outcomes quality measures, 162, 232 Outliers, 406 Out-of-pocket costs, 416; regional
variations in, 26 Outpatient support service scheduling:
nurses and, 218 Outpatient surgery, 17
Outplacement assistance, 345 Output: clinical support services per-
formance measures and, 264; mea- sures for operational scorecards, 69; nursing performance measures and, 232; scorecards for clinical services and, 160
Outsourcing contracts: selection and management of, 396–97
Overload: repetition and, 43 Oversight: definition of, 501 Owners/ownership, of healthcare
organizations: governing boards and, 14, 101; model of stake- holder–HCO interaction and, 11; principle concerns of, 14–15
Pain management guidelines: flow process design in, 150
Pain Treatment Plan Algorithm, 148 Palliative care, 20, 21, 182, 290, 297,
298, 412; delivering, 273; nursing and, 219, 229; nursing care plan and, 216; rise of, 17
Pareto graphs, 453 Pathology laboratories: performance
measures and, 265 Pathways. See Patient management
guidelines Patient autonomy: individualized
planning and treatment and, 153 Patient-based measures, 477, 478, 479 Patient care: ACGME competencies
in, 175–76; excellence in, 5, 6 Patient care planning and treatment:
individualizing, 142, 153–55 Patient care quality and cost measure:
for tracking transformational cul- ture, 55
Patient-centered care, 12; clinical staff and, 175; clinical support services and, 243; conflict resolution and, 502; definition of, 11; deliver- ing, nursing and, 209; elements and measures in, 6; functions fundamental to, 145; individual- ized planning and treatment and,
Index 543
153; nursing and IOM goal of, 211; nursing role and examples of, 213; nursing workforce essen- tial to, 233; optimum stakeholder relationships and, 485; population health and, 281; using functional protocols in, 139
Patient-centered medical homes, 20, 219, 298, 299
Patient data: electronic access to, 151–52
Patient discharge surveys, 163 Patient ledgers, 404 Patient management guidelines:
advantages with, 145–46; classifica- tion of, 146; clinical staff–HCO relations and, 200; clinical support services and, 243–44; creating and managing, 177–78; definition of, 145; electronic access to, 151–52; individual care provider perfor- mance improvement with, 146; nurse participation in, 223–24; prevention and health promotion and, 156; review of, 147; surgical procedures and, 150; sustaining platform of, 164–65
Patient Protection and Affordable Care Act (ACA), 13, 14, 299, 354, 412; community health missions and, 156; effect on population health, 274; role of advanced prac- tice nurses and, 227
Patient relationships: maintaining, clinical support services and, 244, 245–47
Patient(s): communication, improv- ing, 483–84; complaints, 478; expectations of, 483; healthy behavior of, influencing, 482–83; model of stakeholder–HCO inter- action and, 11; principle concerns of, 11–12; selection of providers/ services, influencing, 482
Patient safety: functional protocols and, 147; maintaining specialty certification and, 181; National
Patient Safety Goals for, 162; regional variations in, 26. See also Security
Patient Safety and Quality Improve- ment Act (PSQIA): reporting sys- tem established by, 153
Patient safety organizations (PSOs), 153
Patient satisfaction: associate engage- ment and, 163; clinical support services performance measures and, 264; management of, 483; Medicare’s value-based purchas- ing and, 219; nursing performance measures and, 232; retained nurses’ experience and, 233
Patient satisfaction surveys, 478; for tracking transformational culture, 55
Patient scheduling: nurses and, 218 Patient transportation: nursing and
responsibility for, 218–19 Payment systems: bundled payments,
249, 416; capitation, 417; clinical support services and, 248–49; fee- for-service, 417
Payroll systems, 351, 404 Payroll taxes, 354 Peer review process: licensed indepen-
dent practitioners and, 106, 107; privileging contract and, 180
Penalties: patient satisfaction scores and, 219
Pension benefits, 354 Performance: measuring and improv-
ing, 63; in transformational cul- ture, 36
Performance data: board and routine surveillance of, 111, 112
Performance improvement: maintain- ing specialty certification and, 181
Performance improvement councils (PICs), 89; building success in process analysis and improvement, 87; continuous improvement in nursing and, 235; definition of, 85; responsibilities of, 85–87
Index544
Performance measures: board and mandated points of reference for evaluating, 110–11; for clini- cal excellence, 160, 162–64; for clinical staff organizations, 199; for clinical support services, 263–64, 264; for continuous improvement, 90–91, 91; engaged workforce and, 158; for environment-of-care management, 392–94; for financial management, 430–31; for human resources, 361, 361–63; for infra- structure functions, 90–91, 91; for internal consulting, 463–64, 464; for knowledge management, 327–28, 329; for marketing and strategy, 497–99, 500; for nursing, 231–32, 232; qualitative, 430–31; quantitative, 430; standardization of, 73, 317; for strategic score- cards, 70, 71; strategic teams and, 25; training and, 345; in transfor- mational culture, 55–56
Performance reviews: auditing and, 50–51
Perquisites, 354 Personal-contact programs, 480 Pharmacists, 53 Pharmacy(ies), 17; collaborative
stakeholder relationships and, 485; practice doctorate degree in, 260; regulatory compliance and, 253; specialists in, 17
Physical assets: protecting, 424–25 Physical therapy: practice doctorate
degree in, 260 Physician assistants, 141, 174, 197 Physician board membership: quality
healthcare organizations and, 202 Physician income: critical volumes for
specialty services and, 189, 189 Physicians, 53, 141, 197; board mem-
bership and, 116, 121; burnout experienced by, 200; certification of, 158; corporate employment of, 193; financial contracts between healthcare organizations and,
194–95; frontline, building good support for, 93; in healthcare mar- ketplace, 20; impaired, credentials committee and, 186; in interpro- fessional care teams, 7; as original clinical staff members, 174; origin and development of healthcare organizations and, 16; predicted shortages of, 203; service lines headed by, in excellent HCOs, 230; shortages or surpluses of, impact of, 107
Physician satisfaction: clinical support services performance measures and, 264; nursing performance measures and, 232
PICs. See Performance improvement councils (PICs)
PITs. See Process improvement teams (PITs)
Planning calendar: annual, 78–79, 80, 88
Pneumococcal immunization: check- lists and, 151
Podiatrists, 174 Population-based long-range planning
model, 75–78 Population forecasts: for epidemio-
logic planning model, 75 Population health, 273–300; compo-
nents of, 4; continuous improve- ment in, 83, 276, 292; critical actions in, 273; definition of, 4; excellence in care and, 6, 141; financing of, 288–90; implementa- tion strategies for, 274, 284–90; improving, 142, 155–56; infra- structure for, maintaining, 299; maintaining HCO’s core contribu- tion to, 273; managerial leadership in, 295–300; managing impact on acute care services, 300; measur- ing, 6, 9; operational measures for programs in, 289, 290–92, 294; performance measures in, 294–95; personal services for, concep- tual model of, 275; personnel in,
Index 545
292–93; promotion of, 283–84, 290, 296–97; purpose of, 274–76; strategic measures of, 294–95; stra- tegic scorecard for, 296; strength- ening, 140; teams in, 292–93, 297–98; understanding commit- ment to, 273
Population health, functions of, 276, 276–92; establish a population health strategy, 276, 284–90; improve continuously, 276, 292; operationalize a population health strategy, 276, 290–92; quantify population health needs, 276, 277–84
Population surveys, 73 Portland, Oregon: variability in HCO
performance in, 26, 26 Position control: definition of, 351 Post-acute care: in healthcare market-
place, 20–21 Postnatal childcare guidelines, 156 Poudre Valley Health System (PVHS):
best practice in knowledge man- agement within, 74
Practice-based learning: ACGME competencies in, 175
Prenatal childcare guidelines, 156 Preoperative care: functional protocols
for, 150 Prescription drugs, 21 Pressure ulcers: checklists and, 151 Prevalence of disease, 6, 7, 9 Prevention: definition of, 155; disease
risk/prevalence forecasts and, 278– 79; as multicomponent activity, 296; nursing and, 210, 219, 230; primary, 156, 278, 279, 296–97; secondary, 156, 278, 279; tertiary, 156, 278, 279
Preventive maintenance: definition of, 377
Pricing, of clinical services: commu- nity health mission, 415; excel- lence-in-care mission, 416; pricing structures for healthcare contracts, 417; transfer pricing, 393, 394
Primary care, 8–9; expansion and inte- gration of, 298–99; medical home approach in, 298–99
Primary care team: chronic illness care and, 144
Primary prevention, 279, 296–97; definition of, 156; disease risk/ prevalence forecasts and, 278
Privacy rights, 307, 308 Privileges/privileging: for clinical staff,
174; clinical staff impairment and, 186; criteria beyond specialization and, 181–82; definition of, 106; elements of, 179–80; granting and renewing, standards for, 185–86; licensed independent practitioners and, 106; recommending, for clini- cal staff, 176, 179; review process for, 182–85; specialization criteria and, 181
Probationary review, 343 Process analysis and improvement:
building success in, 87–88; defini- tion of, 83; HCO-wide, support- ing for continuous improvement, 65, 83–88; translating opportuni- ties for improvement to improved performance, 86
Process effectiveness: measuring, 53 Process improvement teams (PITs), 3,
73, 85, 145, 158, 165, 230; assign- ing membership in, 86; building success in process analysis and improvement, 87; burnout and, 201; clinical performance improve- ment and, 156, 157; clinical staff leadership and, 199; clinical sup- port services and, 245; continuous improvement and, 28; creating, 27; data warehouse use and, 312; effec- tiveness of, 452–53, 465–67; in environment-of-care management, 383, 397; functional protocols and, 150, 157; guidelines designed by, assumptions for, 177–78; improve- ment goals pretested by, 69, 70; internal consulting and
Index546
Process improvement teams (continued) support for, 439, 440; leadership,
continuous improvement, and, 89, 90; listening opportunities and, 45; monitoring progress of, 87; nurses and, 211; nursing team sup- port structure and, 231; patient management guidelines and, 147; performance measures for infra- structure functions and, 91; pre- venting evasion and subversion of, 466–67; stakeholder needs and, 66; technical assistance for, 90; unexpected event reporting and, 51; union participation and, 358
Processing hardware, 323 Process modeling: internal consulting
and, 453 Process quality measures, 162, 163,
232 Productivity: clinical support services
performance measures and, 264; nursing performance measures and, 232
Professional autonomy: peer review and, 180
Professional development plans/ programs: environment-of-care- related, 389–90
Professional domain: stakeholders and question of, 159
Professionalism: ACGME compe- tencies in, 176; commitment to excellence and, 503; maintaining specialty certification and, 181
Professional rights: disputes over, 159 Professional standards, 159 Profitability: accountability and, 82 Profit-and-loss statements, 404 Pro formas, 405, 414 Programmatic capital investment
proposals: clinical support services and, 257; cost-related benefits, 258–59; defending, 260; examples of, 456; market share improve- ments, 259–60; quality-related
benefits, 258; review of, 456, 457–58, 458–61, 459
Programmatic proposals: definition of, 257
Programmers, 54 Promotions: candidates for, 56; trans-
formational culture and, 54 Prospector archetype, 492, 493 Prostate cancer: localized, low-risk,
average lifetime costs for treatment of, in men age 65 and older, 153, 153
Protecting healthcare organization assets, 35, 38, 50–53; auditing, 50; communication and resolu- tion program, 51–52; correction, 52–53; external reviews and over- sight, 50, 52; internal audits, 50, 51; transparency, rounding, and performance review, 50–51; unex- pected event reporting, 51
Protocol development teams: educa- tion provided through, 191–92
Protocols: for recruitment of health- care workforce, 342–43. See also Functional protocols
Prudence: governing boards and, 114 PSOs. See Patient safety organizations
(PSOs) PSQIA. See Patient Safety and Quality
Improvement Act (PSQIA) Psychologists, 53, 174 Public Health Service Act of 1994,
20; Title VIII of, 227 PubMed, 312 PVHS. See Poudre Valley Health Sys-
tem (PVHS)
QPP. See Quality Payment Program (QPP)
Qualitative indicators: continuous improvement and, 88; of OFIs for maintaining continuous improve- ment, 89
Qualitative measures: for financial per- formance, 430–31
Index 547
Quality, of healthcare: critical volumes for specialty services and, 189, 189; CSS performance measures, 264; environment-of-care services, 393–94, 395; nursing performance measures, 232; strategic measures, 497
Quality assessment/measures: of clini- cal assessment, 162–63; of clinical support services, 265
Quality-based rewards, 200 Quality improvement organizations,
13 Quality of work: ensuring for internal
consulting, 467–68 Quality Payment Program (QPP), 315 Quality review: high performance and,
145 Quality statistics: analyzing, 162–63 Quantitative indicators: continuous
improvement and, 88 Quantitative measures: for financial
performance, 430 Quantitative monitoring: at Baldrige
Award–recipient HCOs, 28
Radiation oncology: regulatory com- pliance and, 253
Random sampling surveys: listening opportunities and, 45
Rapid response team: definition of, 216
Rawls, John, 39 Reach in advertising, definition of,
484 Reactor archetype, 492, 493 Real estate: acquisition of, 374; board
approval of transactions, 113 Reasonableness: governing boards
and, 114 Records management, 356–57; core
files of HR records, 357; guidelines for, 356–57
Recruitment and selection, of health- care workforce, 341–43; of clinical staff, 173, 190–91, 241;
components of, 191; forecasting future need for clinical staff and, 189; higher nurse-to-patient ratios and impact on, 222; high perfor- mance and, 145; nurse supply and cost of, 233; of specialists, 187
Referral linkages, remote consultation and, 151
Regional variation: in health and healthcare, reducing, 26–27
Registered nurses (RNs), 221; edu- cational backgrounds of, 225; educational levels of, 226; inpatient nursing units and, 230; training and, 234
Regulatory agencies: model of stake- holder–HCO interaction and, 11; principle concerns of, 13–14
Regulatory compliance. See Compliance
Rehabilitation facilities, 20, 280 Reinforcement: transformational cul-
ture and, 43, 45 Reliability: of data, ensuring, 309,
316–20; of estimates, reporting, 319; of information, maintaining, 307
Religiously affiliated healthcare orga- nizations: values defined in, 46
Remote consultations, 151 Repetition: transformational culture
and, 43, 45 Reputation: of board members, 118 Reserved powers: definition of, 83;
organization structures for HCO systems and, 84; subsidiary boards and, 124
Residents: definition of, 192 Resilience: promoting, resources for,
202 Resource allocation, 24, 107 Resource consumption and effective-
ness: environment-of-care services and, 393
Resource distribution: representation criteria for boards and, 118
Index548
Resource distribution perspective of governance, 100
Resource specialists: nursing organiza- tion and, 223
Respect, 94, 157; associates and meaning of, 12; commitment to, 501; culture of, 99, 130, 165–66
Responsiveness: reinforcing transfor- mational values with, 48
Restraint of trade, collusion in, 190 Retail clinics, 20 Retention, of healthcare workforce,
341; higher nurse-to-patient ratios and impact on, 222; of qualified CSS professionals, 241; sustaining nurse supply and, 233
Retirement planning, 345 Retreats: for governing boards, 130 Return-on-investment (ROI) calcula-
tions, 259 Revenue: collections and, 406, 421;
cycle, 406; design innovations and, 373–74; gross, 406; transactions, 402–3
Revenue accounting, 406, 433 Review teams: forming, 88 Rewards/reward systems, 332; achiev-
able, 54; for associates’ contribu- tions, 38, 48–50; definition of, 48, 49; in environment-of-care man- agement, 391; fairness of, 363–64; goals and, 49; intangible, 49, 49, 50; quality-based, 200; subjective elements of, 49; tangible, 49, 49, 50; taxonomy of, used in excellent healthcare organizations, 49; trans- formational management and, 22; wise use of, 201
Risk management: safety and, 381 Risk management professionals: certi-
fication of, 158 Root causes: accurate identification of,
90, 223; finding and correcting, 64, 84
Rounds/rounding, 92, 163, 165, 332, 479, 501; auditing and, 50–51; at Baldrige Award–recipient
HCOs, 28; clinical support services and, 251; definition of, 42; listen- ing opportunities and, 45; at Mer- cyhealth, 42; nursing leaders and, 235; senior leadership and partici- pation in, 50–51; transformational management and, 22
Run charts, 448–49, 449, 453
Safe care: clinical staff and, 175; clinical support services and, 243; conflict resolution and, 502; ele- ments and measures in, 6; func- tions fundamental to, 145; nursing and IOM goal of, 211; nursing role and examples of, 213; nursing workforce essential to, 233; opti- mum stakeholder relationships and, 485; population health and, 281; using functional protocols in, 139
Safety, in healthcare facilities, 377–78; of associates, 343–44; logistic and strategic teams and, 9; and regula- tory compliance, 371, 381–84
Safety net hospitals: definition of, 17 Saint Luke’s Health System (Kansas
City): collaboration with HCA, 126
Saint Luke’s Hospital (Kansas City): strategic scorecard for, 70, 72
Salary administration, 351–52 Sanctions, 157 Sarbanes-Oxley Act, 52; board effec-
tiveness and compliance with, 116; passage of, 113
Scatter charts, 452 Scenarios: corporate strategy, 491;
long-range financial planning pro- cess, 412; strategic, implications for healthcare organizations, 108, 109
Scheduling for patients: nurses and, 218
Scheduling systems: clinical support services and, 245, 246, 246–47; well-designed, characteristics of, 222
Index 549
Scorecards, 3, 160–63; balanced, 68, 114; demand and output, 160; monitoring of, 501; nursing unit leaders and, 223; operational, 68–70, 69, 90, 160, 161, 294, 362, 362, 363, 392, 468; patient satis- faction and associate engagement, 163; quality assessment, 162–63; strategic, 70–71, 71, 90, 110, 128, 199, 288, 296, 497; supporting use of, 439; unit, 199, 498, 502
Seat belt use, 156 Secondary prevention, 279; definition
of, 156; disease risk/prevalence forecasts and, 278
Securities Exchange Commission, 14 Security: of data warehouses, 423;
of healthcare data, ensuring, 309, 321–23, 322
Security services, 381–82 Self-care: promoting, resources for,
202 Self-screening, 342 Senior leadership, 24, 471; annual
demand forecasts and, 78; at Bal- drige Award–recipient HCOs, 28; board agendas and, 129; Charles- ton Area Medical Center commu- nication model, 43, 44–45; clinical performance improvement and, 157; clinical staff and, 177; clini- cal staff–HCO relations and, 200; clinical staff organization and, 198; clinical staff representation on governing boards and, 202; clinical support services and, eval- uation questions, 266; consistent, 364–65; continuous improvement and, 66, 88, 167; evaluation car- ried out by, 91; fact-finding and, 41; financial management role of, 432; forecast preparation and, 75; information protection and role of, 73; knowledge management planning committee membership and, 330; managerial accounting role, 434; for multiteam HCOs,
81; nurses in, 228; nursing unit performance and, 223; profes- sional training of, 103; rounding and, 50–51; stakeholder needs monitored by, 66; SWAP creation and, 110; transformational culture and, 54, 57
Sensitivity analysis, 445 Sentara Healthcare: education invest-
ments by, 192 Servant leadership, 41; empowerment
and, 234; nurses trained in, 234 Service: establishing culture of, 99 Service excellence, 57; chain in health-
care, 39, 40; definition of, 39; lead- ership role in, 41–42; promoting, 39–42, 337; transformational cul- ture and, 35, 54; transformational leadership and, 38
Service excellence model: excellent HCOs and, 39; HCO applications of, 40
Service lines, 163, 493; achieving excellent care in, 175; clinical performance improvement and, 156; clinical staff organization by, 198; clinical units and, 158; credentials committee review and, 183; definition of, 17, 80; designing HCO systems and, 82; improvement goals in nurs- ing and, 223; joint ventures and, 126; operational scorecard for, template of, 160, 161; organiza- tion in excellent HCOs and, 230; possible organization of, 158, 159
Service recovery, 50, 51–52, 347–48; auditing and, 50; definition of, 51; summarizing, 152
Services plan, 494 Sewage treatment, 156 Sexual harassment, 52, 502 Shadowing, 479 Shadow systems, in knowledge man-
agement, 323 Shared governance: definition of, 220
Index550
Sharp HealthCare (San Diego), 317; behavior standards, 46, 47, 48, 433; managerial leadership at, 56; relationship with community, 67–68
Shortages: of nurses, projected, 233; of physicians, projected, 203
Short-term forecasts: providing, con- tinuous improvement and, 65, 74–78
Sick leave, 354 Six Sigma, 85, 87, 439, 453; continu-
ous improvement and, 23; defini- tion of, 84
Smartphones, 320 Social marketing: community health
activities and, 290 Social media: listening opportunities
and, 45 Social Security, 351, 353, 354 Social Security Act: Hospital VBP Pro-
gram and, 163–64 Software: antivirus, 323; for clinical
information-capture operations, 318; for compensation and payroll management, 351; to improve patient scheduling, 324; long-range financial plan preparation, 411; maintaining support for, 309, 320– 21; statistical process control, 320
Southcentral Foundation, 83 Space allocation, 369, 371, 375–76,
395–96 Specialty care: in healthcare market-
place, 20–21 Specialty certification, 151; continu-
ing medical education and, 191; criteria beyond specialization and, 181–82; maintaining, 181. See also Certification
Specialty hospitals, 20, 493 Specialty services: critical volumes for,
189, 189; forecasting future need for, 189
Specification: definition of, 319; pro- cess, 447
Specification taxonomies, 447;
healthcare provider, 448; insurance intermediary and employer, 448; patient-oriented, 447
Staff requirements forecast: for epide- miologic planning model, 76
Staff/staffing. See Workforce Stakeholder coalitions, 15–16 Stakeholder groups: maintaining con-
tact with, 63 Stakeholder model: commitment to
fact and, 502 Stakeholder needs: monitoring, for
continuous improvement, 65, 66–68
Stakeholders, 10–16, 24; associates, 11, 12; buyers, 11, 12; community groups, 11, 14–15; in commu- nity health, 287, 291; conflicting desires of, 10; CSS team account- ability to, 262; culture of trust and respect for, 94; definition of, 9; external reviews and oversight and, 52; governing board and, 100; health insurers and government payment agencies, 11, 12–13; iden- tifying needs of, 282–83, 474, 477, 478–79, 479–80; internal consult- ing and, 440; interprofessional conflicts and, 159, 160; managing collaborative and competitive rela- tionships, 474, 485–87; market- place and power of, 15–16; other provider organizations, 15; owners, 11, 14–15; patients and families, 11, 11–12; regulatory and accredit- ing agencies, 11, 13–14; relating to, 3; stakeholder–HCO interac- tion, model of, 10, 11; suppliers and financing agencies, 11, 15
Standard deviation, 320 Standard error, 320 Standards for Maintenance of Certifi-
cation (ABMS), 181 Standard work, 147 Standing committees, 130; of govern-
ing board, typical, 123; of well- managed boards, 122
Index 551
Stark law, 195 State governments: hospitals owned
by, 18, 19 States: certificate-of-need laws in, 13;
physician incentive compensation regulations in, 195
Statistical analysis, 446; for internal consulting, 443
Statistical process control, 320, 448– 49, 478
Statisticians, 54 St. David’s Foundation, 79 St. David’s Healthcare (SDH): annual
planning process for, 79, 80 Stephen Ministries, 293 STEPS methodology, 331 Stewardship, 46 Stipends, for house officers, 193 Stockholders, 101, 119 Strategic capabilities: strengthening,
94 Strategic investments: evaluating, 416,
418 Strategic listening: commitment to,
501 Strategic measures: of marketing and
strategy, 497–98; of population health, 294–95
Strategic opportunities, 489–91 Strategic partnerships, 388, 397, 486,
488 Strategic plans, 494; clinical support
services and, 242; for effective knowledge management planning committees, 330
Strategic positioning: defining, 489; implementation of, 495; strategic opportunities in, evaluating, 491; strategic opportunities in, identify- ing, 489–91
Strategic review, 489–91 Strategic scorecards, 70–71, 90, 497;
accountability and, 82; annual goal setting and, 110; annual review of, 78; board performance measured by, 128; clinical staff organization performance and, 199; definition
of, 70; incentive compensation for board CEOs and, 105; measures for, 71; for population health, 288, 296; for Saint Luke’s Hospital, 70, 72
Strategic support teams, 8, 9–10; excellence in HCOs and role of, 25
Strategic theories, 492–94 Strategic types: Miles and Snow typol-
ogy of, 492, 493 Strategy, 471–503; definitions of, 472,
488; documenting, 494; interrela- tionship with marketing, 472, 488; learning by practice, 496; mana- gerial issues in, 500–503; perfor- mance measures, 497–99; purpose of, 472–73; theories of, 492–94
Strategy, functions of, 474, 488–95; define the strategic position, 474, 489–94; document the strategy, 474, 494; implement the strategic position, 474, 495; improve con- tinuously, 474, 495; maintain the mission, vision, and values, 474, 489
“Stretch goals,” 28, 49, 69 Subcommittees: governing board, 130 Subjective quality assessment: for
financial performance, 430–31 Subsidiary boards: contributions and
popularity of, 124; reserved powers and, 124
Substance abuse: clinical staff and, 186 Success: governing boards and, 114 Succession plans, 346–47; board-
related, 103; for clinical support services, 262; leadership develop- ment and, 105
Supermajority, 124 Suppliers: model of stakeholder-HCO
interaction and, 11; principle con- cerns of, 15. See also Vendors
Supply chain management, 384–86; functions of, 385
Support teams: guiding coordinated action of, 3
Surgeons, 144
Index552
Surgical care: functional protocols for, 150
Surgical services: patient requirements in, 221–22
Surgical time-out: checklists used in, 151
Surprise: strategic failure and, 501 Surveys: community, 481; formal,
of stakeholder needs, 477, 478; of promotional campaigns, 499; 360-degree, 499
Sustainability: definition of, 374 Sutter Medical Center (California):
Perinatal Data Committee char- tered at, 179
SWAP. See Systemwide action plan (SWAP)
SWOT (strength, weakness, opportu- nity, threat) analysis, 490
Sydenham, Thomas, 141 Systematic listening: continuous
improvement and, 88 Systems-based practice: ACGME com-
petencies in, 176, 177 Systemwide action plan (SWAP), 110
Tablet computers, 320 Talent management, 346 Tampa, Florida: variability in HCO
performance in, 26, 26 Tangible rewards, 49, 49, 50 Taxation: of multicorporate healthcare
organizations, 422. See also Inter- nal Revenue Service (IRS)
Tax-exempt status: clinical staff rep- resentation on governing boards and, 202; federal hospitals and, 18; inurement and, 101, 131; multicorporate accounting and, 421–22; of not-for-profit HCOs, 66; physician board representation and, 121
Teachable moment, 482 Teaching hospitals, 19, 192 Team leadership: for multiteam
HCOs, 81; selecting and training, 56
Teams: accountability and, 41; in clinical support services, 260–61; identifying, 39; internal consult- ing and, 442, 462; in population health, 292–93, 297–98; rapid response, 216; of teams, serious ill- ness and, 164
Team structure of twenty-first-century care, 7–10; clinical support teams, 8, 9; current trends and, 10; excel- lence with, requirements for, 21; interprofessional (or interdisciplin- ary) care teams, 7–9, 8; logistic support teams, 8, 9–10; population health teams, 8; strategic teams, 8, 9–10
Teamwork, in healthcare: sustaining culture of, 165–66; values and, 46
Technical skills, 345 Teleconferencing, 197 Telehealth, 267 Telemedicine, 151, 267, 268, 320 Tennessee: for-profit hospitals in, 18 Termination, 53 Terminology: defining, 317–18 Terrorist attacks, preparation for, 382,
387, 388 Tertiary prevention, 279; definition
of, 156; disease risk/prevalence forecasts and, 278
Texas: for-profit hospitals in, 18 Theft: detecting, 35; discouraging, 50 Therapeutic services: common, 242 Therapists, 53 Timely care: clinical staff and, 175;
clinical support services and, 243; conflict resolution and, 502; ele- ments and measures in, 6; func- tions fundamental to, 145; nursing and IOM goal of, 211; nursing role and examples of, 213; nursing workforce essential to, 233; opti- mum stakeholder relationships and, 485; population health and, 281; using functional protocols in, 139
TJC. See Joint Commission, The (TJC)
Index 553
Tokenism: governing boards and, 118 Town hall meetings: listening oppor-
tunities and, 45 Training, 94; of care providers, 151;
clinical performance improvement and, 157; clinical support services and, 245; communication and, 45; in disaster response, 388; in envi- ronmental control methods and equipment, 391; excellent HCOs and, 56–57; expanded, 93; high performance and, 145; as human resources activity, 345–46; in infor- mation use, 312–14; leadership, 54; for nurses, 234; nursing proto- cols and, 223; of process improve- ment team members, 452–53; in transformational culture, 43, 165; in transformational leadership, 158; transformational management and, 22
Transaction accounting, 402, 404–5 Transactional culture, 36; empower-
ment in transformational culture vs. in, 37; reward system as substi- tute for “control” of, 48
Transactional management: authority in, 54
Transaction costs: definition of, 486 Transactions: nonoperational, 406–7 Transfer price/pricing, 393, 394 Transformational culture, 141; added
elements building on, 92; at Bal- drige Award–recipient HCOs, 28; Baldrige-style, 22; broadcast- ing and, 43; building, 3; CEO of board and, 103; clinical perfor- mance improvement and, 156–57; clinical staff–HCO relations and, 200; collaboration and, 54; creat- ing and sustaining, 35–59; critical actions for, 35; definition of, 21; empowerment in, 36, 196, 197; engaged workforce and, 158; enhancing, 93–95; ensuring sincere commitment to, 94–95; excel- lence in HCOs and, 21, 22–23;
explaining, 57; leadership hierarchy and, 80; listening and dialogue in, 67; managerial leadership in, 56–57; measures in, 55–56; mea- suring and continuously improv- ing, 35; meeting clinical support services needs in, 251; nursing unit leaders and, 223; people in, 53–54; performance in, 36; protecting HCO assets and, 50; purpose of, 36–37; strategic teams and, 24; sustaining, nursing organization and, 220; tracking, measures com- monly used in, 55; training in, 165
Transformational culture, functions in, 37, 39–43, 45–46, 48–53; communicate, 38, 43, 44, 45–46; empower HCO associates, 37, 38, 39; improve continuously, 38, 53; model and reward values, 38, 46, 48; promote service excellence, 38, 39–42; protect HCO assets, 38, 50–53; reward-associated contribu- tion, 38, 48–50
Transformational leaders: reinforce- ment used by, 43
Transformational leadership: coaching on, 166; commitment to respect and, 501; functions of, 38; Lean and, 85; nurse managers trained in, 220; supporting, 39; training for, 158
Transformational management, 22, 70, 86, 363, 493; assigning of PIT membership in, 86; burnout strategies and, 202; continuous improvement in nursing and, 235; elements of, 22; goal setting and, 70; reward systems, 22; two-way communication and, 195
Transformational values: actions rein- forcing, 48
Transparency, 95; auditing and, 50–51; external reviews and over- sight and, 52; in financial manage- ment, 432
Transportation associates, 218
Index554
Transportation of patients: nursing and responsibility for, 218–19
Treatment specialists: diagnostic pro- cess and, 144
Triage: definition of, 387 Trump administration: budget cuts
and, 146 Trust, 94; board members and, 114;
in CEO–board relationship, 104; servant leaders and, 41; transfor- mational culture and, 196–97
Trustees: compensation for, 12; defini- tion of, 101; time commitments of, 103. See also Governance
Trust obligations: of board, carrying out, 114
Turnover, 53, 163; associate, transfor- mational culture and, 55; at Bald- rige Award–recipient HCOs, 28; low, in Magnet HCOs, 220; nurse burnout and, 27; nurses, work- load peaks, and, 222; reducing, and sustaining nurse supply, 233; reducing, service excellence model and, 40
Unexpected events: learning from, 152–53; reports, 50, 51, 381, 479; resolving, 63
Unified operations, 252 Uninsured individuals: pricing policies
for, 416 Unions, 12, 358 Unit costs: critical volumes for spe-
cialty services and, 189, 189 United States: healthcare expenditures
in, 17–18, 18 United Way, 15, 349 Unit scorecards, 199, 498, 502 Universal Protocol, 162 University of Pennsylvania Health Sys-
tem: Mortality Review Committee, 178–79
Upcoding, 433 Urgent care centers, 20 USA Nursing Management Minimum
Data Set, 231–32
US Department of Commerce, 13 US Department of Defense: federal
hospitals and, 18 US Department of Health and
Human Services, 314; Healthy People 2030, 4; Office for Human Research Protections, 451; Office of Inspector General, 194
US Department of Homeland Secu- rity, 386
US Department of Justice, 13, 451 US Department of Veterans Affairs:
federal hospitals and, 18 US Preventive Services Task Force:
breast cancer screening recommen- dations, 188
Utilities management, 379
Vacation time, 354 Validity of data: ensuring, 309,
316–20 Value-based incentive payments: capi-
talizing on, 94 Value-based insurance design: defini-
tion of, 13 Value-based purchasing, 163–64,
219 Values: aligning, and strengthen-
ing culture, 201; annual goal setting and, 111; collaborative development and, 48, 48; defin- ing and modeling, 46; expanding on, 46–48; governing board and establishment of, 105; maintain- ing, 489; protecting, 35; repetition and, 43; strengthening, leadership role in, 48; sustaining culture of teamwork and respect and, 165; transformational, actions reinforc- ing, 48; transformational culture and, 54
Value stream of actions: in Lean, 85 Variability: of estimates, reporting,
319–20 Variable staffing, 221 Variation: identifying external causes
of, 447–48
Index 555
Variation in HCO performance: exam- ples of, 2016, 26; reducing, 26–27
Vendors: of environment-of-care ser- vices, 378; of knowledge manage- ment services, 312, 314; of materials management services, 385–86
Vertical integration, 19, 485 Virginia: for-profit hospitals in, 18 Vision: collaborative development
and, 48, 48; excellence in health- care and, 140; governing board and establishment of, 105; main- taining, 489; sustaining culture of teamwork and respect and, 165
Visioning, 48, 105, 489 Vital signs, 214 Volumes: critical, for specialty services,
189, 189 Voluntary insurance programs, 354 Volunteer Protection Act of 1997,
120
Wage administration, 351–52 Waiting times: as operational measure,
294 Walk-throughs, 479 Waste management, 383 Water safety, 155 Well-Baby Program example, 475, 476 Well-managed healthcare organiza-
tion: foundations of, 3–29; sources for, 6–7
Wellness: nursing plan of care and, 215; promotion campaigns, 482–83
WhyNotTheBest.org, 12, 26, 162, 477
Workers’ compensation insurance, 383
Workforce: competent, building, 337; development of, 341–48; diversity and inclusion in, 344–45; engaged, 157–58; nursing, 221–22, 233, 234; reductions in, 349
Workforce services, providing, 340, 348–50
Working capital, 420–21 Work–life integration: promoting,
201 Workload demands: nursing organiza-
tion and, 222 Workplace wellness, 348, 349 Work processes, supportive: reinforc-
ing transformational values with, 48, 48
Work-related injuries and illnesses, 343–44
World Health Organization (WHO): definition of health, 4; diagnoses maintained by, 317
Yale–New Haven Hospital (YNHH): organization-wide method changes at, 178
557
ABOUT THE AUTHORS
Kenneth R. White, PhD, AGACNP, ACHPN, FACHE, FAAN, holds the University of Virginia Medical Center Endowed Professorship in Nurs- ing and is the associate dean for strategic partner- ships and innovation at the University of Virginia School of Nursing. He also holds professorships in the University of Virginia McIntire School of Commerce, Darden School of Business, and School of Medicine. He maintains a practice as a palliative care nurse practitioner at the University of Virginia Medical Center.
From 1994 to 2013, Dr. White served on the faculty of Virginia Commonwealth University (VCU) and in leadership positions for its gradu- ate programs in health administration. He was also the inaugural Charles P. Cardwell, Jr., Professor and the Sentara Professor in the Department of Health Administration. Dr. White is visiting professor at LUISS Guido Carli in Rome, Italy.
Dr. White received a PhD in health services organization and research and an MS in nursing from VCU, an MPH in health administration from the University of Oklahoma, and a post–master’s degree certification as an acute care nurse practitioner from the University of Virginia. He has more than 40 years of experience in healthcare organizations in clinical, administrative, gover- nance, academic, and consulting capacities. Dr. White is a registered nurse, an adult–gerontology acute care nurse practitioner, and a certified as a palliative care nurse practitioner. He is a Fellow of the American College of Healthcare Executives (ACHE) and formerly served on its Board of Governors. He is also a Fellow of the American Academy of Nursing and a current member of its board.
He is coauthor (with John R. Griffith, LFACHE) of this and several prior editions of The Well-Managed Healthcare Organization, Thinking For ward: Six Strategies for Highly Successful Organizations, and Reaching Excel- lence in Healthcare Management. He is also the coauthor (with J. Stephen Lindsey) of Take Charge of Your Healthcare Management Career: 50 Lessons That Drive Success; coauthor (with Dorrie K. Fontaine) of Boost Your Nursing Leadership Career: 50 Lessons That Drive Success; and a contributing author to
About the Authors558
Human Resources in Healthcare: Managing for Success, Managerial Ethics in Healthcare: A New Perspective, and Evidence-Based Management in Health- care (all published by Health Administration Press). Dr. White is also a con- tributing author to the books Advances in Health Care Organization Theory (Jossey-Bass), Peri-Anesthesia Nursing: A Critical Care Approach (Saunders), On the Edge: Nursing in the Age of Complexity (Plexus), and Introduction to Health Services (Delmar).
Dr. White has received ACHE’s highest honor, the Gold Medal Award (2019); the James A. Hamilton Award (2012); the Exemplary Service Award (2011); the Distinguished Service Award (2009); the Edgar C. Hayhow Award (2006); and two Regent’s Awards (1999 and 2010). He has also received the Virginia Nurses Association award for Virginia’s Outstanding Nurse (1999), the VCU President’s Award for Multicultural Enrichment, and numerous teaching awards. He is the founding chair of ACHE’s LGBT Forum.
John R. Griffith, MBA, LFACHE, is professor emeritus in the Department of Health Manage- ment and Policy at the School of Public Health, University of Michigan, Ann Arbor. A graduate of the Johns Hopkins University and the University of Chicago, he was the director of the Program and Bureau of Hospital Administration at the University of Michigan from 1970 to 1982 and the chair of his department from 1987 to 1991.
Professor Griffith has served as chair of the Association of University Programs in Health
Administration (AUPHA), as a commissioner for the Accrediting Commis- sion on Education in Health Services Administration, and as senior adviser to the board of the National Center for Healthcare Leadership.
He was the founding author of The Well-Managed Healthcare Organi- zation (first edition 1987) and founding editor of the ACHE journal Fron- tiers of Health Services Management. He has published several books and over 50 peer-reviewed articles on managing healthcare organizations.
Professor Griffith received the Gold Medal Award from ACHE in 1992. He has also been recognized with the John Mannix Award of the Cleveland Hospital Council, ACHE’s Edgar C. Hayhow Award (in 1989, 2003, and 2006) and its Dean Conley Award, the Filerman Award for Edu- cational Excellence from AUPHA, and citations from the Michigan Hospital Association and the governor of Michigan. He received the Excellence in Teaching Award from the University of Michigan School of Public Health in 2009. He was an examiner for the Baldrige Performance Excellence Program from 1997 to 1998. In 2014, Professor Griffith was inducted into Modern Healthcare’s Health Care Hall of Fame.
- Cover
- Brief Contents
- Detailed Contents
- Preface
- Introduction and Overview
- Chapter 1 - Foundations of Well-Managed Healthcare Organizations
- Chapter 2 - Creating and Sustaining a Transformational Culture
- Chapter 3 - Building Continuous Improvement
- Chapter 4 - Establishing Strategic Governance
- Section II - Clinical Excellence
- Chapter 5 - Foundations of Clinical Excellence
- Chapter 6 - The Clinical Staff Organization
- Chapter 7 - Nursing
- Chapter 8 - Clinical Support Services
- Chapter 9 - Population Health
- Section III - Logistic and Strategic Support
- Chapter 10 - Knowledge Management
- Chapter 11 - Human Resources
- Chapter 12 - Environment of Care
- Chapter 13 - Financial Management
- Chapter 14 - Internal Consulting
- Chapter 15 - Marketing and Strategy
- Untitled
