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Clinicians Should Be Partners in Value Revolution

By Jonathan Warsh, PhD
and Michael Nurok, MCBhB, PhD

As conversations about how to control healthcare costs dominate the policy landscape, clinicians in hospitals often find themselves as pawns in an increasingly complex medical chess game. Under pressure from payers, chief financial officers and department chairs increasingly task clinicians with finding ways to decrease costs.

Clinicians struggle to respond, often feeling overwhelmed by growing public scrutiny of their outcomes in a setting in which care delivery is becoming ever more complex. Clinicians and policymakers will remain at loggerheads unless we develop new approaches to engage clinicians as partners in the value revolution. We believe that clinicians, as the providers of frontline care, can be essential players in driving value from the bottom up.

Reports about bends in the cost curve have provided some cause for optimism that cost containment in healthcare is possible, although the unwieldiness of the American healthcare system and the institutional barriers standing in the way of delivery system reforms have tempered that enthusiasm. Medicare experiments around bundled payments, accountable care organizations and other value-based payment schemes have shown some success, yet the movement of private payers away from legacy fee-for-service schemes has been slow going. Hospital administrators routinely talk about impending budget shortfalls and thin operating margins as hospital consolidations continue to dominate the landscape.

Pressure on providers

Against this backdrop, doctors and other care providers feel pressured from above, with payers and hospital management viewing them as passive subjects upon whom behavioral and economic incentives need to be forced. The assumption seems to be that the interests of payers and providers are not aligned and that, left to their own devices, providers are not interested in efforts to control cost.

This assumption leads to a system in which payers and administrators reason, "If doctors aren't willing to be responsible custodians of the healthcare system, we must force them to act conscientiously by changing how they're paid."

It would be naïve, of course, to underestimate the role that payment incentives play in our system; the impact, for example, of fee-for-service schemes on utilization trends is exceedingly well-documented. But it is our contention that, in specific ways, hospitals and payers can do much more to engage clinicians as partners in helping to control costs. Indeed, if long-term cost control is to be successful, clinicians must not just have a seat at the table but be leaders in driving reforms from the ground up.

Why is it, then, that those who are delivering frontline care so often feel left out of conversations around how to control healthcare costs? To be sure, many providers may be uninterested in this type of work, while others may bristle at the notion that clinicians should even consider cost, positing that there is a conflict between providing optimal patient care and thinking about the financial implications of their decisions.

Although there is growing recognition among many providers that attentiveness to value may actually lead to higher-quality care, the chasm between clinical teams and their management and finance counterparts has only grown over time. A failure to empower clinicians with the tools that they need to be champions for higher-value care constitutes a major blind spot for the healthcare system.

Measuring productivity by volume, not quality

Understanding the nature of this divide is important. First, hospital finance systems are almost always indecipherable to clinicians (or indeed, to anyone without an accounting degree), relying on arcane concepts like relative value units and cost-to-charge ratios that don't make intuitive sense. In an inpatient setting, the costs of care may be assigned to literally dozens of "cost centers," but exactly how those costs are assigned remains opaque.

Moreover, clinician productivity is often measured on the basis of metrics that incentivize the volume, but not necessarily the quality, of care. Indeed, while a clinician's focus on maximizing professional fee billing may make sense from the perspective of a department chair, such efforts drive up the total cost of care. Perversely, efforts that result in decreased lengths of stay while maintaining or improving outcomes may negatively impact both professional and facility fee revenues.

Second, clinicians are rarely given specific guidance on what they can do to help lower costs — in cases in which costs are growing too rapidly, department chairs are often given instructions to simply lower their costs, which can lead to decisions (e.g., across-the-board cuts) that actually compromise high-value care. If there is no effort to understand the potential savings in addressing "fixed" costs, then even heroic efforts to lower such costs may have no impact on cost savings.

For example, if clinicians focus on decreasing lengths of stay in the ICU, but the hospital does not flex the ICU staff when there are fewer patients, then cost savings will be minimized and ICU costs will remain "fixed." Alternatively, if ICU staffing is reduced when there are fewer patients in the ICU, or if the open beds in the ICU are used to accommodate other patients who need beds, then the hospital system would realize cost savings.

Third, hospital finance systems still exist in very discrete silos aimed largely at ensuring the economic viability of the organization. Department chairs are frequently given their own budgets to "manage" and may be subject to negative feedback or other consequences when they exceed those budgets. Highly reimbursed programs invariably end up subsidizing necessary but money-losing programs in other departments.

But patients and diseases have little regard for those neat silos. Sometimes, the same procedure is performed by different departments within the same hospital, which invariably results in redundancy of capital expenses.

In other situations, guild-like referral patterns may steer a patient to one type of therapy in a situation in which they could benefit from a very different intervention. For example, depending on the referring doctor, a patient with coronary disease may be sent to see either an interventional cardiologist or a cardiac surgeon.

Finally, clinicians are often in the dark when it comes to understanding practice variations both inside and outside the walls of their own institutions. Many clinicians talk anecdotally about how one colleague always uses expensive implants or diagnostics, but hospitals have not shown continued success in helping clinicians understand the ways in which particular clinical decisions affect cost. Patients and payers may have little control over cost either, as referrals generally are made through established social networks with no regard for the cost of care.

Turning clinicians into partners for reform

What can be done to engage clinicians as genuine partners in reforming care delivery? First, educational initiatives that demystify concepts in healthcare financing and accounting can start to break down the psychological barrier between clinical and finance teams. Programming in both business and medical schools as well as continuing education has been instrumental in educating practicing clinicians and executives, but as more medical schools mandate courses in ethics, sociology and health policy, they would do well to also give future doctors the tools to understand the microeconomics of healthcare delivery.

For example, a series of executive education courses offered through Harvard Business School attempts to engage clinicians and finance personnel together in an effort to have them unite in improving value. In the realm of medical education, organizations like Costs of Care are working on curriculum development to bring courses on value into medical schools and residency programs.

Second, hospital finance departments can partner more closely with clinical leaders in an effort to better understand how clinical decisions affect cost within different disease categories. While we know, for example, that patients with longer stays are more expensive, the factors that drive that longer stay will be different depending on the medical condition being addressed.

At Cedars-Sinai, for example, physicians along with teams from finance have created an alternative cost model for our extracorporeal membrane oxygenation program that allows clinicians to predict the financial implications of decision-making in real time. Dashboards that measure these clinical metrics can be of much greater use to clinicians than general financial reports that use the language and parlance of accounting to break down costs.

Also, through a partnership with a commercial analytics company, clinicians in the Cedars-Sinai Heart Institute are provided with easily interpretable data on their costs of care; these data can then be compared with those of other clinicians performing the same procedure and can also be broken down into clinically actionable components.

In addition, as healthcare systems move toward interdisciplinary team-based approaches to delivery, convening those same interdisciplinary groups to lead cost reduction and process improvement measures can ensure that we begin to think about costs from the perspective of the patient rather than that of the individual department or cost center. As an example, the clinical transformation group at Cedars-Sinai provides support teams to work with clinicians across specialties in developing and implementing cost-reduction strategies.

Getting away from the guild structure

In some instances, it will be necessary to create financially and clinically aligned administrative structures that support a patient- and disease-centered approach to care. The creation of such structures may mean transitioning away from the traditional departmental guild structure on which hospitals have relied for decades and toward more patient- and disease-oriented institutes or centers.

For example, Cleveland Clinic has largely shed the traditional department-based medical infrastructure in favor of disease centers that integrate care around the patient's medical condition rather than the physician's medical specialty. As a result, the clinic has seen substantial domestic and international growth driven not just by reputation but by superior outcomes and lower costs.

In addition, hospital finance representatives should be embedded in the transformation of clinical care to enrich conversations about the financial implications of clinical decision-making. For example, at Cedars-Sinai, a standing High Value Care Committee that includes finance representatives and frontline clinicians regularly convenes to explore and implement approaches to value-based opportunities across the hospital system.

Other hospitals, like the MD Anderson Cancer Center and the Hospital for Special Surgery, have established "value management" offices that coordinate these activities and serve as umbrella entities to promote value-based care.

Finally, armed with an understanding of the clinical drivers of cost, clinicians can be empowered and incentivized to work together to reduce unwanted sources of variation in care delivery. Although the health policy community has given considerable attention to the well-studied issue of geographic variation in healthcare spending, there has been much less of a focus on how to drive down variation within individual hospitals and healthcare systems.

We do not mean to discount the vital work being done around payment reform — the economic incentives at play in healthcare continue to exert influence over clinical behavior. But a conceptual shift toward seeing clinicians as allies — and not adversaries — is badly needed in the value revolution.

As costs continue to rise, it makes good sense to directly engage those who have the greatest ability to effect change. Provided with the right tools, clinicians can be essential partners in leading the value revolution.

Jonathan Warsh, PhD, is senior researcher and senior project leader at Harvard Business School.

Michael Nurok, MBChB, PhD, is medical director of the Cardiac-Surgical Intensive Care Unit at the Cedars-Sinai Heart Institute and a Cedars-Sinai faculty member.