How UCSF Is Solving the Quality, Cost and Value Equation

I sometimes explain to medical students that they are entering a profession being transformed, like coal to diamonds, under the pressure of a new mandate. “The world is going to push us, relentlessly and without mercy, to deliver the highest quality, safest, most satisfying care at the lowest cost,” I’ll say gravely, trying to get their attention.

“What exactly were you trying to do before?” some have asked, in that wonderful way that smart students blend naiveté with blinding insight.

It is pretty amazing that healthcare has been insulated from the business pressures that everybody from Yahoo! to my father’s garment business have experienced since the days of Adam Smith. We experienced a bit of this pressure in the mid-1990s, when pundits declared healthcare inflation “unsustainable” (sound familiar?) and we invented managed care to slay it. We know how that story ended – the public and professional backlash against HMOs defanged the managed care tiger to the point that it could barely produce a “meow.” The backlash was followed by a 15-year run during which efforts to slash healthcare costs have been remarkably meager.

That run has ended.

Luckily, while we’ve been let off the hook on cost-reduction, we’ve not been given a free pass on improvement. Beginning with the Institute of Medicine reports on safety (2000) and quality (2001), we have been under growing pressure to improve the numerator of the value equation: patient safety, quality of care, and patient satisfaction. Particularly for those of us who work in hospitals, we now feel this pressure from many angles: from accreditors (more vigorous and unannounced Joint Commission inspections, residency duty hour limits), transparency (Medicare’s Hospital Compare), comparative measurement (HealthGrades, Leapfrog, Consumer Reports and many other hospital rankings), and, most recently, payment policies (no pay for “never events,” penalties for readmissions, value-based purchasing, and “Meaningful Use” standards for IT).

These initiatives have created an increasingly robust business case to improve. Hospitals everywhere have responded with new resources, committees, ways of analyzing data, educational programs, computer systems, and more.

In my own Division of Hospital Medicine at UCSF, we have powerwalked this walk. Faculty members from my division now lead our division’s QI committeeour department’s QI efforts, our medical center’s QI/safety and patient satisfaction programs, and our hospital’s IT implementation.

While our commitment to improvement has been inspiring, about three years ago I started worrying about the balance of our value improvement activities. At one of our weekly lunches, I asked about 30 of my faculty a series of questions.

“How many of you are involved in a project designed to improve quality?” I asked. Virtually everyone raised his or her hand.

“Great, how about patient safety projects?” About half raised their hands. “Fabulous.”

“Projects whose primary goal is to improve the patient experience?” About a third.

“OK. How about projects whose primary goal is to reduce the cost of care or decrease waste?” One or two people sheepishly raised their hands.

“Wrong!” I barked, nearly banging my shoe on the table. “If we’re serious about improvement – and we need to be – then we should be attacking the denominator of the value equation with as much passion as we are the numerator.” The next day, we launched our efforts to rebalance our portfolio.

We’ve been at this value improvement business for a couple of years now, and there are some lessons regarding how to structure a program that I’d like to share with you. I suspect that if you’re not deeply engaged in this work yet, you will be, and soon.

The first question we faced was this: where should the various components of value improvement “live” in our org chart? We faced this at the divisional level, but this question is relevant to departments, to medical centers, and to healthcare organizations. Is cost reduction work its own thing or is it a branch of the existing QI workflow?

As I described in my closing address at last week’s Society of Hospital Medicine annual meeting, there are some fundamental differences between quality and cost work. First, the latter requires the acquisition of some new skills, including methodologies such as Lean (more on this later). Moreover, to do cost reduction well, you need to know something about accounting and payment policies, or make sure there is someone on your committee who does.

Perhaps more importantly, cost reduction work requires that you pay attention to diplomacy. One can spend a lifetime improving quality and safety and not make anyone too upset. But the minute you begin to tackle “unnecessary” procedures or “wasteful” practices, you are attacking someone’s livelihood and budget, and you have to be prepared for pushback. When our division decided to take on unnecessary CT scans, it was only a few minutes before the chair of radiology gave me a ring, inquiring about what we were doing and how he could help. Key stakeholders need to be identified before you get too far into their space, either bringing them into the tent or figuring out ways to manage their objections.

Despite these differences, if you already have a strong quality/safety/improvement infrastructure (as we did), I strongly recommend that you roll your cost reduction work into it. Many of the core skills (literature and best practice reviews, change management, IT, data analysis) are the same, and building a new infrastructure would be, ironically, wasteful. Perhaps the largest threat to rolling the cost work into the existing quality/safety/patient experience work is the chance that the former will be under-resourced – significant new work being covered under the old budget. But the alternative, I believe, is worse.

Our division created a “High Value Care Committee” – a multidisciplinary group co-chaired by an extraordinary young faculty member, Chris Moriates, and our fabulous division administrator, Maria Novelero. In its first year, Chris, Maria, and the energetic committee members have tackled a half-dozen targets, areas in which our practice was costly and added little value: using nebulized bronchodilators when metered-dose inhalers would do, ordering far too many ionized calcium laboratory studies (at $100 a pop), leaving patients on proton-pump inhibitors for far too long (or putting them on inappropriately in the first place), excessive and near-reflexive use of telemetry beds. Some of our choices were informed by the lists produced by the ABIM Foundation’s “Choosing Wisely” campaign, while others were chosen by the committee after brainstorming and literature review. As Chris described at the recent SHM meeting, the results to date are impressive, including a nearly 50 percent reduction in the use of nebs. More importantly, these projects have gotten the attention of our trainees (who increasingly find cost awareness “cool”) and the other services in our medical center. I will be surprised if other major departments, and the medical center itself, don’t launch equivalent committees within a couple of years.

The High Value Care Committee’s work “lives” under the umbrella of our QI director, Michelle Mourad, and we treat it as one of the components of our quality work, along with safety and patient satisfaction. (The nomenclature is a source of perpetual confusion. I think of value as being the integration of quality, safety, patient experience, and cost. Yet the oversight committee is often called a “quality” committee, and the cost/efficiency group is often called a “value” committee. As we did, these choices should be made pragmatically, and based on local culture and preferences.) As hoped, keeping the work connected has created many synergies (such as shared personnel, data, and infrastructure), and a high level of physician engagement. As this work goes medical center-wide, I will lobby to stick with the same philosophy: not to wall off cost-reduction in a corner of the organization (such as under Finance, which would disenfranchise the clinicians) but to make it a critical component of our value improvement activities.

Another part of the jigsaw puzzle – one I didn’t anticipate – comes in the form of Lean. Many healthcare leaders, most prominently Virginia Mason’s Gary Kaplan, have embraced Lean with near-religious fervor, to great effect. At UCSF, under the leadership of Adrienne Green, a hospitalist and the medical center’s Associate CMO, we’re just beginning to use it to attack complex processes. One of our first Lean projects involves mapping out all of the wasteful steps in our discharge process. As you know, Lean’s philosophy begins with this kind of mapping, followed by identification of non-value-added steps to be purged. While I worry that Lean is being a bit overhyped, it is a powerful tool to address complex, multifaceted, multidisciplinary processes. I’m quite sure that every healthcare organization will need to adopt it, or some similar methodology, to help organize its cost and waste reduction activities in the next few years.

So this is another part of the puzzle that needs to be solved: some efficiency activities will resemble the ones that Chris and Maria are working on: attacking discrete targets like overused nebulizers, CT scans, or laboratory tests. The steps here are relatively straightforward: choose the target (via literature review, inclusion in Choosing Wisely, or faculty consensus), analyze the consequences of overuse (including cost but also patient harm and wasted clinician/patient time), build a campaign around curtailing its use (including education, audit and feedback, computerized decision support, administrative or other barriers to use, and perhaps incentives), anticipate and address pockets of resistance, analyze the outcomes, disseminate them (if the program worked; retool if it didn’t), and implement a strategy to maintain the gains.

This process works well when you’re trying to get the docs to order fewer hematocrits, but is all but irrelevant when you’re trying to improve the registration process. For the latter, a Lean-type effort will be necessary. Whether the same committee manages both of these kinds of programs is going to be determined by local circumstances, including the interests and skills of the leaders. For our division, Chris and Maria’s committee is currently driving the target-specific work, while Adrienne and the medical center are managing the Lean projects. My hope is that we will ultimately integrate the two types of work under a single structure, though the Lean projects, particularly the big ones, involve so many departments and disciplines that they are likely to require co-management at a higher level of the organization.

Value org chartClick to enlarge

Yes, culture does trump strategy, and a great org chart will not guarantee a great program. But a bad one can nearly guarantee failure. As we move aggressively into value improvement, making sure this work is organized and resourced correctly will markedly increase the odds of success.

And succeed it must. Given the estimate that 30 percent of healthcare expenditures produce no benefit for our patients, we are, quite literally, Too Big to Fail.

Robert Wachter, MD, professor of medicine at UCSF, is widely regarded as a leading figure in the patient safety and quality movements. He edits the federal government’s two leading safety websites, and the second edition of his book, “Understanding Patient Safety,” was recently published by McGraw-Hill. In addition, he coined the term “hospitalist” in an influential 1996 essay in The New England Journal of Medicine and is chair of the American Board of Internal Medicine.  His posts appear semi-regularly on THCB and on his own blog, Wachter’s World.

11 replies »

  1. While UCSF may be trying to bring down costs, who benefits? Surely they do not pass on the cost savings to the patients. Under my insurance plan a simple two view X-ray at UCSF is $375, at a nearby radiology center it’s only $45. A lower spine MRI at UCSF is about $4,000, at the radiology center it’s about $475. I saw a student physical therapist and got charged $300. I saw a PA for three minutes in urgent care–$400.
    Hospitals are big business, many have turned their emergency rooms and urgent care centers into big profit centers. Some have discontented most of their services and only offer the most profitable services.
    One of the most irksome things as a consumer is the inability to get pricing from a hospital in advance. I’ve called and tried to get pricing from UCSF but I’ve been told they don’t know… that’s if they return my calls at all.
    O.K. I’m done ranting.

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  3. It’s a start. But as others have noted above, until the costs/pricing are (a) visible to all; (b) attached to shared decision making, root and branch; and (c) embraced from the C-suite to the admit desk … it ain’t soup yet.

    I had the pleasure of talking to Chris Moriates and his UCSF colleagues at HM13 as part of my work for The Hospitalist. I hope that he, and other young guns inside the US hospital system, can drive some change in HIT vendor thinking (yes, Epic/Cerner/et al, I’m talking to you) and in the admin-brains running academic hospitals today.

    It’s important to be able to manage revenue. However, as a patient, I think it’s even more important to help us help YOU figure out if you’re actually delivering value for that revenue …

  4. Typical health-tech cost reduction idea conversation:

    StartUp: “We have a great way to decrease costs significantly and increase patient satisfaction, it’s ____.”

    Hospitalist: “Awesome idea. We just gave Epic $165 million dollars. Again. Does it integrate to that?”

    Epic: “F*ck you. No one gets to enter our market. Integration questions closed. Now kindly piss off.”

    Hospitalist: “So what did Epic say? Nice guys, right?”

  5. In addition to the need for both internal and external price and quality transparency tools, we need doctors to view knowing and caring about the cost, quality and effectiveness of services, tests, procedures and drugs before they order or prescribe them as an important part of their job. Of course, to do that, we need to put all the appropriate information at their fingertips in a user friendly and easily accessible format.

    It should be easier for salaried doctors to change their behavior in this manner, especially if they are hospital employees as opposed to private docs with hospital practice privileges. For fee for service doctors who might perceive a greater threat to their income, it will be more of a challenge.

  6. This all sounds great in theory, but when will hospitals agree to share meaningful, standardized cost and quality metrics openly, on the Internet, with employer payers as well as individuals? Purchasers and patients desperately need this information to make informed choices about where to purchase and seek care. (And, by the way, it is entirely possible to control for the complexity of cases when calculating these metrics.) Also, why aren’t doctors above a certain age (65 or 70, say) tested for basic physical and cognitive competence, like airline pilots? Only this type of willingness to undergo scrutiny and provide transparency will truly revolutionize healthcare. As long as the healthcare industry is veiled in protectionism nothing will really change.

  7. As a patient at UCSF and a Quality Program leader at a Health Plan, UCSF does some things right and some things wrong. The doctors outside of the hospital need to work on Customer Service…if they are not pleasant to people then patients, including myself, are reluctant to visit them. UCSF, just like many similar institutions (Stanford) do not understand how to optimizerevenue. It’s really quite simple but the size of the organization overstates the complexities of simple to implement stratagies. Contact me for further explanation.

  8. Hospitals’ $84B of annual medical equipment expenditures are one area for cost reduction that Dr. Wachter didn’t highlight as an opportunity for hospital cost savings. Hospitals typically focus on the cost of new equipment but 75% of the $81 B is spent after the initial purchase–on service, maintenance, and disposition–frequently at the mercy of equipment manufacturers.

    Hospital executives have little or no data transparency relative to the fair market prices for the equipment they buy every year, the fairness of the trade-in values they are offered from manufacturers, cost-efficient alternatives for service needs, and the true incremental clinical value of the “new new” equipment seductively laid out to them by equipment reps.

    As a result, estimates are that $10 B of the $81 is wasted. What does it mean to hospitals? About $11 K per bed per year.

    In our personal lives, none of us would buy a car or accept a trade-in offer without getting some comps from Edmunds or the Kelley Blue Book. Its time that hospital executives do the same when making medical equipment spending decisions.


  9. Bob,

    As a physician and consultant to hospitals in quality processes, I often find myself asking if the changes being advocated now are really so different from those from the past. Operational redesign, looking for wasteful steps, assessing cost vs benefit of various medications and procedures and designing best practices, utilization protocols and review committees are really nothing new.

    Whether it was managed care organizations trying to increase their profit or ACO’s trying to retain the largest share of their premiums possible, it doesn’t seem that different.

    The two critical differences that I can tell have much less to do with issues around profit motive or a desire for operational improvements, but rather the public emphasis that has been placed on quality – by transparency measures which are publicizing information – and by the linkage of cost/payment and quality.

    The concern I have now is if we’re dumbing down the process so much that poor proxies are being used to assess quality. Much like focussing on resident work hours to reduce medical error rates and finding no change and actually a ‘paradoxical’ worsening, it seems that much attention is paid to process measures (i.e. did a blood glucose get measured for a diabetic patient) as a measure of outcome (ie 30dy readmission rates), when both seem to be fairly crude measures of actual quality and neither may address some of the cost issue.