What health care can be an expanded role for financial leaders: glimmers of changes to healthcare governance, policy, and financing are on the horizon. How can you be a driver of change?

Healthcare Financial Management, June, 2005 by Paul H. O'Neill

In Pittsburgh and in other places around the country, we have helped hospital leaders perform thousands of hours of observations of nurses, unit clerks, custodians, physicians, supply clerks, and other front-line staff working. The story is always the same: Roughly 40 percent to 50 percent of the staff's time is spent on truly value-added work. About 50 percent to 60 percent is spent working around problems that occur and recur, day after day. In other words, 50 percent of the time and cost is wasted.

In a recent one-hour observation of four staff members at a fine health system, 81 problems occurred in meeting a patient's needs. For only one problem was a solution attempted that might have prevented it from happening the next day to the same patient and staff member, let alone others across the organization and the country. Only one problem was reported in the institution's formal incident reporting system, where it will end up as a data point on a monthly risk management report full of information that is not useful for understanding what happened or how to prevent a recurrence.

This is how we have designed the system. We have conditioned front-line staff to work around problems rather than participate in solving them, and we have assigned quality and risk management functions to small teams of people who can't possibly support effective problem solving across the organization. We sit around in endless meetings with the wrong people trying to create and impose the wrong solutions. Does it surprise us that 50 percent to 60 percent of the potential value of your institutions' resources is being wasted every day?

How can you begin to capture that value? By restructuring approaches to problem solving and process improvement to involve everyone in the organization in three areas of activity geared toward solution:

* Identifying everything that goes wrong

* Rapidly investigating causes and implementing experiments as close to the front line as possible to prevent recurrence

* Openly sharing learning

There are no magic bullets or secret solutions here, just models that have been proven to work in organizations that handle complexity and risk very well. As a point of comparison, Alcoa's 131,000 employees across 43 countries arguably work with much more risk in their industrial production environment than American healthcare workers. Yet today, their lost workday rate of 0.07 per 200,000 work hours is 27 times safer than the rate for the average American hospital.

What Can Healthcare Financial Executives Do?

What does any of this have to do with financial staff in hospitals? In most places, regrettably, not much. In my experience, people trained in finance and accounting are inclined to think in systems terms if they are permitted to do so. Yet I know of no place in the nationwide healthcare system where there is a full-fledged activity-based costing system that links costs to outcomes--work that can and should be done by the financial staff. When was the last time someone from the financial staff in your institution visited a medical floor for several hours to understand the near chaos of the work process and the things gone wrong, and developed the authority of knowledge required to participate with the staff in designing a system for continuous improvement?

How many of your hospitals have a system that identifies every medication problem in real time and takes action to find the root cause? And does something about the root cause, in real time?

How many financial staffs have calculated the wasted money spent in dealing with illegible prescriptions and physicians' orders to target that waste for elimination? Some financial staff may need additional training to do this work, but others are already well equipped.

At one hospital, we helped the staff do an activity-based costing analysis of the inputs and revenues derived from patients who developed central-line associated bloodstream infections (CLABs) in their medical intensive-care units. Management had assumed that since these patients generated large outlier payments, the institution was at least breaking even on these train wrecks. The facts were that on a fully loaded basis, the institution had lost $10 million per year on just three classes of infections, because the costs of providing the care far outstripped the outlier payments. They'd also killed 40 percent of those CLAB patients (that is, 17 people). Happily, we also helped them drop the rate of CLABs in their medical ICUs by more than 90 percent in 90 days, so these savings--human and financial--were not theoretical.

To emulate those results, healthcare leaders must begin to ask themselves these kinds of questions every day, and relentlessly act on them:

* How do we know if we are getting each patient exactly what she or he needs?

* How do we know if something we expect to happen doesn't (or something we don't want to happen does)?

* How do we know if our people are able to solve that problem to its root?

* How do we know if our people have made an improvement?