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A pivotal role for physician executives.

A Pivotal Role for Physician Executives

Some have said that true leaders are born, not made. But this idea no longer makes sense in the health care industry. Managing billions of dollars of resources (personnel with complex technical skills and equipment embodying numerous complex technologies) requires a sophisticated blending of skills that synthesize the principles of economics, finance, accounting, organizational development, marketing, quality improvement, and other traditional business disciplines. Yet, the true challenge for physician leaders will be to blend their clinical and management skills into a responsible vision and strategy for the future. Their expertise will be essential to resolving the paradox of excess and deprivation that is today's United States health economy, where we spend much yet exclude many.

The present system of health care financing is unfair. It provides most people--those who are regularly employed by a medium-sized or large employer--with coverage either at no cost or at prices subsidized by the employer and the tax system. The system denies coverage to millions of others--seasonal and part-time employees, self-employed persons, widows, divorcees, early retirees, the unemployed, workers in businesses considered by insurers to be risky, and others whose employers choose not to provide health care coverage--for no good reason.

In the past, our open-ended financing system provided a ready source of financing for those who could not pay, even if it did not ensure equitable access to care. Hospitals simply raised their charges to those who could pay in order to cover the costs of those who could not. In recent years, afbkrts by employers and the government to contain costs have attacked this means of support for "uncompensated care." Physicians and hospitals have come under increased financial pressure to develop strategies to avoid caring for those who cannot pay. Many who cannot pay turn to public providers of last resort, such as county hospitals. But these institutions and their management teams are also under increasing financial pressure as public finances are strained and the numbers of the uninsured increase.

The present health care system is wasteful in many respects. We have spend little on evaluating medical technology, and there is much uncertainty about efficacy of technology already in use. [1,2] Much care appears to be of unproved value. [3,4] There is uch duplication and excess capacity in our medical facilities. We cherish efficiency and fairness, but we have a system that is neither efficient nor fair. We value quality, but we have a paucity of information upon which to make judgments on the quality of care. Very few Americans believe that other Americans should be deprived of needed care or subjected to extreme financial hardship because of an inability to pay. Yet we have failed as a society to create institutions that assure all persons the opportunity to obtain high-quality care when they need it and without an excessive financial burden.

The physician leader must understand these paradoxes and have the academic, intellectual, and creative resources to contribute to development of a comprehensive strategy to improve the health care system. Partial interventions can produce negative consequences or be rendered ineffective by developments elsewhere. Attempts to contain costs by the cost-conscious choice of managed care systems will be fruitless if, somewhere else, open-ended demand is bidding up the prices and access standards that the managed care systems must meet.

The problems of achieving equity and efficiency while improving quality are intimately related. Attempting to promote efficiency by making everyone conscious of costs conflicts with providing cross-subsidies for uncompensated care, but it is compatible with theories of continuous quality improvement. To rationalize these seemingly conflicting incentives, health care leaders in the '90s will need, first, to provide financial protection from health care expenses for everyone, either through enrollment in comprehensive health care financing and delivery plans or, for the irreducible minimum of people, through public providers of last resort.

Second, these leaders will be called upon to promote the development of economical financing and delivery arrangements. There is ample evidence that efficient prepaid group practices can reduce the cost of care by 10 to 40 percent, compared with open-ended fee-for-service practices. They have done this even without competition from other HMOs in order to serve cost-conscious purchasers. [5,6] There is good reason to believe that competition to serve cost-conscious purchasers could motivate cost-reducing innovation and slow the growth of health care spending.

Third, physician leaders will be challenged to develop strategies for reducing the cost of care while improving its quality. We would suggest that they look to the writings of W.E. Deming, Joseph Juran, David Garvin, and Donald Berwick, among others, to learn about the powerful theories and techniques of statistical quality control and continuous quality improvement. [7,8,9,10] In the '50s, Deming and Juran contributed to and shaped the industrial quality revolution in Japan, giving rise to enormously successful companies such as Honda, Toyota, and Sony. Garvin has been writing about the link between business strategy and continuous quality improvement, while Berwick has made the crucial connection between quality improvement and its applicability to health care.

Continuous quality improvement theories and techniques require those in health care to abandon the traditional notion that more money buys better quality. The Japanese industrialists have demonstrated that by eliminating the costs of poor quality--scrap, rework, and senseless duplication of effort--overall quality improves and costs decrease. Ipso facto, overall efficiency and allocation of resources improves. However, the success of this approach is not accomplished easily or quickly. The Japanese embarked on their quality effort by making a total management commitment to improve quality, a complete and deeply rooted cultural change for a country whose products produced prior to 1950 were known for their poor quality.

In health care and elsewhere, continuous quality improvement asks us to look at the many complex processes that translate inputs into outputs. It challenges us to consider the production of health care as a series of complementary processes influenced by a broad matrix of individuals, both clinical and nonclinical. It asks us to think in terms of process and system efficiencies, to question what can be done to improve the process of getting a patient from point A to point B. It requires that we abandon the notion of finding "bad apples" who can be blamed and focus our attention on weaknesses in the process that prevent people from doing a good job.

Continuous quality improvement techniques will provide managers a strategy for improving the clinical outcomes of care as well as the overall management of health care. As more and more clinical outcomes are measured and their validity and quality becomes ranked on a relative scale, employers and consumers will have more empirical data upon which to make their health care choices. More information will enable purchasers to make better informed, cost-conscious decisions knowing the relative quality of different medical procedures.

Physician leaders of the '90s must recognize that continuing on the present path sill produce results that are increasingly unsatisfactory: more and more people lacking coverage, expenditures rising to intolerable levels (15 percent of the gross national product and beyond), and little confidence that money is being well spent. The country needs physician leaders with management as well as clinical training if we are to tackle and resolve these problems and successfully provide the public with efficient, equitable, high-quality health care at a price we can afford.


[1] Eddy, D. "Variations in Physician Practice: The Role of Uncertainty." Health Affairs 3(2):74-89, Summer 1984.

[2] Wennberg, J. "Dealing with Medical Practice Variations: A Proposal for Action." Health Affairs 3(2):6-32, Summer 1984.

[3] Siu, A., and others. "Inappropriate Use of Hospitals in a Randomized Trial of Health Insurance Plans." New England Journal of Medicine 315(20):1259-66, Nov. 13, 1986.

[4] Winslow, C., and others. "The Appropriateness of Carotid Endarterectomy." New England Journal of Medicine 318(12):721-7, March 24, 1988.

[5] Luft, H. "How Do Health-Maintenance Organizations Achieve Their 'Savings'? Rhetoric and Evidence." New England Journal of Medicine 298(24):1336-43, June 15, 1978.

[6] Manning, W., and others. "A Controlled Trial of the Effect of a Prepaid Group Practice on Use of Services." New England Journal of Medicine 310(23):1505-10, June 7, 1984.

[7] Deming, W. Out of the Crisis. Cambridge, Mass.: MIT Center for Advanced Engineering Study, 1986.

[8] Juran, J. Managerial Breakthrough. New York, N.Y.: McGraw Hill, 1964.

[9] Garvin, D. Managing Quality: The Strategic and Competitive Edge. New York, N.Y.: The Free Press, 1988.

[10] Berwick, D. "Continuous Improvement as an Ideal in Health Care." New England Journal of Medicine 320(1):53-6, Jan. 5, 1989.

Alain C. Enthoven, PhD, is Professor and Carol B. Vorhaus, MBA, is a Research Associate, Stanford University, Stanford, Calif.
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Title Annotation:health care delivery
Author:Vorhaus, Carol B.
Publication:Physician Executive
Date:Jul 1, 1990
Previous Article:Status quo won't work.
Next Article:Why physician managers fail - part two.

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