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What kind of information will be required if we are to reform health care?

In confronting the informational needs implicit in health care reform, we must address quality improvement and cost management. The goal of quality management is to meet or exceed the expectations of the customer (i.e., patients, providers, policyholders, and external or internal customers). The technical aspects of care and how it is appreciated are the prime indicators of quality. Cost management is also essential to enhance value - a relationship of quality, efficacy, and cost-effectiveness.

A common point in discussions at a recent seminar on health reform[2] was that we can no longer rely on cost-shifting to providers (prospective payment), cost-sharing with patients (increasing their out-of-pocket expenses), or variance (outlier) analysis to solve our health care problems. Rather, it was suggested that we will effect change through management. Goldfield stresses that information is a product and that a broad definition of cost-benefit is an obligation.[3] Quoting from the President's Commission for the Study of Ethical Problems[4]: "The level of care that is available will be determined by the level of resources devoted to producing it. Such allocation should reflect the benefits and costs of the care provided. It should be emphasized that these benefits as well as their costs should be interpreted broadly and not restricted only to effects easily quantifiable in monetary terms. Personal benefits include improvements in individuals, functioning and in their quality of life and the reassurance from worry and the provision of information that are a product of health care."

A proposal of the American College of Physicians establishes that it is "committed to informed, data-based decision making. This philosophy underlies health care reform. Informed decision making requires data systems to support excellence, not only in medical practice, but also in planning, policy development, and system administration."[5]

The informational needs are becoming clear. How does one determine cost-benefit? How does one become truly informed? Then there is the a priori question: What data are needed?

Cronin and Milgate provide some answers to these questions.[6] Alluding to a position of the Washington Business Group on Health, they point to a series of paradigm shifts that characterize the current situation in health care:

* Fragmentation to Integration.

"Individual practitioners currently deliver care without the benefit of standardized practice information or systematic knowledge of both the process of ongoing care or care outcomes, particularly if it involves multiple practitioners and treatment sites.

"The development of new information systems, the maturing concept of management based on cooperation, and the potential integration of all health care partners will allow movement toward a unified system capable of combining a variety of heretofore isolated delivery system elements."

* Passive Participation to Active


"Patients will be expected to make informed choices about their care, work with practitioners to design and follow appropriate treatment plans, and take responsibility for preventing illness. Providers will actively use the system's information, respect patient preferences, and facilitate approaches to care that include overall health indicators. Purchasers will develop selective and evaluative criteria to provide better care for their members."

* Paying for Services to Buying


* Shifting Responsibility to

Taking Responsibility.

* Focus on Sickness to Focus on


Brown has addressed one of the approaches to health care reform being considered in the U.S. Congress (Health USA Act of 1991, S. 1446, 102nd Congress, 1st Session).[7] This health care reform proposal establishes an all-payer system of fee schedules and expenditure targets-capitation payments or salary, coupled with tax (as opposed to employment) financing., and a broad, uniform package of benefits. He states, "To help physicians keep within expenditure targets, the state program would provide them with profiles of their own practice patterns and would send appropriate practitioner associations at each expenditure-target level the profiles for physicians within their grouping."

If the need for information is so fundamental, where is it? The information we have is scanty or narrow in focus or scope (e.g., it may only tell us about hospital expenditures when the full episode of care should be evaluated). It is unavailable when we need it most. For instance, doctors, unfamiliar with a particular patient, are often hampered by not having a clinical database index or summary available at every documentable point of contact with the patient. This creates rework and duplication. It also contributes to depersonalization in health care.

An explanation for this information crisis can be found as we review historical trends in the evolution of health care[8]:

Phase I. Autonomy. Health care began as a cottage industry characterized by solo practice, paternalism, and virtually no sharing of information, except as anecdotes. This phase was not conducive to epidemiologic research in the real world of medical practice. In other words, it contributed little to medicine's collective intelligence.

Phase II. Insurance. Because catastrophic illness was devastating the personal finances of the unfortunate in the second decade of this century, the concept of insurance was born. It would minimize the risk of catastrophic illness by spreading that risk across the community of interest. Phase II, however, also had an untoward informational effect. For example, it left us with a database of chargeable items, many of which were inflated (up-coded, unbundled, etc.) and reflected care that was unnecessary or unhelpful. Furthermore, insurance does not consider such holistic issues as adverse life-style choices and social or educational needs, thereby creating informational gaps for the health care manager. Also, as insurance companies and managed care organizations began directing patients through financial pressure or restrictive networks to certain doctors and services, health care became fractionated and depersonalized. Information systems could not keep up with this diversity and complexity. This led to managers, "drilling down" on available data in order to identify outliers and "refine" their networks. This effort failed, as shown by the next phase.

Phase III. Utilization Review/ Utilization Management (UR/UM). The industry responded to the bad news of rising costs and varying quality of health care by putting providers at risk and by asking consumers to bear part of the cost. These are not quality improvement strategies. They are not concerned with access, fairness, helpfulness, or equity in the distribution of scarce health care resources. Moreover, they do not help explain variations in medical practice that exist between communities and physicians.[9]

This phase fathered "coordinated" or "managed care." But, while it provides second opinion programs, preadmission testing, and outlier analysis, it does not keep track of the individual patient, unless his or her health costs are extraordinary. How this phase convinced the medical community it was managing care is a mystery! This entire approach lacks cohesive information about what ails patients or about their expectations or progress. It is insensitive to severity of illness (case mix), quality of life, and the full episode of care. Basing judgments on deficient information impairs analysis of quality and cost-effectiveness, ultimately corrupting our ability to manage care.

Phase IV. Managed Care. For managed care to improve the cost effectiveness, efficacy,[10] and quality of health care, it cannot be bogged down by inspection and reproach, typified by the UR/UM procedures in the third phase. Continuous quality improvement,[11] as a concept, is an alternative because it empowers us with new knowledge about health care process and outcome. Its method is akin to field research and therefore familiar to us in medicine. For example, it is replete with statistics, epidemiology, and cogent observation. Finally, as espoused by Crosby, Juran, and Deming in postreparation Japan, it questions "what" rather than "who."[12,15] This technique empowers customers with information. It lends itself to system improvements that, in turn, stem from common or root causes.

Phase V. Managed Health. Using information as a tool and uniting it with inference and forecasting, we can become proactive.[16-17] This will position us to support optimal medical practices.

In profiling its customers, the American Express Company uses available data (customers, charges or buying histories and demographics) to modify its marketing strategy. This is knowledge-mining. The analogy in health care would be the use of information we glean from the study of process and outcome to anticipate medical problems, avoid duplication of tests, and provide smart interventions.

The evolution in health care has brought us out of the stage of autonomy into the realm of possibility of knowledge-mining and collaboration. This is what is implied when the quality gurus admonish us to: "Do it right the first time!" "Avoid rework and duplication." "Empower the worker with information." Health care is a multidisciplinary industry without a cogent inventory. What other business is so ignorant of its processes and results? There is an exception, however. The singular field in health care that shares in protocol development and standards is oncology. It benefits enormously from observation of daily practice. All of the health care field would benefit from emulation of oncology's example. Let us learn from what we do, and do what we learn as a community.


[1.] Kaplan, J., and Brophy, J. "Informed Decision Making - An Essential Metamorphosis in Health Care." Medical Interface 5(5):62-70, May 1992.

[2.] "U.S. Health Care Reform: Its Impact for Clinicians and Providers., Presentation at the National Institute on Health Care Leadership and Management, American College of Physician Executives, November 17, 1992, Indian Wells, Calif.

[3.] Goldfield, N. "Why We Cannot Agree on the Direction of Health Reform: An Exploration of American Values" Physician Executive 1894):16-22, July-Aug. 1992.

[4.] Presidents Commission for the Study of Ethical Problems in Medicine and Biomedical and Behavioral Research. Washington, D.C.: U.S. Government Printing Office, Washington, D.C., 1983, p. 36.

[5.] Scott, H, and Shapiro, H. "Universal Insurance for American Health Care - A Proposal of the American College of Physicians." Annals of Internal Medicine 117(6):511-9, Sept. 15, 1992.

[6.] Cronin, C., and Milgate, K. "Organized Systems of Care - A Vision of a Future Healthcare Delivery System." Health Progress 73(8):22-8, Oct. 1992.

[7.] Brown, E. "Health USA - A National Health Program for the United States." JAMA 267(4):532-3, Jan. 22-29, 1992.

[8.] Kaplan, J. "Managed Care Is a Continuous Quality Improvement Process, Leading to Managed Health." Medical Interface 5(10):25-6, Oct. 1992.

[9.] Chassin, M., and others. "Does Inappropriate Use Explain Geographic Variations in the Use of Health Care Services: A Study of Three Procedures." JAMA 258(18):2533-7, Nov. 13, 1987.

[10.] Kaplan, J. "Efficacy - The Real Bottom Line in Health Care." HMO Practice 3(3):108-11, May/June 1989

[11.] Couch, J., Editor Health Care Quality Management for the 21st Century. Tampa, Fla.: American College of Physician Executives, 1991, pp. 132-3, and personal communication.

[12.] Crosby, P. Quality Is Free: The Art of Making Quality Certain. New York, N.Y.: McGraw Hill International Book Co., 1979.

[13.] Juran, J. Managerial Breakthrough. New York, N.Y.: McGraw Hill International Book Co., 1964.

[14.] Deming, W. Out of the Crisis. Cambridge, Mass.: Massachusetts Institute of Technology, Center for Advanced Engineering Study, 1986.

[15.] Leonard Rubin, MD, Kaiser Permanente, personal communication, 1975.

[16.] Kaplan, J. "Real Time Management Technology: Improving Accountability, Efficiency a Effectiveness." Presentation at Group Health Institute, June 12, 1990, Group Health Association of America.

[17.] Kaplan, J. "Accountability, Efficiency, and Effectiveness." Medical Interface 3(5):13-7, May 1990.

Jeffrey Gene Kaplan, MD, MPS, is Corporate Medical Director, Blue Cross/Blue Shield of Western New York, Buffalo. He is a member of the College's Forum on Medical Informatics and its Society on Managed Health Care Organizations.
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Author:Kaplan, Jeffrey Gene
Publication:Physician Executive
Date:Oct 1, 1994
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