Innovation in Practice: Case Study in Health Care (Part 2)

In my last post, Are You Ready for an Innovation Initiative?, we discussed three main capabilities that need to be in place to give innovation initiatives a chance of success.    In this piece, I want to illustrate a live example.  This one is in the field of Health Care.

First some background

Xavier just hosted a one day conference on the Future of Health Care.  As some may not be aware, this is an industry in the throes of dramatic change, driven significantly by the Congressional passage of the new Affordable Care Act (ACA).  Everyone is aware of the continuing rise in overall health care costs (which now surpass $17.6% of total US GDP).   In a nutshell, the government (which pays about 35% of this total bill through Medicare and Medicaid) is seeking to restructure the way reimbursement payments are made to health providers.  Historically, providers have been compensated per transaction.  In other words, the more patients you see, and the more procedures you administer, the more money you get.   The ACA reforms seek to reimburse based on OUTCOMES rather than on transactions.  So if it is less costly to treat someone as an outpatient, or for the hospital to reduce the number of re-admissions, then we want to create incentives to encourage lower cost solutions that produce good health outcomes.

The ACA contemplates reimbursements to health providers more on the medical conditions they are treating, than on the discrete procedures they execute.  As you may appreciate, this turns health care almost upside down.  Hospitals that have made massive investments in buildings and the latest equipment and medical technology have always thought about how they could keep them filled with patients.  Under the new law, they could be penalized for filling hospital beds if, for example, in-home health care might be as effective and less costly.

Most Health delivery systems are figuring out that they need to change, dramatically and quickly . . .  but how?

Innovation Case Study

The Centers for Medicare and Medicaid Services (CMS) in Washington first created its own Innovation Center whose mission is to educate and encourage transformation in our health delivery system.  Toward this end, they started what they call Pioneer Accountable Care Organization Model.  From a large number of applicants, CMS chose what it felt were 32 of the most innovative health systems from around the country to operate under the new reimbursement model.  The hope is that as they innovate in new delivery strategies, they can serve as examples for other health systems to emulate.

This is a good example of what I called in my last post, “A Supporting infrastructure”.

At Xavier’s conference, there were two presentations that I felt were stunning.  One was by the Dartmouth-Hitchcock ACO (one of the 32 initial Pioneers) and St. Vincent’s Health System (headquartered in Birmingham Alabama) who was not selected, but is innovating in big ways none-the-less.  You can download both presentations from the Xavier conference web site (see link above) at the first paragraph.

Here is what St. Vincent’s did (you should really read their PowerPoint slides).

1)      Engaged in an open and honest strategy process that defined a call to action.   They looked at their internal data, and the drivers shaping their industry.   They reached by themselves the conclusion that NONE of the following could be sustained:

  • The size of the growing Federal Deficit
  • Spending more than 17% of GDP on health care
  • Growing Medicare and Medicaid budgets
  • Seeking to transfer more costs to employees and employers

2)      They created a STRATEGIC GOAL – to transform themselves by changing their health delivery system – “bending the cost curve”, and creating processes that could improve quality of that delivery.

  • And they built a business plan (financial plan) that ASSUMED REDUCED IN-PATIENT SERVICES (forcing themselves to develop new revenue and cost solutions)

3)      Senior Executives decided on a three-pronged approach.    These were to  Cut Costs, Restructure the Business, and Restructure their Clinical Practices.

4)     They formed focused teams to work in physician integration, clinical integration (coordinated care) and process re-design.  These were intended to focus on shifting from what St. V’s called “Provider-Centric” (transaction based) to “Person-Centric” where the health care system was expanded to consider community and family support and deepening trust relationships between patient and care providers.

  • They also defined different care strategies based on the patient group  (elderly, healing and chronic, poor and vulnerable, young and invincible, parents with young kids)

5)  They re-defined Care Giver Roles to re-shape clinical protocols (changing the role of doctors, nurses, and other “physician extenders”.  (this was arguably the idea that caused the biggest shift in process performance.)

  • They created a position of Clinical Nurse Leader (CNL) to focus not on performing daily traditional “nursing duties” but to focus on overall patient outcomes in quality and safety – integrators of provider resources.
  • They piloted on 6-West (a 24 bed medical surgical unit)  (start small, prove concept, and build out from there)

The early results

In the pilot program the 24 bed unit demonstrated over $3.5 million in cost savings/cost avoidance benefits.   Staff, patient, and physician satisfaction scores rose to not-before seen levels.

Ensuring Sustainability

With these initial impressive results, the teams took some of the following steps to help ensure sustainability. They…

1)      Established new metrics and scorecards that helped encourage “right behaviors”

2)      Created an annual planning process – identifying new areas for improvement and setting new goals

3)      Documented and trained to new process ideas (they reduced time to discharge a patient by 50% through procedure changes – as one example – thus increasing patient throughput.)

4)      Spread the gains – (taking the new successes and implementing system-wide)

So there you have it . . . DRASTIC change in an environment that has a bias toward conservatism and caution about change.  It worked because it was a strategic imperative, with the full support of senior execs; they invested in creating teams to work on the elements of the problems they felt would have the most impact; they were willing to abandon all preconceptions about how they had done things in the past (including systems process budgets and metrics); and used inspired, passionate people to lead the initiatives.

There is much more to the story.    You might consider reaching out to Jan Radcliff and Nan Priest at St. V’s.


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Filed under Innovation, Strategy, Systems Thinking

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