Considering Cost and Quality

In our June 2015 Intelligence Report, 80% of healthcare leaders indicated that cost containment efforts were not negatively impacting quality of care, although 10% said quality had declined. HealthLeaders Media Council members discuss efforts to maintain quality.

This article first appeared in the December 2015 issue of HealthLeaders magazine.

Chris McLean
Chief Financial Officer
Methodist Le Bonheur Healthcare
Memphis, TN

We're big believers in the balanced scorecard. We have financial measures, quality measures, and service measures that measure consistently in reporting. We don't just report the financials each month—we track over 100 quality measures, as well as service measures like patient satisfaction and employee engagement.

We keep an eye on measures as they roll out. If we see a decline in our quality measures, we do a deep dive into what's causing it, and if any cost reductions are part of the problem, we'll make adjustments. And one of our mantras is that the easiest way to reduce costs is to not add unnecessary costs.

Benchmarking is a big part of our quality control and cost containment. We don't just benchmark against ourselves, but against other not-for-profit and even some for-profit healthcare entities. We're open to learning as many best practices as we can so we can implement them.

Change management is always the hardest part of cost containment—we have to convince ourselves that the goals are achievable, and convince our leaders and the frontline staff that the changes make sense. Even when transforming just one area of a given hospital, you must stay diligent to ensure the change is properly implemented.

Mark Herzog
President and CEO
Holy Family Memorial
Manitowoc, WI

Holy Family Memorial is deeply committed to process improvement methodologies. When we decide that we need to change processes to accommodate new operating realities, our extensive use of process improvement takes into consideration that the change will add value for customers, including safety and quality, as opposed to detracting from them.

Continuing changes in payment methodologies do, however, impact on patient access and quality, and providers' efforts to ensure continuity and safety are challenged.

What frequently happens is that patients think that Medicare or their insurer is going to cover something expensive—for example, a month of their stay in the nursing home—and later learn that they are not covered.

In the nursing home example, Medicare frequently points out that they were not an official inpatient at the hospital for three nights—possibly, they left the hospital before midnight or were marked as being under observation. This affects the willingness of the patient to be admitted to the skilled nursing facility—for many of these patients, if their stay is not covered, they're going home. Some patients forgo necessary tests or treatments for similar reasons, too—and high-deductible plans are a cause of this as well.

Reza Kaleel
Chief Operating Officer
St. Mary's Medical Center
Grand Junction, CO

We try to focus very carefully on our cost-containment initiatives, always being careful to balance them with any downstream effects they might have. But in many cases, reducing costs can actually improve quality; by removing added steps in a complex process, you may remove some of the reasons why errors were made in the first place. I think that, in most cases, reducing costs will not automatically impact quality.

We have multiple cost-saving initiatives in our hospital. Perhaps most important is our comprehensive throughput initiative. We've been closely examining all the steps in the value stream from the point that the patient accesses us and removing non-value-added steps. We also are utilizing a dashboard of key process indicators we monitor to identify where we have the most opportunity to save money or improve our process.

The greatest barrier around sustainable cost reduction is the assumption many people tend to make: that if costs are driven down, quality will automatically be reduced. So, a challenge for us is trying to educate and bring along people in control of a lot of those costs that, no, we're not trying to make changes that are going to impact quality or safety in the negative—here's why we don't think it will, and then make our case for why these changes will actually improve quality and safety.

Ken Lewis, MD, JD
President and CEO
Union Hospital
Elkton, MD

On the value of improving care: Frankly, the best way to reduce cost in the long run is to improve quality. We do this using the Lean process model; when waste is eliminated or clinical outcomes are improved, that reduces the cost of care in the long run.

I realize costs can be reduced by cuts in labor and services, and certainly we look at contract negotiations and our supply chain for savings, but we believe that broader initiatives to improve quality are actually the heart and soul of true cost-reduction efforts.

On improving process improvement: We're moving away from a top-down senior executive–driven leadership and process model to a middle management and frontline model. Many hospitals have a committee structure that sometimes overemphasizes analysis or is not anxious to move forward with changes.

At our hospital, we do rapid-cycle testing to quickly assess whether or not a proposed quality initiative will have an impact. It's also key to make good on the ideas by providing resources needed to analyze data from those workers and come up with the best methodology to achieve change. Don't just sit on the data—use it.