Pushing Toward Value-Based Care? Try Incentives, Scorecards

A white paper from Press Ganey shows how to build the metrics for value-based care, and how to find the right incentives to help the transition.

Thomas H. Lee, MD, CMO at Press Ganey Associates, is a big fan of balanced score cards and incentive programs as critical tools that can help health systems transition from volume to value.

When balanced score cards first emerged in the 1990s, Lee says, the business sector then was much like the healthcare sector is now.

"There was lots of turmoil and mergers and new kinds of strange bedfellows were being thrown together and they needed tools to show what they were trying to accomplish as an organization," Lee says in an interview with HealthLeaders.

"That's where we are in healthcare today. We've got healthcare systems from organizations that were bitter rivals, and we've got newly named organizations that don't mean anything because they're brand new and they picked the words out of some marketing exercise."

Problems arise, however, when health systems attempt to transfer those "lofty" transitional aspirations to clinical care, Lee says. To help with the transition, Press Ganey has issued a white paper that offers suggestions on how to build a balanced scorecard that will measure the metrics that are important for organizational success, and how to find the incentives to help achieve those metrics.  

Lee spoke with HealthLeaders. The following is a lightly edited transcript.

HLM: What do you hope to accomplish with this white paper?

Lee: A lot of organizations in healthcare are recognizing the need for fundamental change. It's easy to say "transformation." It's harder to actually execute on it. This is about going from that lofty goal to tactics. If you're going to change, how do you measure, and then what do you do that makes what you're measuring improve. That is what we set out to do, to go from talking about transformation to being tactical.

HLM: What is the most common mistake that hospitals might do in this transition?

Lee: It's getting overwhelmed and then searching for a single magic solution. We have to be ready to think holistically about how the various performance metrics track back to having an engaged workforce. That is an integrated way of looking at things but it is challenging and complex. Don't be overwhelmed and don't look for simple solutions. With complex problems, you break them down and make progress on them.

HLM: How do you determine the correct incentive program for your hospital?

Lee: In the long run we think that financial incentives work best for financial issues, and nonfinancial incentives are most effective for nonfinancial issues such as quality of care and safety. Some of the most respected healthcare systems in the country—Cleveland Clinic, Mayo Clinic, Kaiser Permanente, Geisinger—all four of them do not use financial incentives for quality. They use nonfinancial peer pressure for quality.

But, not everyone has a culture where nonfinancial incentives can be effective. Recognize where you are in the process of owning the culture. Many organizations need financial incentives just to get people to show up for a meeting. If that is where you are, that is where you are. But, you should recognize where you're trying to go is to create a culture where nonfinancial incentives can be more effective.

HLM: What's the problem with financial incentives?

Lee: We see many organizations around the country regretting what they've done with financial incentives. It's often goal setting that is aspirational, but not realistic, such as every physician has to be at the 90^th percentile or they lose 2%, 3%, 4% of their income. Then, doing it at the individual doctor level. Those are mistakes that we see that have been made, that are still being made.

Incentives financial and nonfinancial, tend to make people upset because they're supposed to put pressure on people.   

HLM: How do you build an effective balanced score card?

Lee: They should be tailored to the organization. These are supposed to be strategic management tools. They're supposed to allow an organization to track something more than their quarterly financial performance. They should also be tracking how are they doing in making progress on the things that should be their competitive differentiators in the long run.

Strategy is based upon what are doing for whom and how are you going to be different? If you are going to be different because your teamwork is superb or you're reliably empathic for patients, then you ought to be tracking those things. You have to ask what is most important for your strategy execution, and those should be the things in your balanced scorecard. They shouldn’t just be the things that are easy to measure.

HLM: What should you keep in mind when you're building this balanced scorecard?

Lee: Organizations and individuals need a goal hierarchy. They need to have clarity on what they are trying to accomplish at the very top. If you don't have an idea of what the goal is, then it's really hard to talk about you're making progress toward your goal.

The successful healthcare organizations that we see put patients first. They are un-ambivalent about it. Meeting the patients' needs is the No. 1 goal. What will help organizations be better and differentiate themselves competitively in their ability to meet patients' needs? That is what the organizations that we see doing the best in healthcare right now do.