A Practical Roadmap for the Perilous Journey from a Culture of Entitlement to a Culture of Accountability

By Nate Kaufman, May 4, 2012

In a culture of entitlement there is the belief that one deserves certain rewards, rights and privileges based on tradition or past achievements. In contrast, in a culture of accountability rewards, rights and privileges are only earned based on the merits of one’s current behaviors and actions. The transition from a culture of entitlement to a culture of accountability is a perilous journey for rights and privileges are no longer automatic, the ‘entitled party’ usually feels disappointed, angry, or mistreated.

A culture of entitlement is deeply embedded in the US healthcare system: patients believe they are entitled to state of the art care regardless of their unhealthy lifestyle; physicians believe they are entitled to a high degree of clinical autonomy and historical levels of compensation; hospitals believe they are entitled to be reimbursed at the highest rates in the world regardless of their inefficiencies or the results they produce; and suppliers e.g., insurance and pharmaceutical companies believe they are entitled to high margins regardless of the value they provide to the system.

This culture of entitlement has driven per capita healthcare spending in the US to twice what our “peer countries spend on healthcare (commonwealth fund.) It has driven healthcare costs to a point where neither the public nor private sectors can continue to absorb the historical rate of cost growth. And it has called the question as to whether the U.S. healthcare system is creating sufficient value, i.e., outputs per unit cost.

In recent years, data on the value created by the US healthcare system has become more available and the early numbers are not good. According to McKinsey, “In 2006, the United States spent $2.1 Trillion on healthcare, more than twice what the nation spent on food and more than China’s citizens consumed for all goods and services. In addition, adjusting for economics, health status etc, the US spent $650 Billion more on health care than expected base on comparison to peer countries.  Hospital and physician care accounted for almost 85% of the spending above expected levels, with drugs, health administration and insurance comprising the remained components of excess spending.

The primary driver of this excessive cost appears to be the salaries and revenues of providers and suppliers. For example, McKinsey estimates that for inpatient care, “Revenue per equivalent admission” accounts for $54 Billion in excess costs compared to peer countries. This is driven in part by the cost of nurses who are paid 36% more than their peers in other countries. Drug prices are 50% higher in the US than in other developed countries. Based on a multiple of per capita GDP, primary care physicians in the US are paid 46% more than physicians in peer countries and US specialists are paid 67% more than their peers. It is no wonder that the global fee for a normal delivery in the US is twice that of most peer countries (international federation of health plans 2010)

Given the relatively high investment in “input costs” one would expect a commensurate benefit in outcomes; however this does not appear to be the case. According to the Commonwealth Fund Study:

The U.S. health system is the most expensive in the world, but comparative analyses consistently show the United States underperforms relative to other countries on most dimensions of performance.

Data on life expectancy vs. cost by country is further evidence that the outcomes produced by the US healthcare system are not commensurate with the investment.

Finally, the high variability in care raises questions as to whether everyone is getting appropriate care:

1. The rate of mastectomy vs. lumpectomy in North Carolina varied from .4 per 1000 Medicare Beneficiaries in the Wilson HSA to 2.7 in the Goldsboro HSA (Dartmouth)
2. The rate of Coronary Artery Bypass Surgery ranged from 8.9 per 1000 in McAllen to 1.9 per 1000 in Pueblo CO. (Dartmouth)
3. Non-radiologist self referrers of medical imaging are 2.48 times more likely to order imaging than clinicians with no financial interest in imaging equipment
4. 53 percent of the heart attack patients underwent a procedure to restore blood flow to the heart through a blocked artery that caused a heart attack more than 24 hours earlier despite clinical practice guidelines recommending against it.

The often quoted disparity in the per capita cost of care of Medicare patients in McAllen vs. El Paso has raised many eyebrows. Recent research from Franzini et. Al. shows that while per capita Medicare spending was 86% higher in McAllen than in El Paso, the per capita  spending for Blue Cross patients in McAllen was actually 7% less than in McAllen. The authors concluded that their study is “consistent with Gawande’s finding that our healthcare system can create a “culture of money, – increasing the use of profitable Medicare services when there is [unconstrained] diagnostic and procedural discretion and clinical latitude.” 

In a recent study of ‘value’ of healthcare services in Massachusetts conducted by the Attorney General, it was found that the difference in prices paid by insurers to its lowest paid physician group vs. highest paid exceeded 145% and the difference in hospital payments exceeded 170%.  The Attorney concluded that this wide variation in the payments made by health insurers to providers is not adequately explained by differences in quality, complexity of services or their characteristics that might justify variation in prices. “Instead prices reflect the relative market leverage of health insurers and health care providers.”

In his recent speech to the American College of Surgeons, Senator Mark Kirk (R-Ill) summarized the government’s position on the current healthcare system when he stated that “every group that relies on federal funding should expect a 10% to 20% drop in that funding.”  When Dr. L.D. Britt, President of the ACS, warned that such cuts could send some healthcare providers into a "tailspin," Kirk replied that “the tailspin is the U.S. economy. There is a new audience at play," Kirk said, referring to U.S. creditors. "The judgments they render, they are swift and severe.”

Shifts in culture are painful but if not recognized, and managed they can be terminal for an organization. Through the implementation of value based purchasing, reduced reimbursement, data transparency health systems are being steered on a perilous journey from entitlement to accountability. The healthcare literature is overflowing with tactics and strategies that sound great on paper and/or may be working in Cleveland or Chicago or Rochester MN after decades of trial and error, however there is little evidence that these proposed solutions will work in most healthcare communities in a reasonably short time frame. Michael Porter provides excellent advice on how to increase the value of the healthcare. He notes that:

“Improving performance and accountability depends on having shared goals that unite stakeholders

In healthcare, the absence of clarity about goals has led to divergent approaches, gaming the system and slow progress in performance improvement

Rigorous, disciplined measurement is the best way to drive progress”

The following are practical steps that a health system can implement to begin the long journey of transformation.

1) Conduct regular briefings for the board members, physicians, employees and the community on the structural changes in healthcare occurring at the local, state and federal level

2) Designate a group of physician leader to be the clinical transformation task force. Use this group as a sounding board and to lead implementation efforts

3) Develop accountability measures for every specialty and hospital department. Initially this data should be blinded but designate a time in the future when all results will be transparent. Note: the health plans and the government have already begun publishing an ever increasing amount of un-blinded outcome data by hospital and physician.

4) The Chief Medical Officer or his/her should actively manage the performance of hospital-based physicians.

5) Select a few high volume Medicare DRGs and initiate a process for designing care to improve cost and quality and reduce readmissions. Pick a redesign methodology health systems are using LEAN. Consider a bundled payment demonstration if the health system and physicians share a common vision for decreasing cost and improving quality (and probably getting paid less per unit of service than under fee for service)

6) ACO-Caveat Emptor --buyer beware. Webster defines ‘risk’ as “hazard, danger, peril; exposure to loss, injury or destruction.” While it is true that there is a theoretical opportunity to make more money by doing less, we learned in the mid-nineties that organizations that take the financial risk for the health of the population can end up much worse off than if they did nothing. After decades of successfully taking risk in California it is clear that the critical competencies needed to successfully take risk include:

a.  Physicians that share a common electronic health record system,
b. A culture focused on reducing utilization of hospitals and high end interventions,
c. A strong base of primary care physicians,
d. Selective use of specialists based on the efficiency of the care they provide, and
e. Robust, mature infrastructure.

Since most of the health systems do not possess these competencies they should limit their exposure to risk and test these competencies on the employee population of the health system. If a health system wants to be in the Medicare risk business consider joint venturing a Medicare Advantage Plan with a local payer.

7)      Finally, every journey requires a roadmap and every health system needs to define its strategic direction, a.k.a. “true north.” To maximize performance under the traditional model most health systems strategic behavior can be  characterized as:

Operating a financially strong health system by maximizing revenues through pricing and volume growth, the provision of a broad range of services and meeting the individual clinical and financial needs of each physician

                The new “true north” is clear:

To operate a financially strong, high functioning health system that consistently achieves optimal measureable value, i.e., outcomes/cost, for every patient.

                Define your ‘true north,’ and begin the journey by taking practical, incremental steps described above. Enjoy the ride!