01 Sep 2010

RX for Change

Health-care reform is more than a policy debate — it’s a managerial challenge that can have life-or-death consequences. A new Executive Education program targets leaders working on the frontlines.
Re: Bing Sherrill (MBA 1962); Bill Joyce (MBA 1976); Pam Germain (MBA 1985)
by Julia Hanna


A small group of senior managers meets around a long table, a tray of sandwiches nearby. Two more join via videoconference. The pesky buzz of BlackBerries punctuates the lengthy and sometimes contentious discussion. It’s a familiar scene in the modern business world, but not one normally associated with a hospital.

The outcome of this and subsequent discussions that took place back in May at Emory University Hospital Midtown will affect more than the bottom line. It will impact the quality of care delivered to thousands of people. Midtown is a 511-bed facility serving over 150,000 patients annually. But it’s just one part of Emory Healthcare, which employs 9,000 people and ranks as Georgia’s largest, most comprehensive health system. Under consideration this day is a proposal to add specialists — known as neurohospitalists — to manage care for patients with disorders such as stroke. Figuring out how to proceed rests with the assembled group of doctors, administrators, and finance folks, all trying to work through the nitty-gritty details of how to implement this patient-care innovation.

“What does the transition plan look like to get from where we are now to a new model?” asks Midtown COO Dane Peterson. “We need to come up with a system that bridges neurology care for Midtown, Emory University Hospital, and Wesley Woods.” Questions raised by the assembled group make it clear that getting from the point of analysis to execution will take some serious work.

“This can’t happen by people with ‘Os’ at the end of their titles meeting for dinner and saying it’s a fait accompli,” Peterson tells the group, referring to the need to balance input between management and clinicians. “It has to be messy for the first hour.” Two people are charged with creating the first iteration of a transition plan by the following week. “If we can’t figure it out, someone who shouldn’t, will,” Peterson warns.

This is the kind of in-the-trenches managerial decision-making that a new HBS Executive Education program for health-care administrators aims to help. Launched last fall, Managing Healthcare Delivery (MHCD) is designed to develop the strategy, leadership, finance, and operations skills that senior health-care professionals need to transform care delivery in their organizations. Presented in three one-week modules offered over a nine-month period, the program is structured around the main themes of organizational design, operational performance, and innovation. Peterson and three colleagues from Emory were among the program’s 68 participants from the United States and fifteen foreign countries.

“We’ve always felt there was an opportunity to apply the leadership and management principles that we teach at HBS to the delivery of health care,” says Professor Richard Hamermesh, faculty chair of the HBS Healthcare Initiative and an instructor in MHCD. Established in 2005, the initiative serves as a gathering point for faculty research, educational programs, and cross-sector collaborative efforts on health care across the School. “We don’t assume a one-to-one translation of everything we teach,” he adds. “There are differences, and we’re respectful of those differences.”

Health care–related programs and courses are nothing new at HBS; in recent years, 10 percent of every graduating MBA class has taken a job in the field. But MHCD fills a previously unmet need. Executive Education, for instance, presents a one-week course in the United States and in Europe targeting CEO-level managers (Leading High-Performance Healthcare Organizations). In addition, University Professor Michael Porter leads Strategy for Health Care Delivery, an invitation-only workshop for top management and senior physician leaders. The School also launched a joint-degree program with Harvard Medical School in 2005, with the first full cohort of students graduating this past May.

Left out were the senior managers who fall between those two poles of experience. Some are doctors or nurses who head departments or units within hospitals. Others are full-time administrators like Emory’s Peterson. Navigating the intricacies of modern medicine requires teamwork, yet there’s a good chance that most came up through a hierarchical environment that is more the norm for health care than the exception. They may not have ever taken a management course, despite the challenge of overseeing dozens of employees across a variety of functions. They’re responsible for their unit’s financial performance but may not know how to read an income statement. “It’s sink or swim,” Hamermesh says. “If they’re good at what they do, they’re given even more administrative tasks. In the meantime, they continue to see patients.

“The good news is that doctors today can reliably diagnose and treat conditions that were far trickier to handle thirty or forty years ago,” Hamermesh continues. “The bad news is that the processes involved in delivering care haven’t kept pace with those advances.”

“This is our way of having an immediate impact on practice,” says Professor Richard Bohmer, faculty chair of MHCD and codirector of the MD/MBA program. “If we’re serious about health-care reform in this country, we have to frame it as a managerial challenge. It’s not simply a policy issue. We won’t improve the system as a whole until we’ve improved the performance of individual health-care delivery organizations, and there are nearly 6,000 hospitals in this country alone. That’s a huge amount of work.”

Bohmer has firsthand knowledge of the issues faced by MHCD participants. A physician, he practiced medicine in New Zealand and England, helped establish a surgical hospital in Sudan, and served as clinical director of quality improvement at Massachusetts General Hospital before joining the HBS faculty in 1997. “We knew we needed a program that ran for longer than a week that not only addresses the higher-level strategic questions but also considers the difficult blocking and tackling that makes health care so challenging for managers on a daily basis.”

Designing such a program also meant including nurses and administrators as well as doctors. “Change will only occur when all three groups have the same set of goals, and a broad agreement on how to realize those goals,” says Bohmer. “The idea of having everyone in the room together defined the design of MHCD from the very beginning.” With the generous support of Howard Cox (MBA ’69), HBS offered matching scholarship funds and needs-based financial aid to broaden the program’s reach and impact.

Once in the classroom, participants work their way through faculty-written health-care cases that challenge them to analyze real-work situations. In addition, MHCD draws on a few classics (“Benihana”) and perspectives from outside the field (“Columbia’s Final Mission”). One morning in June, I joined a class where Bohmer led a discussion of a case he wrote, “Virginia Mason Medical Center,” with case protagonist Dr. Gary Kaplan in attendance.

Appointed CEO of Seattle-based Virginia Mason in 2000, Kaplan steps into a low-morale environment of increasing competition from area hospitals and decreasing revenues. In 1998 and 1999, the medical center lost many millions of dollars, the first such losses in its history. As a first move, Kaplan introduces a “physician compact” that specifies the responsibilities of the organization and its employee doctors and ties those principles into the incentive compensation plan. The physician compact is a particularly effective way to formalize a culture change, comments one participant. “The process is the product,” Bohmer confirms. “It’s much more than a piece of paper.”

Next, Kaplan and his team introduce the Toyota Production System (TPS), which transforms the hospital’s health-care delivery model. How those enormous changes are introduced and implemented — and the results they achieve — make for a lively discussion. Bohmer describes how TPS can force a clear understanding of each element of the production process — in this case, the treatment of a patient from intake to discharge.

“Every activity is actually an experiment for improvement,” remarks Dr. Jamiu Busari of the Atrium Medical Center in Heerlen, the Netherlands.

“There are two jobs at Toyota,” Bohmer agrees. “The job. And making the job better. Improvement is the real work.”

At Virginia Mason Medical Center, TPS leads to a number of process changes in patient care and a rethinking of workspace organization. “Value-stream mapping” in the oncology department standardizes the follow-up process with patients. An improvement strategy called “3P” (production, preparation, process), used to radically redesign space according to workflow, eliminates the need to spend between $12 and $15 million for planned additions and relocations. The hospital also introduces a patient safety alert system as a direct result of seeing the andon cord in action during a Toyota factory visit in Japan. As a result of such changes, the hospital experiences a 44 percent gain in productivity from 2002 to 2004. Even so, this new way of approaching patient care is not universally embraced within the hospital. “We don’t make cars, we treat patients!” is a common complaint. Ten doctors leave the medical center.

In class, Kaplan confirms that 10 percent of his staff had an “over my dead body” attitude when it came to TPS, another 10 percent were early adopters, and 80 percent were “somewhere in between, thinking they might fly under the radar.” Over time, however, TPS was accepted as more than a “tool kit” to layer on top of everyday operations. “We came back from Japan understanding that we make things, and that this is simply the system for how we lead and manage,” Kaplan explains.

“Virginia Mason used to be a physician-driven organization,” he continues. “Now we’re patient-driven. Our goal is to be the highest quality provider in our area at the lowest cost. We’re probably halfway there. We know there’s a long way to go to really transform the organization.”

That drive for increased efficiency and quality at lower cost resonates with many of the institutions represented at MHCD, which include the Cleveland Clinic, Children’s Hospital Boston, and The Johns Hopkins Hospital.

At Emory, Dr. Bryce Gartland, medical director of care coordination, describes one such quality and efficiency example, an “immensely successful” pilot program in which health-care teams go on rounds together and take a structured, scripted approach to discussing a patient’s care in his or her presence so that the details of each case can be addressed in real time.

“Medical advances have resulted in a paradigm shift in physician provider roles. The role has changed from iterative to explicit care provider and from individualism to team-based care, so there’s been a mismatch between what we’ve been trained to do and what we’re asked to deliver,” Gartland says. “Instead of getting frustrated about how health care is being managed, clinicians need to take responsibility for letting health care get out of their hands and help right the ship in the way health-care systems are being managed. Physicians can not absolve themselves and simply get mad when finance managers make the decisions.”

Back in Atlanta, the Virginia Mason case comes to mind as I sit in on a value stream analysis meeting of Emory’s clinical trial process with Chief Nursing Officer Susan Grant. A lean manufacturing technique that originated with Toyota, this particular exercise has produced a blizzard of multicolored Post-It notes from the meeting’s participants, each citing an element of waste in the system that hurts Emory’s efforts to preserve the integrity of its research while maintaining high patient safety standards. As morning passes into afternoon, the group breaks into teams to brainstorm specific changes and create a vision for future clinical health trials.

Grant and others I spoke with agree that perspectives gained during the MHCD program assist them in decision-making when they return to their hospitals and clinics. “We’ve challenged more sacred cows since taking the course,” she says.

In addition, participants say they value their time on campus as an opportunity to step away from day-to-day demands, exchange ideas with practitioners facing similar challenges, and return with a renewed energy and insight. Some of this exchange of ideas happens at twice-daily case discussion groups of six or so people organized according to participant living groups, or “pods,” a space arrangement designed to encourage interaction. “The discussion groups are where the rubber hits the road,” Grant comments. “You get a sense of how people are really applying what they’re learning.” With participants from countries as far-flung as Nigeria, Ireland, Mexico, and Saudi Arabia, there’s also the potential to get a global view of how health care is functioning — or not functioning — outside one’s country. Those differences spark insights.

Every organization has its own particular needs and patient population, emphasizes Richard Bohmer. As a result, a dominant model of organizational design in health care has not evolved. But there are a few common principles: putting patient care decisions, tasks, and workflows first; separating complicated, ambiguous diseases and conditions from those that are understood; ensuring that infrastructure and practices such as the mix of staff, incentive systems, IT, and clinical layout are configured in conjunction with the redesign of clinical processes; and designing those processes in such a way that organizations systematically learn from their daily work.

Assessing the impact of a program like MHCD requires short- and long-term gauges of measurement. “We are in the midst of an industrial revolution in health care,” says Bohmer. “At the end of the 21st century, our grandchildren will look back and see an unbelievable transformation of the industry. This is just the beginning.”

There are more immediate reverberations, however. In a final session to synthesize the takeaways and specific actions undertaken as a result of participating in MHCD, Professor Amy Edmondson elicits a range of responses. “We’re planning to change our policies and processes in order to decrease readmissions and improve outcomes,” says Bonnie Glica of Erie County Medical Center. Other remarks touch on the effect of culture on safety and quality; the importance of collaboration, even among competitors; and the understanding that MHCD cannot have an impact if its ideas are not shared across the organization. “We plan to send more people to MHCD and to do our own internal training,” says José Aguirre of Ecuador’s Humana health-care system, a view echoed by others.

Moving the needle on safer, more efficient health-care delivery is as difficult as implementing organizational change in any business, with the important difference that doing so is a matter of life and death, both human and economic. Health-care expenditures in the United States have ballooned to an estimated 17 percent of GDP, well above that of other countries — yet those extra dollars don’t result in better care. According to a 2010 Health- Grades report, patient safety incidents cost the federal Medicare program nearly $8.9 billion and resulted in 96,402 potentially preventable deaths from 2006 to 2008. Health care will change, because it must. Designing that transition with minimum threat and maximum benefit for patients is a delicate management challenge that will ultimately affect us all.

And for frontline managers working to bring about patient-focused changes, the work can be deeply fulfilling. Dallis Howard-Crow, Emory’s chief human resources officer, would sometimes accompany her father, a hospital CEO, as he walked around the building and greeted everyone from custodians to vice presidents. She recalls being fascinated by his personal relationships with so many people, each of whom had a different role to play in providing patient care. “I see a clear connection between what I do in human resources and the patient in the bed,” says Howard-Crow. “That makes my work extremely gratifying.”

A Core for Collaboration

With a long tradition of sponsoring nonprofit community leaders to attend Executive Education programs, the HBS Club of Buffalo viewed the Managing Healthcare Delivery program (MHCD) as an ideal means of expanding that impact to the region’s health-care systems. In an effort spearheaded by Richard (“Bing”) Sherrill (MBA ’62), William Joyce (MBA ’76), and Pamela Germain (MBA ’85 and an MHCD attendee), the club, with the help of matching funds provided by HBS, sent eight managers and clinicians from three organizations to the program. Eight from the original three centers plus two each from two other medical centers are scheduled to attend MHCD’s next session in October.

“Our focus is on sowing each of the organizations with the same seeds, so that they grow together more than they normally would,” says Sherrill. “The idea is to raise the level of discussion and to keep that conversation going. We want the region to move forward, not just any one hospital.”

“What’s begun here is the core for collaboration among competing health-care providers,” says Dr. Judy Smith of the Roswell Park Cancer Institute in Buffalo. “It won’t eliminate the competitive nature of the business, but it will help us work together when we can,” she adds, citing the development of a regional database that will open up the exchange of information across area providers and payers.

Like many organizations, Roswell Park had a focus on optimizing operations before MHCD. But the program provided clarity around how to best achieve that goal. “Going through the program has crystalized our thoughts on the issues we’ve been looking at,” says Smith. “How to improve outpatient services, how to redesign our operating rooms — all the ideas and concepts needed to take Roswell to the next level.”


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