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Yale J Biol Med. 2010 June; 83(2): 93–95.
Published online 2010 June.
PMCID: PMC2892768

Perspectives on Efficiency and Quality in an Ever Changing System

Healthcare 2010

Abstract

The Healthcare 2010 conference at the Omni New Haven Hotel at Yale in April focused on how different stakeholders in the healthcare industry can excel in light of the recent landmark health-reform bill. A session titled “Maintaining Efficiency and Quality in an Ever Changing System” provided valuable insights into several perceptions of these two tenets, with respect to both the current state of U.S. healthcare and the recent reform. The engaging dialog that ensued concerning payer, provider, public, and patient perspectives yielded a unique view of the dynamic interplay between efficiency and quality in the context of the current healthcare system. While the discussion highlighted differences in the definitions of efficiency and quality upheld by the various players, a unifying theme emerged: In order to excel in this ever changing system, incentive structures will have to evolve to take full advantage of the potential synergies between the two.

The recent passage of a landmark health-reform bill has tremendous implications for the future of U.S. medicine and healthcare. The Healthcare 2010 conference, which took place in April at the Omni New Haven Hotel at Yale, focused on how different stakeholders in the healthcare industry should proceed in light of this legislation. While a hallmark of the reform bill is expanded access to healthcare for millions of Americans, analysts generally couple the need for access with the tenets of efficiency and quality, forming the “iron triangle” of health policy. A session titled “Maintaining Efficiency and Quality in an Ever Changing System” provided valuable insight into perceptions of efficiency and quality from several perspectives, with respect to both the current state of healthcare and the recent reform.

The session began with the perspective of a private-sector payer. Dr. Ricardo Guggenheim, vice president of Care Management Strategy at McKesson Health Solutions, emphasized that a large fraction of non-sustainable increases in healthcare costs are derived from non-medical expenses. Studies have found that administrative costs are one of the fastest-growing components of hospital budgets [1]. Dr. Guggenheim also revealed that hospitals are not nimble in their operations due to a heavy reliance on bonds and many fixed costs. Along these lines, one study conducted in a large urban hospital determined that 84 percent of the hospital’s budget stemmed from expenses that were fixed [2]. Likening it to the banking industry two decades ago, Dr. Guggenheim suggested that the healthcare industry has been lagging behind every other industry in leveraging technology for improvement. In his view, this represents large-scale inefficiency that can only be surmounted by enhanced quality. However, while Dr. Guggenheim acknowledged that the objective of various stakeholders in the healthcare sector is high quality of care, he asserted that cost-effective means should be developed to reach this eventual destination.

The potential synergy between efficiency and quality was further elucidated from the provider perspective, represented by Dr. Leora Horwitz, an assistant professor at the Yale School of Medicine and a past Robert Wood Johnson Clinical Scholar. Dr. Horwitz highlighted how providers conceptualize fiscal efficiency in terms of maintaining revenues and minimizing costs, while also considering throughput efficiency in terms of patient flow as well as personnel efficiency, improved by reducing turnover and ensuring that work is done by the most qualified employee. Shifting to the issue of quality, she explained that while stakeholders in the health sector largely agree on the objective of high quality, varying — and sometimes conflicting — ideas of what constitutes high quality complicates policy decisions. Providers rely primarily on process measures and some outcome measures to assess quality in response to external mandates, including publicly reported CMS measures and malpractice drivers, and internal mandates, such as a hospital’s yearly quality plan or board of trustees’ reports. Dr. Horwitz then noted some points of divergence between efficiency and quality from the provider’s perspective. For instance, decreased lengths of stay may result in increased readmissions and using less expensive equipment can be more conducive to failed procedures. Yet she also outlined examples of how better quality may improve efficiency, such as when better discharge care results in fewer readmissions. Greater efficiency also can improve quality in her opinion, as exemplified by fewer medical errors with the advent of electronic medical records. Finally, Dr. Horwitz concluded that incentives are the primary determinant of whether quality and efficiency operate in conflict or synergy. A proper payment structure should incentivize efficiency, while internal and external mandates should work to incentivize quality.

Dr. Elizabeth Drye, director of Quality Measurement Programs at Yale-New Haven Hospital Health Services Corp., followed with the public perspective, based on her extensive public health policy work in senior government positions in Washington, D.C. According to Dr. Drye, quality was not an issue given much emphasis in the United States before the Institute of Medicine (IOM) issued a report in 2001, entitled Crossing the Quality Chasm. This report established six aims in order to improve healthcare quality: safety, efficiency, effectiveness, timeliness, patient-centeredness, and equity [3]. Dr. Drye emphasized that existing methods of ensuring quality, such as accreditation and threats of malpractice, are not sufficient to improve quality. Building upon Dr. Horwitz’s call for a change in incentive structures, she advocated pay-for-performance using tools such as Healthcare Effectiveness Data and Information Set (HEDIS) scores to influence physician decision making. She added that the major problem in determining a measurable way to achieve high-quality care is that determining what constitutes the “right” care is a very polarizing issue. A solution sometimes employed by both the government and private health plans is to leave the decision of determining the “right” amount of care to providers. Dr. Drye specifically supported a semi-capitated system that gives providers a certain amount of money and allows them to determine how best to use it. She then detailed an array of new potential policy levers that the government could implement to enhance existing incentive structures, such as increasing public reporting of outcome measures, incorporating more quality measures, building broad coalitions in the private sector, instituting pay-for-performance, and using Medicare to test novel approaches.

The conversation later shifted to the patient perspective, and the group questioned how the drive toward efficiency and quality could maintain respect for the views of the patient. Dr. Horwitz responded that providers could rely on results from publicly reported patient-satisfaction surveys. The Consumer Assessment of Health Plans (CAHPS) project and the Picker Institute, for instance, have developed valid and reliable patient survey instruments that provide useful qualitative data that have been increasingly publicly distributed [4]. Responding to the apparent shift toward considering the patient’s experience, Dr. Drye cautioned that patients may not always be in a position to make accurate assessments of quality. On a broader scale, she also worried that improved access, as laid out in the health-reform bill, may not necessarily lead to improved quality on its own.

In sum, the engaging dialog concerning the payer, provider, public, and patient perspectives yielded unique insight into the dynamic interplay between efficiency and quality in the context of the current healthcare system. The recent healthcare reform has taken some steps toward achieving greater efficiency and quality, but the discussion at the conference highlighted the urgent need for additional progress. Looking ahead, different stakeholders in the healthcare space can borrow from other industries for innovative solutions. While the session highlighted differences in the definitions of efficiency and quality among the different players, a unifying theme emerged: To excel in this ever-changing healthcare system, incentive structures must evolve to foster potential synergies between the two.

Abbreviations

IOM
Institute of Medicine
HEDIS
Healthcare Effectiveness Data and Information Set
CAHPS
Consumer Assessment of Health Plans

References

  • Shulkin DJ, Hillman AL, Cooper WM. Reasons for increasing administrative costs in hospitals. Ann Intern Med. 1993;119(1):74–78. [PubMed]
  • Roberts RR, Frutos PW, Ciavarella GG, Gussow LM, Mensah EK, Kampe LM. et al. Distribution of Variable vs Fixed Costs of Hospital Care. JAMA. 1999;281:644–649. [PubMed]
  • Committee on Quality of Health Care in America, Institute of Medicine. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington DC: National Academies Press; 2001. [PubMed]
  • Cleary P. The increasing importance of patient surveys. Now that sound methods exist, patient surveys can facilitate improvement. BMJ. 1999;319(7212):720–721. [PMC free article] [PubMed]

Articles from The Yale Journal of Biology and Medicine are provided here courtesy of Yale Journal of Biology and Medicine