Thursday, March 17, 2016

Busting Through the Healthcare Performance Frontier

The costs of business performance - for example, customer delight, reputational excellence, high worker satisfaction, workplace safety, leadership diversity, environmental sustainability or reducing social disparities - are typically viewed through the lens of a zero-sum game. 

In this classic world view, achieving profitability means cutting performance, while pursuing high performance reduces profits. The relationship between the two variables can be displayed as a curve:

Population Health Blog readers can find out more about this here.

Most firms in the real world operate on the "A" curve.  Different firms under different circumstances make dozens, if not hundreds, of decisions on a day-to-day basis involving trade-offs that move them along the curve that extends along the profitability and performance continuum.

Examples of healthcare companies that moved up on the curve at the expense of performance include the Veterans Administration and Turing Pharmaceuticals.  At the other end of the curve, the understandable unwillingness of some hospitals to walk away from their community service obligations may have led them to bankruptcy.

The "B" curve represents the theoretical limit for greater profitability and performance using the current business model.  In other words, as companies maximize all opportunities and minimize all inefficiencies in their existing business models, they can move the curve up and to the right.  That is what all management, executives and boards can define and aspire to.  That "B" curve is known as the "performance frontier."

Examples of healthcare companies that moved toward the "B" curve? You can find more about them here.  If they're hospitals, they fill beds with short lengths of stay and high patient satisfaction.  If they're clinics, they maximize billing revenue and minimize waiting lists.  If they're an ACO, they manage risk by contracting for an actuarially optimum population while pursuing the Triple Aim.
The "C" curve beyond the established frontier is what becomes possible with transformational innovation, superb leadership or both. Examples outside of healthcare include Apple under Steve Jobs and Tesla under Elon Musk. Firms that create value by inspiring employees, new products and innovative processes not only benefit from even greater profitability, but offer enhanced performance

In "C" level healthcare settings, the top-line growth and decreasing costs would be accompanied by better measures of customer/patient well-being, community burden of disease, worker engagement, leadership diversity and improvements in social determinants of health.

While the Population Health Blog eagerly awaits reports of frontier-busting healthcare providers, it offers a few observations:

1. Healthcare organizations have generally not done a good job in defining and measuring their performance metrics.  They've also not made them part of the C-suite's DNA or placed them prominently on their governing boards' agendas. If they did, breakthroughs would become more likely.

2. The EHR's primary functions of billing and documentation will never get healthcare organizations to the C curve.  This is not part of a breakthrough strategy.

3. In contrast, big data, risk stratification, mHealth and machine intelligence have the economic/business potential to identify risk, channel the right care, circumvent high cost service options and rationalize decision-making, but could also increase performance through the engagement of consumers, increasing access to more care options, reducing disparities and minimizing provider busywork.  These are the ingredients for a breakthrough to C-curve level performance that is only just beginning.

4. By the way, another ingredient for high healthcare provider performance can be found here.

5. Last but not least, the leadership of many innovative health technology companies already intuit much of this.  They're looking for partners that are not just looking for "B" level performance, but want to bust through the performance frontier. 

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