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Co-creating Value to Achieve Sustainable Healthcare Delivery

Dear CSS Colleagues:

It is my pleasure to share with you some excerpts from a recent manuscript authored by Prof. Robert Kaplan at HBS and Bruce L Gwertz MD at Cedars-Sinai Medical Center. This is under review at JAMA, but it is so timely I wanted to make sure to share some of it with you.

First of All, Bob Kaplan is a Senior Fellows and Marvin Bower Professor of Leadership Development, Emeritus at Harvard Business School. He is known for not only leadership but being the father of modern accounting as the co-developer of TDABC (Time Determined Activity Based Cost) method of accounting. He was our Codman Shoulder Society lecturer in 2019 and spoke on the topic of “How to Measure Outcomes and Quality in Healthcare.” ( ). If you’ve not seen his lecture, I’d strongly recommend you take the time to do so.

In their manuscript, Kaplan and Gwertz consider the future of healthcare as it relates to fee-for-service and evolving payment models. This is a reality for all of us. Central to these reforms is the dreaded “bundled-payment” model. The current systemic problem in our hospitals is that there is a lack engagement and collaboration between the hospital and the physicians. The authors point out that “administrators view physicians as people they must “manage,” not as potential partners to help them” reduce costs and improve quality. This is the case in both employment and non-employment hospital models. The authors go on to say that “Admittedly, physicians are notoriously independent, often poorly organized, and not inclined to spend uncompensated time to collaborate with hospital administrators. But if physicians and administrators continue to function with independent objectives and incentives, hospitals will struggle to succeed under the new value-based payment models. “This situation is very short sighted as it fails to recognize that “Physicians make clinical choices every day that affect both patient outcomes and hospital costs.” In fact, in many cases a physician may select a treatment that seems to be more expensive than the current method, but in actuality saves resources and time and thus creates value and quality for the patient and the hospital. “Yet little dialogue and strategic planning occurs between clinicians and hospital administrators”.

The authors go on to point out that “Collaboration would eliminate the dysfunction caused by hospital executives’ attempts to lower costs through arbitrary headcount reductions”.

Hospital sub-optimization also occurs when administrators try to save money by restricting the use of new drugs and devices that are both more effective and more expensive. Patients who continue to be treated with the existing, less expensive drugs and devices have longer length of stays and require more time of expensive clinical personnel.”

“Clinicians rarely participate in these staffing and purchasing decisions. As a result, they cannot provide professional guidance on how hospitals can achieve the twin goals of better patient outcomes and lower cost”. And it is not just physicians who can co-create value. Patients want to participate in decision-making and “Payers increasingly want to co-create value with hospitals, not just pay the bills submitted to them.

My own conclusion is that re-calibrating hospital-physician relationships with such alignment as offered by co-management and gainsharing will not only align physicians in a process that delivers a better bottom line for their hospital but reduce physician burnout and administrative burden. I’d ask you, where do you work and where is your hospital system going?

Once this work is published, I’ll be sure to let all of you know where you can find the final article.

I hope you find this helpful and interesting.

Kind Regards,

“JP” Warner, MD

Founder, The CSS


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