Healthcare and the "new management"

by Joe Flower


International Copyright 1995 Joe Flower All Rights Reserved
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Technique of the Week

They came one after another -- one-minute management, Theory Z, zero-based budgeting, corporate re-structuring, future scans, team building, systems thinking, TQM, benchmarking, the learning organization, re-engineering, visioning. All through the `80s and into the `90s the new management techniques sweeping American business have swept into health care.

Look, for instance, at quality management, perhaps the most easily tracked of these ideas. According to a recent national survey conducted by Northwestern University's Center for Health Services and Policy Research and the J.L. Kellogg Graduate School of Management (published in Hospitals and Health Networks), nearly 70 percent of all American hospitals and health systems have live TQM/CQI programs -- fully three quarters of them started in the past two years, and only 4 percent older than four years.

So it's fair to say that the use of quality management in healthcare is exploding. But how much difference will it make?

Carla O'Dell, Senior Vice President, American Productivity And Quality Center, says, "There will be a dramatic impact as healthcare organizations adopt approaches that have been honed and refined in other sectors. They will not have to go through the same evolution of total quality that other sectors have had to go through in the past 15 years. They will have an accelerated rate of improvement. There are examples from whom they can learn. We already have ample evidence from the experiences of Henry Ford, Intermountain, Harvard Community Health Plan, Mayo, and others, that show that dramatic gains can be made in process improvement, cost control, quality improvement, and patient satisfaction."

Quality management: a long project

Healthcare will experience overwhelming pressure from outside to adopt quality management, says O'Dell. "Many purchasers of healthcare by now have a long experience with quality management, and they are beginning to demand the same kind of evidence of quality processes in healthcare that they are used to demanding from their suppliers."

The experience of other industries is that quality management is a long project. So the results reported in the Northwestern survey have to be read carefully. If, through statistics and anecdote, we look at the institutions that have used it longest and given it the biggest commitment, it becomes clear that quality management has the power to make profound changes in healthcare. For instance, though the average hospital in the Northwestern study reported no savings yet from quality management, fully 35 percent of the large hospitals (more than 400 beds) reported savings of over $100,000 per year.

Individual hospitals have shown how much more is possible. To take two examples from Orlando, Florida: using a combination of quality management and outcomes management, Florida Hospital completely eliminated its $1100 to $1500 loss per Medicare patient in only 18 months. Orlando Regional Medical Center went from losing $12 million per year on Medicare cases to making $3 million per year. Both hospitals performed these feats while driving overall costs down, and driving their measures of quality up. We can imagine how healthcare in America would change if even a significant fraction of our institutions pursued these techniques with such vigor.

Deep effects

Yet even these impressive results are, in a sense, surface phenomena reflecting something far deeper.

Far more important than the immediate numbers are the effects these methods have on organizations when they are taken seriously, not faddishly. The results didn't just show up by executive fiat -- they grew out of deep shifts in the way the organization talks to itself. Quality management and other new techniques give the organization a new flexibility, a capacity to learn and change. Future scans, visioning, systems thinking, and re-engineering demand that members of the management team learn to get outside their "nine dots," to think in new ways, and become open to new possibilities. TQM, benchmarking, and team-building teach those skills, in real, hands-on ways, all the way through the organization, from the CFO and the chief of staff to the candy-stripers and the security guards. These methods reframe the whole discussion inside the walls of the organization. They open dialogue between groups that don't normally talk, about things that are normally off limits.

When that happens, the "learning organization" becomes not a metaphor, but a reality.

Few people expect the rest of this decade to be a calm experience, and organizations that have an ability to change, an ability that goes right down through the organization to its toes, will deal with that turbulence far more easily and effectively than those that lack that ability. As that difference becomes evident, the "new management" revolution will increasingly be forced on even the most reluctant institutions, prompting serious changes in the organization of almost every institution that survives.

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