R.J. Smith, MBA

Patients will obtain more buying power and use it wisely, with the help of dedicated professionals.

R.J. Smith, MBA

"The history of medicine has been written as an epic of progress, but it is also a tale of social and economic conflict over the emergence of new hierarchies of power and authority, new markets, and new conditions of belief and experience."

—Paul Starr, PhD,
The Social Transformation of American Medicine

I think that the health care system may well be broken. Many intelligent, rational people — colleagues and casual acquaintances — agree. We need not look far for reasons. Rather, we must virtually ignore them to avoid them. Ample evidence documents, and routine experience depicts, health care as sometimes dangerous, often unreliable, always wasteful, and arguably insatiable in the dollars it could consume. Health care's fragmentation and myopic self-interest seem ironically epidemic and largely self-inflicted. And yet, I actually hold more optimism than I have in a long time; I hold a higher conviction that we now have unprecedented tools and opportunities for addressing the quality/cost nexus. Never have we had the options for raising the standards, improving the efficiency, and increasing the access to appropriate care that we now have.

I have five reasons for my optimism:

Health care's knowledge workers. Health care's professional practitioners — physicians and nurses, technicians and pharmacists — are health care's knowledge workers. They know more about what they do daily than the people who try to oversee them. As management consultant and well-known author Peter Drucker so aptly notes, knowledge workers are typically more committed to their profession and the standards of their profession than to the organization that employs or pays them. Management too often does not understand this, and organizations that prize loyalty above all else usually cannot accept it. But the commitment of professionals to their standards and to their patients seems almost indestructible and surely serves as the bedrock of the industry. The key to organizational excellence has never changed: Engage and support the knowledge workers. (This alone largely explains why most insurer-sponsored "managed care" has failed.)

Informatics and information. Twenty-five years ago, I mistook the promise of information systems to integrate health care as a reality. In many ways, the systems then symbolized the fragmentation and rigidity of the organizations that employed them. In part, I confused automation for integration. Today's evolving informatics and the resultant availability of knowledge-nourishing information bring unparalleled power to the three key constituents: health care's knowledge workers, who rely on information; health care's consumers, who must have that information but have historically been denied it; and health care's true purchasers, the employers, who fund it all but had no idea what they were paying for. From smart IV pumps to smart patients, informatics and information will improve care.

Evidence-based medicine. This brings a previously unknown level of discipline to what has been more art than science. As I heard one business coalition executive say, "There can't be 10 best ways to do the same thing." Informatics will dig the grave for the era of guild-based knowledge development and transfer (the idea that an older generation of "craftsmen" will pass on its know-how to a younger one). Evidence-based medicine will fill it in.

National performance standards. Knowing the right approaches is not enough. We must finally focus on specific targets. As the Institute of Medicine has observed, the quality of health care can be quantified and measured. If the health care sector of our economy, and thus our entire economy, is to move forward, it must be. Several excellent committed organizations — from the Agency on Healthcare Research and Quality (AHRQ) to the National Forum for Health Care Quality Measurement and Reporting, a not-for-profit organization created in 1999 on the recommendation of a presidential commission on health quality — are enabling that now.

Value-based purchasing. Economics drives health care. It drives both delivery and financing behaviors. It sculpts and even determines its structures. But now health care's purchasers, led by the National Business Coalition on Health and major business groups across the country, seem to be on the verge of changing how health care is bought and sold and, thus, health care itself. A few third-party payers are following their leads. By defining value as other industries with globally competitive products built on excellence have defined it, we place quality smack in the middle of the table and must deal with it. This seems only fair. After all, much of the devastating fragmentation of health care — the graphic equivalent of some World War II European cities — resulted from the relentless pounding of deeply discounted fee-for-service payment.

The remarkable interdependencies and befuddling complexities of health care — clinical, operational, financial, organizational, social, and even psychological — make mere illusions of simple solutions. It seems, however, that we are developing the means of moving forward. Enabling consumers and purchasers with ubiquitous informatics, identifying best practices based on outcomes, and establishing uniform standards can only advance health care. First and last, however, real change in health care will derive from the efforts of responsible purchasers who, by moving from price-based to performance-based purchasing, will finally tap directly into what has always been the great reservoir of promise — millions of health care workers wanting to do the right thing for the right reason.

R.J. Smith, MBA, is vice president for strategic planning and managed care at St. Joseph's/Candler Health System, a multihospital system in Savannah, Ga. He is a member of the faculty of the American College of Healthcare Executives, teaching managed care contracting for the past 10 years. He is also coauthor of Managed Care Contracting, published by Health Administration Press.

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