Tuesday, March 25, 2014
A Managerial Blind Spot
The healthcare.gov web page fiasco calls attention to a
persistent management problem; namely, the frequency with which IT projects
fail.
Anyone wishing to pursue the matter can simply Google up “IT
project failure.” One reference it
produces quotes a study by the McKinsey consulting company reporting that “On
average, large IT projects run 45 percent over budget and 7 percent over time,
while delivering 56 percent less value than predicted.” A survey by KPMG consultants in New Zealand
found that “….70% of organizations have suffered at least one project failure
in the prior 12 months.”
A variety of reasons are given to explain this pattern of
chronic failure. All undoubtedly have
some merit. My own view is that it is
attributable mainly to inadequate management - what I call a managerial blind
spot.
Complex projects (and all IT projects are complex) can be
greatly affected by detail. An analogy
would be that of adding a foot to the width of a bathroom while a house is
under construction. Doing that might
seem like a small thing but because of its potential effects on everything else
it could easily cause a major increase in cost and a delay in completion.
In the case of
healthcare.gov, it is reported that there was a question as to whether anyone
would be allowed to go on the website and see the coverage options available
and the cost of each. Massachusetts had
done that and the federal programmers were following the Massachusetts
example. Late in the planning process,
someone decided that was not a good approach and that people should first have
to learn whether they were eligible for subsidies. Implementing that decision required that a
lot of the programs be rewritten.
The point here is that if IT projects are to be successful,
the end product must be clearly defined in advance and any issues involved it
achieving it must be resolved. Contemporary managers are not particularly
good at that. They like to think of
themselves as “big picture” people who delegate what they see as small stuff to
others. But in complex projects, what
seems to be small stuff, like widening a bathroom, is behind many of the
failures. Also, managers are often reluctant to deal
with the friction associated with resolving differences and so Issues get
kicked down the road. The result is
delay, cost overrun, and a failure to achieve the desired result..
Obama took a lot of heat for the debacle, and appropriately
so. But he doesn’t have to feel
particularly lonesome in his misery.
Sunday, March 16, 2014
Major and Unremarked Change
The place of the medical profession in society is undergoing
a major, important and largely unremarked change.
The era immediately following the end of World War II might
appropriately be characterized as the Golden Age of Medicine. Nothing happened in health care that was not
subject to the profession’s approval. I
remember that sometime around 1960 polio vaccine became available and we took
our two young boys over to the local school for their free inoculations. Nurses were doing the work but two doctors
were quite obviously in attendance; reminders that it was happening with the
approval of the local county medical society.
At that time, it was common that medical society membership
was a prerequisite for appointment to a hospital’s medical staff, thus giving
the profession effective control over who could practice medicine in the
community. Hospitals ostensibly were
controlled by their trustees, but medical staffs were considered to be
“self-governing” and woe betide any administrator or trustee who interfered in
professional affairs.
The adoption of Medicare in 1965 marked a big change in all
of that. Up until then, the American
Medical Association had been able to block any such thing and so Medicare was
the first health care decision taken by the federal government against medical
advice.
Another marker of change was the quality movement that got
seriously under way in the late 1980’s.
Preventing errors and improving outcomes require support and action by
institutions. The loosely structured
profession with its emphasis on the independence of the individual practitioner
was not able to do it by itself.
A current marker of importance is the growth of salaried
practice, to a large extent by hospitals.
A February 14 article on the subject in the New York Times reported that
“About 60 percent of family doctors and pediatricians, 50 percent of surgeons
and 25 percent of surgical sub-specialists….are employees rather than
independent.” It has also been reported
that the number of physicians employed by hospitals is now greater than the
number who are dues-paying members of the AMA.
The NYT article focused on the economic and clinical
implications of this trend. It did not
address the social consequences, which may well be greater.
Tuesday, March 11, 2014
Provider Charges
For years now, hospitals have been charging ridiculously
high rates for their services. Medicare
beneficiaries are accustomed to getting reports showing how much the hospital
charged and how much Medicare paid, with the latter usually being but a
fraction of the former.
I have finally learned how we got into this crazy
situation. It is partly due to insurance
companies that negotiate and contract with providers to pay a percentage of
charges. Those contracts periodically
come up for renewal and the negotiating process being what it is, a common
result is an increase in the charges and a reduction in the percentage paid.
The other and possibly more important factor has to do with
what are called “outliers” in Medicare.
For standard cases like joint replacements and heart attacks, Medicare
pays hospitals a predetermined lump sum.
Cases that do not fit any of the established categories are known as
“outliers” and payment is determined by an algorithm in which the hospital’s
prevailing charges play an important role and which work in such a way that the
hospital can increase outlier payments by increasing its charges. Hospitals have fallen into the pattern of
counting on generous payment for outliers to compensate for the rather stingy Medicare
lump sum payments, and hospitals for which Medicare covers a large percentage
of their total patient load have come to be financially dependent on payments
for outliers.
The result has become an embarrassment bordering on a
scandal but so far nobody has come up with a remedy. If, as many are urging, the fee-for-service
system of reimbursement is replaced by some form of capitation (monthly
prepayment), charges will become irrelevant and the problem will go away. But that is not likely to happen for a while.
