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
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.