Second Curve- a New Strategy for Bending Healthcare’s Cost Curve

The Tenth National QUALITY COLLOQUIUM on the Campus of Harvard University

Cambridge, MAAugust 14,2012

Martin D. Merry, MD, CM andTom Bigda-Peyton, EdD,Second Curve Systems

www.SecondCurveSystems.com

Presentation outlineIntroduction to Healthcare’s Second Curve

A New Performance Curve and Strategy The Cost of Poor Quality

Overuse, underuse, misuse, and waste of careCompeting on valueToward high-reliability

Improving Quality and Bending the Cost Curve: Current StrategiesGovernment/Policy: Health Reform and the Massachusetts experimentEmployer-Based Initiatives: Getting to 50% Cost Reduction (Hannaford,

Asheville, Milstein)ACOs and health system redesign (cases from the US and Canada)

What’s missing/ the Second Curve contributionReliable System Design: a new leverage pointTransforming the Medical-Legal environmentSCS startup strategy

The Net Effect“Way better care at half the cost”: the US 2015 project

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Does This Resonate?“At this point, we can’t afford any illusions (re: health care): the system won’t fix itself, and there’s no piece of legislation that will have all the answers, either. The task will require dedicated and talented people in government agencies and in communities who recognize that the country’s future depends on their sidestepping the ideological battles, encouraging local change, and following the results. But if we’re willing to accept an arduous, messy, and continuous process we can come to grips with a problem even of this immensity. We’ve done it before.”

- Atul Gawande, MD. “Testing, Testing,” The New Yorker, 12/14/09

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“No problem can be solved from the same level of consciousness that created it. We must learn to see the world anew.”

- Albert Einstein

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Time

Circa 1910

Healthcare’s Second Curve: A New Performance Curve and Strategy

(Bifurcation curve: 2011)

First Curve/ 4 sigma

(Craft-Age Culture)

(Craft+Information- Age Culture )

-

Future Performance (Second Curve/

6+ Sigma)

“Crossing the Chasm”

Perf

orm

ance

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1st

2nd

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Our 1st 2nd Curve Journey

Why must we move from 1st curve health care?What is 2nd curve health care?How 2nd Curve “Bends the Cost Curve”Leadership

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“The Four Doctors”

Welch

Halsted

Osler Kelly

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“The most important event in the history of American and Canadian medical education”

(And the birth of health care’s “1st Curve”)

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1st Curve Health Care’s Performance Problem

1st Curve Health Care (Craft Culture)90% OK 100,00095% OK 50,00099% OK 10,000

Sigma Defects per million1 690,000

2 308,0003 66,8004 6,2105 2306 3.4

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The “Stealth” Cost Culprit“Cost of Poor

Quality”?*$390 Billion, Annually

* What IOM labels as “overuse, underuse, misuse

and waste”

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The INEVITABLE consequence managing highly complex health care with a 4 sigma

quality infrastructure

Medical errors as 5th- 8th leading cause of

death in US

44,000 – 98,000 deaths annually

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Toward High-Reliability and Beyond

Less Bounded System

Adaptive Living

System

Normal>>>RWF Grant

(22>>>10)

Reliable High- Reliability

Begin A3s on Falls>>> Use A3s system-wide (12>>>4>>>0)

>>>Ultrasafe

Mechanistic Organizations

Living Organization

s

More Bounded System

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“ . . . OK, so it’s confirmed the sun will slam into the earth in 3 days. I don’t

want any more gloom and doom, I want suggestions!”

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Our 1st 2nd Curve Journey

Why must we move from “1st curve”health care?What is 2nd curve health care?

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The 21st

Century’s Flexner Report?

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The Vision: 10 Rules of Performance in a Redesigned/2nd Curve Health Care System

1. Care is based on continuous healing relationships.2. Care is customized based on patient needs and

values.3. The patient is the source of control.4. Knowledge is shared, and information flows freely.5. Decision making is evidence based.6. Safety is a system property.7. Transparency is necessary.8. Needs are anticipated.9. Waste is continuously decreased.10.Cooperation among clinicians is a priority.

- Institute of Medicine, Health Professions Education, 2003

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Columns 2 & 3 = 2nd Curve

Regulation Hammurabi

Legal system

State Boards

JCAHO

“Inspection”

Fed/State regs

ORYX, EMTALA, HIPAA, Etc.

JC, CMS “core

measures”

Medical Science

Hippocrates

Nightingale, 4 doctors

Flexner, Codman, ACS/Hospital

Standardization

M&M conferences

Donabedian,structure process, outcome

Outcomes, Disease

management

Evidence based care, Hospitalists

Management Science

Industrial Revolution

Taylor: “Scientific

Management”

Shewhart

Deming, Juran, Total Quality

Complexity theory

Six Sigma, Lean, Action Learning, Adaptive Design, Resilience

Columns 2+3 = 2nd Curve

Health Care Reform!

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1st Curve 2nd CurveEvolved around medical and hospital practicesDisease focus, one patient at a timeHierarchical, physician controlledPerformance problems assumed as people-caused“Culture of blame”Fragmentation of care givers and health care functions, “hand-off” gaps commonMedical records paper, frag-mented, “owned” by caregiverComplexity frequent errors, harm to patientQuality is compliance-oriented, 2-4 sigma commonReactive to “sentinel events”

Designed around patient/ community experienceHealth, prevention focus, patient plus populationTeam-based systems outperform hierarchyRecognition that performance problems 95% systems-based“Just Culture”Integration of all system elements, care “seamless” for patientsEHR, “smart cards” owned by patients Integration of “quality sciences”minimizes error, harmQuality, value oriented toward 6+ sigma performance Proactive, O preventable harm

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Our 1st 2nd Curve Journey

What is our “1st curve dilemma”?What is 2nd curve health care?How 2nd Curve “Bends the Cost Curve”

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The Policy Environment: Affordable Care Act

New insurance rules guaranteeing coverageHigh-risk pool for people with pre-existing conditionsProtection for children with pre-existing conditionsCoverage for young adults, to age 26Small business tax creditsPreventive care, free for proven servicesEarly retirees temporary reinsurance“Doughnut hole” rebates for MedicareAnnual review of premium increasesAccess to care: $ Billions for Community Health Centers and the National Health Service Corps for low-income and uninsuredNew incentives for providers (ACOs, CMS rewards and penalties, shared gain provisions)

Improving Quality and Bending the Cost Curve: Current Strategies

Government/Policy: Health Reform and the Massachusetts experimentEmployer-Based Initiatives: Getting to 50% Cost Reduction (Hannaford, Asheville, Milstein)ACOs and health system redesign (cases from the US and Canada)

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The “Deming Cascade:” Simultaneous Quality , Cost , Value (W. Edwards

Deming)

Improve Quality

Decrease Cost

Enhance Value

Increase Market

More Jobs

( Process Improvement)

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Designing New Structures

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Board of Trustees

• Credentialing• Departmental (Peer)

Review• Surgical Case

Review• Blood UR• Drug Usage Review• Pharmacy and

Therapeutics• Medical Records

Medical Staff Functions(“Silo 1”)

• Nursing• Ancillary• Laboratory• Radiology• Physiotherapy• Risk Management• Finance, Planning• Regulatory Agencies• Etc.

Hospital Functions(“Silo 2”)

Chief Executive Officer

Medical Staff Executive Committee

Our Structural Heritage, 1917-2011 Our structural “fatal flaw”

Management:(industrial culture)

Physicians:(craft culture)

2011: The Structure Hierarchy, Fragmentation, Communication gaps,

Misunderstanding, Power Struggles, etc.

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Building New Leadership

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“Command & Control” Pyramid (Taylorism, circa 1900)

Top Management

Obedience

Commands

Hint: Doesn’tWork Anymore

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“Stewardship/Servant Leadership” (Covey, Block, others)

Top Management

Resources/Support

Caregivers/InnovationThose We Serve

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Systemic Leadership (Argyris, Schon, Senge)

Improve Quality

Decrease Cost

Enhance Value

Increase Market

More Jobs

( Process Improvement)

Systemic Leadership (Argyris, Schon, Senge)

Copyright Action Learning Systems 2005 32

BBehavior

Environment

Industry/Sector

Organization

Thoughts, Feelings, Intuitions

Beliefs, Assumptions

Governing Values

Myths, Legends, Heroes

Intended

Consequences

UnintendedConsequences

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1 stCurve 2nd Curve

Are we ready to board the “2nd Curve boat”?

“Void”

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Case examples

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The ThedaCare Breakthrough“Realizing that ThedaCare needed change, leaders tried one improvement program after another over the course of many years. Most of the programs offered incrementally better results for a while, until everyone slid back into old habits. Finally . . leaders started thinking about breaking down the divisions between caregivers’specialties, divisions of labor and habits of working to create a unified focus on the patient. Because this would require change in everyone involved, it was clear that hospital units needed a revolution instead of isolated, incremental adjustments.”

Breakthroughs in progress?

Iowa Health System: no falls for____Baylor U. Health System:Ontario Health System: Excellent Care for All Act and StrategyResilience Engineering and Learning Network: Vancouver, B.C.

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In Summary . . . “1st Curve” health care has run its course. It is unsustainable financially and quality-wise, and in search of a new paradigm. Fortunately that new paradigm is already emerging, awaiting our embrace. Emerging now is “2nd Curve” health care, a patient and community-centered system that will be better than we can now imagine.The greatest challenge of moving to the 2nd Curve is for health care leaders, and perhaps uniquely physician leaders, to understand and embrace this paradigm shift. They will be crucial, at the national, regional, and local levels in maximizing our nation’s ability to move toward higher value health care that can fulfill the desires and commitment of virtually all health caregivers

- Martin Merry, MD

What’s missing/ the Second Curve contribution

Reliable System Design: a new leverage point

Transforming the Medical-Legal environment

SCS startup strategy

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Patients and Families as Part of the Care Team

Home care/ Telemety

Team-basedcare

PharmacyNursing/NP/PA Care

Social Work

Spiritual Healing

Reliable System Design

Community Partnerships!

MD

Leadership, Co-Management

AccountableCare

Organizations

Case Mgt

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Observed & Expected Operative Mortality

Concord Cardiac Surgery 7/6/98 to 12/31/01

010203040

0 200 400 600

sequential patients

deat

hs 3sd higexpecteobserv

(4.8) Concord Expected

(2.1) Concord Observed(0.3) Salem Observed

All Case Operative Mortality

Concord Expected (NNE Risk Model)

Concord Observed

Salem Observed

All Case Mortality (percent)(When Team- base care, Informatics

entered)

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And the Caregivers ?Heroes!2 lives saved by ER, ICU and NICU teamsDeeply grateful family

(Does it get any better?!)

2 weeks before trial, all 3 physicians and hospital settle lawsuitsHeadline story in local press1 physician censured by state board of medicine(And can we imagine what it must be like for these physicians today – and for how long?)

(But does anyone believe that the OB office did a “near miss” root cause analysis on their telephone triage practices?)

Transforming the Medical-Legal Environment

Just CultureRelational LawSystemic Law

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Life Sciences

Life Sciences

Medical

DevicesMedical

Devices

SuppliersPayors and Funders

Increase  Access to centers of 

excellence

Increase Access  to Outpatient CareLack of community services

Need for communitynavigation

Community services need to focus on recovery and  medical issues

Increase access to rehab for acute chronic conditions

Lack of awareness of Community programs

Long  waits for Services in the community

Taking a regionalperspective on research

Increase connections withPrimary care

Expanding CaregiverPilots 

Expand wellness programs– e.g. Fit for Function

Need for strategicCollaborations/partnerships

Increase need for Peer support –

survivor groups

SCS Startup Strategy 

Biotech

Technology

Need to focus on transitions

•Improve Care•Reduce Cost•Create Jobs

Need to create systemsperspective on care

Need to collaborate withother strategies – i.e. COPD, Diabetes, cardiovascularImportance of timeliness

of treatment

Increase in options for 

community re‐integration

Translate Data into practice

Unique challenges for specific populations of care

Lack of accountability in Hospital  Planning 

Delivery  System

Hospitals,  Providers,  Care 

Networks

Increase partnerships with case management

Coordinated Pediatric Care

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Time

1910

2 Historical Curves of Health Care Innovation(derived from Kuhn, Toffler, Morrison, Merry)

(Bifurcation curve: 2010)

First Curve/ 4 sigma

(Create and Build

Momentum)

(Transfer/Sustain Momentum)

-

Future Performance (Second Curve/

6+ Sigma)

“Crossing the Chasm”

Perf

orm

ance

“Theoretical Ideal”

Toward Resilient Systems

Today1930 1980

THEORY OF ERRORAnalyze accidents and system failureAvoid unacceptable risk with rules complianceFocus on what

goes wrong because we know how things work

THEORY OF ACTIONFocus and appreciate the barely noticeable traits of everyday safe and productive work Learn how the system adjusts to sustain performance under expected and unexpected conditions

Robus

t

Resili

ent

Source: Erik Hollnagel

Curve ICurve II

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Way Better Care at Half the Cost: the US 2015 Project

Healthy Behavior Credit for all employees, the self-insured, and Medicare/Medicaid recipients;Collaborative Care Model for chronic and persistent conditions;Medical Village Model to create care coordination and patient navigation and align specialists with primary care;Wellness Advantage, a scalable worksite wellness initiative that combines local campaigns with regional and national action learning networks; andCommunity Hearth/Mosaic, a program that combines learnings from the self-help movement, story-based focus groups, and community health outreach to create local self-reliance, improve population health, and build community resilience.

The Net Effect When implemented in an ACO, health system, state, or region, the US 2015/Second Curve program results in the following:

Reduction of the cost of care to globally competitive levels (e.g. from 18% to 12% of GDP);

Improvement of quality to highly reliable levels (on par with high-performing systems in other industries);

Patient safety improvement to the level of ultrasafety, thus making healthcare as safe as commercial aviation;

Economic magnet zones, supported by an economically sustainable community health model.

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2nd

Curve