The numbers are shocking. The U.S. spends $2 trillion a year on its health system-50 percent more per capita than any other nation. Yet, as many as 90,000 Americans die each year from preventable medical errors during hospitalization, reports the Institute of Medicine. In fact, more than a third of doctors and 42 percent of Americans have experienced medical errors while receiving care, according to a joint survey by the Harvard School of Public Health and the Henry J. Kaiser Family Foundation. “Hospital errors rank between the fifth and the eighth leading cause of death, killing more Americans than breast cancer, traffic accidents or AIDS,” states a Kaiser Family Foundation briefing on the topic. 

In addition to the loss of lives, errors saddle the system with significant costs. The lost income and costs related to disability and corrective treatment due to such mistakes is estimated at as much as $29 billion annually. What’s more, medical errors are just one of many issues the health care industry faces in delivering affordable, quality care. Employer health care costs continue to climb, rising 6.1 percent in 2007. Fifty million Americans remain uninsured. And, with obesity and diabetes on the rise, the population’s overall wellness seems to be in decline. 

Clearly, it’s time for a sensible prescription for change, agreed CEOs gathered for a roundtable on health care cosponsored by Cardinal Health and Chief Executive magazine.

“Health care is a business with some very interesting contradictions and very big conundrums that need to be addressed,” asserted Kerry Clark, CEO of Cardinal Health. “There’s a growing body of knowledge that quality through productivity and safety of delivering health care are going to be key tools in helping manage the cost of health care and, over time, improving the health level of our population.” 

At the same time, there’s something of a disconnect between how quality is perceived by employers and patients vs. by the health care industry. Patients-who are typically not privy to the statistical data on outcomes for specific procedures at a given hospital-are apt to judge their hospital experiences by the friendliness of the staff and the quality of the food, rather than on the degree of safety procedures in effect or whether those procedures are followed. 

To Err is Expensive 

“The average person comes into the hospital expecting to get the best care,” noted Dennis Millirons, CEO of Condell Health Network. “They don’t look at whether people wash their hands between patients or follow drug administration procedures. They look at how quickly the call button gets answered. And the average executive has the same problem. They don’t know what constitutes health care quality.” 

For the most part, employers also don’t see the connection between poor quality and higher costs.  Contracting pneumonia or another infection while in the hospital, for example, leads to a longer hospital stay and bumps up a hospital bill by hundreds or even thousands of dollars. Administering the wrong medicine can have a similar, or even worse, impact. Surgical errors, such as leaving a sponge or surgical instrument inside a patient, can add tens of thousands of dollars to the cost of the patient’s care. Yet despite the fact that preventable incidents like these contribute to higher bills for health care benefits and disability premiums, employers tend to focus on reducing benefits and/or shifting benefit costs to employees rather than addressing the issue of quality.

And for good reason, noted participants from health care institutions, who pointed out that quality metrics-let alone proven measures that improve quality-are hard to come by in the health care industry. “Can I differentiate-that is, show that the care you get in my hospital or any one of our hospitals is as good or better than you can get someplace else?” said John Lynch III, CEO of Main Line Health. “That’s where this breaks down, because there are ways to measure and compare outcomes, but they’re crude.”  

The Data Dilemma

Already, many hospitals are voluntarily collecting and publishing data on patient outcomes for certain procedures, such as heart surgery, and states like California and New York are mandating that such data be made public. Organizations like The Leapfrog Group are gathering and   reporting information on hospital quality. Increasingly, information is even available for individual physicians.

But even when data is available, the numbers can be difficult to analyze and compare. The riskiest of heart patients, for example, tend to travel to hospitals with the best cardiac facilities-and risky patients bring outcome statistics down. In fact, health care institutions worry that making data available will discourage doctors from treating high-risk patients whose outcomes might drag down otherwise stellar treatment records. 

Ironically, they also worry about what is standard practice in most industries-advertising their competitive advantage. When Baptist Health South Florida was preparing newspaper ads that would trumpet its open heart surgery data, CEO Brian Keeley recounted the reaction to his suggestion that the ads list other hospitals’ data. “People were convinced we were going to start World War III by publishing everybody else’s statistics,” he said. “Patients can access this information through the Florida Agency for Healthcare Administration, but the idea that we start publishing the data of our competitors as well as our own was seen as having the potential to create a huge problem.” 

Despite such reservations, virtually all health care company CEOs recognize the positive aspects of providing data-and that the more specific that data, the better. “If you don’t actually start from the front end and work on physician mortality statistics, you get doctors who say, ��Those are group numbers. That’s not me,’” reported Chris VanGorder, CEO of Scripps Health, which is located in California, where releasing data is now mandatory. “Physicians are now more engaged on the quality issue and the safety issues than they were before. They’re starting to talk about system-wide, evidence-based best practices. And medical staffs are taking a harder look at their credentialing.” 

“The standard response you hear from a doctor about outcome data is, ��My patients are sicker,’” agreed Michael Israel, CEO of Westchester Medical Center, who says that, despite initial resistance, his hospital ultimately benefited from releasing both individual physician and institutional information. “It forces us to work more closely. We now have people saying, ��We need to improve x or y. And we need to do it now because this will have an effect on me.’” 

Bring on the Boards 

While publishing outcome data alone won’t necessarily improve patient outcomes, many in the industry see it as a necessary first step toward identifying best practices and benchmarking quality. What’s more, it can be instrumental in overcoming one of the challenges health care organizations face in improving quality-namely, getting boards more firmly involved in the equation. Boards are not comfortable with the issue of quality,” noted Glen Fosdick, CEO of The Nebraska Medical Center. “They’re very comfortable with financial reports, but the system [for qualifying physicians] in the past made it very difficult for laypeople to make decisions on clinical issues.” 

Yet it’s up to the board of trustees of a hospital to provide physician credentials, the right for a doctor to practice at a particular hospital, and the privileges he or she has-such as which procedures that doctor is certified to perform. Often, however, board members lacked the necessary data to make informed decisions or the medical background necessary to analyze the information they were given. 

The Nebraska Medical Center changed to a three-tier credentialing system to ease that process. “The first tier includes doctors who are clean as a whistle and therefore almost automatically [authorized],” Fosdick explained. “Tier two is any physician who has had maybe one problem that we reviewed and found to be okay. Tier three is any physician who has had multiple behavioral or malpractice issues or was not approved by the medical executive communities. We are mandated to disclose those situations in detail to the board. What that does is focus the board’s attention on the 0.5 percent of doctors they should be concerned about.” 

Scripps Health faced a similar issue. “Eight years ago, the data being thrown out was probably so complicated it was difficult for laypeople to understand,” reported Van Gorder. “And I’m not sure that we were terribly transparent with errors and near misses.” 

Over time, the company’s board developed a quality community on par with that of its finance committee in terms of power and prestige. Today, all the hospital chiefs of staff participate on the quality committee, and serious events, such as errors or near misses, are discussed by the board in detail. The change, reported Van Gorder, has helped the company’s quality practices. “We’re starting to communicate more transparently than we ever were before, and we’re starting to agree on the systems necessary to prevent that error or near miss from ever occurring again.” 

For example, recognition that errors in medication administration were a major issue prompted the purchase of new infusion pumps (devices used to administer IV medication) with safety features. The switch represented a $6 million initiative but enables Scripps to catch a problem before it occurs-a potentially life-saving change. 

Proven Potential 

Progressive hospitals are also looking beyond their own walls and even the medical field to find and adopt quality initiatives that proved successful in other industries. The Nebraska Medical Center introduced employing a “crew resource management training” program. Developed by the aeronautical industry to reduce airplane fatalities, the system was based on statistics suggesting that the most common denominator of plane crashes involved a pilot with 20 years’ experience flying with a copilot who he or she had never flown with before. The reason? Co – pilots would use the “H&H,” or hint-and-hope communication approach. He or she would say, “Gee, that’s a big mountain in front of us,” and hope that the pilot would think, “Right, I should probably go around it.” 

At hospitals, a similar dynamic exists between experienced doctors and operating room nurses, who are understandably not inclined to attempt to share their opinions with surgeons. “The FAA’s crew resource management program mandated that pilots listen to crew members, and the result was a dramatic improvement in accident prevention,” said Fosdick. “We did something similar. What’s intriguing is that physicians who were initially critical of the concept have become strong advocates because they’ve had experiences where they avoided significant issues by doing this.” 

The Nebraska Medical Center also adopted the Six Sigma quality control system developed by GE. “Each year, five people from our organization leave their jobs permanently to spend two or three years being trained as black belts in lean manufacturing, and then we put them back in the system,” explained Fosdick, who says the program helped cut 150 basis points from the supply chain. “This is the easiest money we ever saved, because we didn’t cut staff; we just found ways to avoid overusage of supplies and resources.” 

Six Sigma also worked well for Condell Health Network, which employed the concept in its laboratories. “The laboratory is the best place to start lean learning because it’s process-driven, very precise in terms of its outcome, and very costly,” said Millirons, who added that adopting bar code delivery of pharmaceuticals, Cardinal Health’s Alaris specialized infusion devices, and paperless medical records are all avenues for increasing efficiency and quality of care. 

The latter is costly and difficult to retrofit into an existing facility-and ultimately requires a level of integration that seems unattainable in the near future. In an ideal world, doctors would have immediate access to a patient’s medical records from wherever they may be-at home, in the office, in the ER or at the patient’s bedside in the hospital. 

The reality? Interfaces for systems are complex and extremely costly and, even when made feasible, must overcome the legal barriers of protecting patient privacy. “We’re very fragmented from an information standpoint,” noted Van Gorder. “Systems don’t connect well with one another and there are limitations to what we can do. Putting our technology into doctor’s offices is a violation of Medicare laws.” 

“If you look at where we need to go in the future, there’s no question that there are problems in the system that need to be fixed,” summed up Millirons, who noted that it will be up to business leaders in the health care industry to drive the necessary changes. “Today, health care CEOs have to be just as comfortable talking about quality data and benchmarking quality as they are at talking about cost and revenue, because it’s just as important. The product we produce is outcomes-outcomes for patients.”

 Supplying Savings

The concept is simple: Carrying inventory is as costly for hospitals as it is for any other business. But at the same time, hospitals and their patients pay much more dearly when a necessary piece of equipment or treatment isn’t on hand. To address the issue of safely streamlining the supply chain, Nebraska Medical Center CEO Glen Fosdick partnered with Cardinal Health in search of a solution. 

“The problem with our supply chain was that the more that our suppliers sold us, the more money they would make. I remember going to see my CFO and saying, ��At Wal-Mart, you don’t pay for the toothpaste until you take it to the cash register. Until then, that’s Procter & Gamble’s toothpaste. How do we do that?’ 

“We talked to Cardinal Health and they said, ��We’re not doing something like that, but we’d like to.’ So we developed a relationship with them where they came and bought out our medical/surgical inventory, which added $5 million to our cash reserves. They installed Pyxis automated inventory technology, so that we don’t start paying for supplies until they come out of the Pyxis equipment. We don’t carry the inventory. That’s not our forte; it’s theirs. 

“Beyond the $5 million we saved, over 99 percent of the time the item is available on the floor when it’s needed. We never, ever could have said that before. First, we never could have measured it before. And second, we all know that about the third time a nurse gets an earful because they don’t have the right gloves for a doctor, they stockpile enough of them to supply Uganda for about two years. 

“Cardinal gave us a guarantee at the time of a minimum of at least $5.2 million over two years. We told them, ��We’ll give you 30 percent of the savings beyond that because we want to incent you to help us to find ways to reduce our cost.’ They now have full-time people in our organization who do nothing but work with our people to try to figure out why we have four different types of 4×4 gauze pads or why we have seven different types of EKG electrodes. 

“These are people with clinical backgrounds who can get in there and communicate and connect with our people. We avoid the traditional problems of internal management who have connections with buddies who provide them with pizza and chicken wings. And what’s intriguing is that these people get excited when they find a way to reduce the number of electrodes that will save us $20,000 a year. 

“The program has been so successful that we’re now extending it. We’re now talking about giving Cardinal 40 percent of the savings because we know we’re getting past the easy fruit. But I’m still happy to take 60 percent of something I didn’t get before.”