Management’s Role in Reforming Health Care

Health care managers are the missing link in debate over reform. Their skills and ideas are needed to sustain and improve upon multiple advances in the delivery of health care for the benefit of patients. An interview with HBS professor Richard M.J. Bohmer, MD, and an excerpt from his book Designing Care: Aligning the Nature and Management of Health Care. Key concepts include:
  • Many health-care delivery issues are managerial rather than policy issues.
  • Much debate on the U.S. stage assumes the current health-care delivery system is a given. Yet innovations in care delivery could potentially help patients and the U.S. health-care system overall.
  • Bohmer's book explains how to create more knowledgeable, flexible, and responsive delivery organizations.
  • Routine medical practice is a fertile source of innovations in care, in both what to do and how to do it.
by Martha Lagace

Despite the urgency of debate on the U.S. national stage about health-care reform, an issue now before the U.S. Senate, one crucial element of change has been less visible: advances in the delivery of medical services.

Innovations in health-care delivery—applying the best available medical knowledge to solving the problems of individual patients—offer enormous potential to help patients and the U.S. health-care system overall, says HBS senior lecturer Richard M.J. Bohmer, a physician and researcher on the intersection of medical care and management practice.

Bohmer's new book, Designing Care: Aligning the Nature and Management of Health Care (Harvard Business Press, 2009), explains how to create more knowledgeable, flexible, and responsive delivery organizations.

“Some of the most important innovations are not technologic—they are in the way we organize care delivery.”

"I don't think we can stop health-care reform if and when we come to agreement about an optimal insurance model," says Bohmer. "For me, insurance reform is a necessary but not sufficient component of health-care reform.

"It is hard not to feel that the cart has been put before the horse," he continues. "We ought to think about the optimal way of caring for a particular type of patient and then how to pay for that optimal way rather than say, 'Here's the payment regime, what can we do in this context?'

"For me, the optimal way is the function of a science: what is possible in terms of drugs, technology, devices, information technology, and personnel; then secondarily, the current regulations in place and the payment models. Part of the purpose of writing Designing Care has been to emphasize the design-of-services component of reform."

At Harvard Business School Bohmer teaches an MBA course on health-care operations management, codirects the joint MD/MBA program, and serves as faculty chair for two Executive Education programs in health-care delivery. A native of New Zealand, he teaches and consults on health management issues in numerous locations around the world. With Thomas H. Lee, MD, Bohmer authored the opinion piece "The Shifting Mission of Health Care Delivery Organizations," which appeared in the August 5, 2009, issue of the New England Journal of Medicine.

Bohmer recently sat down with HBS Working Knowledge to explain how managers can apply their skills and knowledge to improve health-care systems. (A book excerpt from Designing Care follows.)

Martha Lagace: How does health-care delivery fit into the greater context of health-care reform?

Dr. Richard Bohmer: Broadly speaking, health-care reform encompasses three big issues: insurance reform, payment reform, and reform of our delivery system. For me, these are three separate but related conversations, clearly not independent of each other. Most of the conversation has been about insurance: how we pay for it and how we ensure that even more Americans are insured and that more are even better insured.

Very little of the debate, so far, has been about how to organize the delivery of care. Instead, the debate takes the care delivery system we have at the moment as a given, though there has been a little discussion on the optimal design of IT systems for delivery.

In my opinion, there is another important set of discussions to be had around how we actually organize care. Many of these issues are managerial in nature, rather than policy issues. Questions we need to answer include:

  • What is the best way of configuring and managing services?
  • Who are the professionals we need?
  • What is the optimal setting and context in which they should be delivering care?
  • What processes should they use?

There are all sorts of operating managerial and strategic decisions that we haven't even talked about at a policy level and national level. Yet at ground zero, lots of interesting experiments are underway with professionals trying different ways of configuring and managing services. On that list I include experiments with disease management programs, substituting nurse practitioners for physicians in certain circumstances, the in-store clinic model for treatment of simple diseases, as well as experiments with IT to enable precise electronic communication between patients and doctors so that real medical discussions can be had at a distance.

At the national level we don't hear much about these innovations—yet they present an equally important set of issues. We need to make a distinction between debating how it will be paid for and what the "it" is that is paid for.

Q: What are the drivers of change in health-care delivery?

A: Several factors are pushing us to change how we deliver care. Perhaps the most important of these is changing expectations. Patients are used to good service from other industries and expect higher performance than they see on the delivery sector. They obviously worry a lot about whether their insurance will cover the medical services they need, but they are also really concerned about the care they get: how accurate, reliable, and fail-safe it is, and how responsive and convenient it is. Employers expect better outcomes, and of course they and patients want fewer errors and fewer patients harmed by care that was intended to cure their disease. Finally, all health care's constituents expect better value.

“A lot of health-care reform is a management problem. It can't be solved by policymakers acting at a distance.”

Having said that, I think we have to recognize that in the last 10 to 15 years there have been substantial advances. Mortality rates for major procedures and conditions have been trending steadily downward.

A second important driver is the evolution of scientific knowledge and of the technology that goes along with this evolution. Little by little, our uncertainty about the cause of a disease or the optimal therapy for each disease is reducing. As we improve our knowledge of what to do, the object of management attention becomes organizing how we do it. We can focus much more closely on managing the actual care rather than the context in which the care takes place. For most of the 20th century the object was managing the institution that served as the context for care—the "doctor's workshop." Over the past 10 to 15 years the object of management attention has widened to include the care itself. With the development of generally accepted standard processes we have become able to design operating systems specifically to support those processes and assess performance through measures of process compliance.

Q: What key innovations are you seeing on the delivery sector?

A: Some of the most important innovations are not technologic—they are in the way we organize care delivery. As I've mentioned, these include disease management programs that target the sickest patients, new venues of care and caregivers, and tools and systems that help and allow patients to be more effectively involved in their own care.

To date, our prevailing model of innovation has been that knowledge flows into medical and nursing practice from funded external research. In this model it is the role of provider organizations to bring knowledge published in the medical and nursing literatures to bear on individual patients by selecting the right therapies and the right way of implementing those therapies: a one-way flow of knowledge from the research community to the delivery community to each individual patient.

However, routine practice is itself a fertile source of innovations in care, in both what to do and how to do it. Medical knowledge and how to operationalize it can be learned through taking care of patients, and delivery organizations create knowledge for themselves. This is knowledge flow not from bench-side-to-bedside, but from bedside-to-bedside. New insights derived from practice can be brought to bear for the benefit of each subsequent patient.

Some health-care organizations, such as Intermountain Healthcare and Kaiser Permanente, are a great deal better at capturing these innovations than others. For Intermountain and Kaiser the notion of knowledge evolution is central to their thinking about how to manage the organization. As delivery organizations become more focused on how to manage the care, learning to capture their own knowledge about it becomes progressively more important. So perhaps the most important innovation is organizational—the creation of organizational structures and processes that foster learning in routine practice and the creation of more effective models of care delivery.

Q: How can better management improve health-care delivery?

A: What I have described above is much of what managers do: design and run organizations that deliver a service effectively and reliably and at the same time that are capable of learning systematically from their own experience. Some of the leading organizations have deliberately designed the way they work. Historically, the hospital aggregated important resources for care, such as technology and an all-important nursing workforce, but it rarely designed care processes to meet the needs of specific patient groups. Given the increased expectations of performance, we now need to design care by asking nitty-gritty design questions such as: How is care going to be delivered? Who will do what, when, where, and how? How will they hand over tasks and decision rights and accountability to the next person who will do what, when, where, and how? And how does technology support these decisions?

Hence, a lot of health-care reform is a management problem. It can't be solved by policymakers acting at a distance. That is why we should devote time to training and supporting managers in practice. I also believe we should help doctors understand the managerial issues related to their clinical practice. My involvement with the MD/MBA program at Harvard Business School is part of that belief. I personally think HBS has a huge contribution to make, because we spend our time studying how to manage things better to give better outcomes.

Q: What can business schools do?

A: There has been a sometimes implicit, sometimes explicit, belief that business and health care do not mix. I think what people mean when they express this belief is that the profit motive in health care bothers them. Yet business schools think about management practice. A not-for-profit institution deserves to be as well managed as a for-profit institution. In terms of health-care delivery, the absence of a profit motive doesn't mean that people should tolerate poorly designed processes and systems—especially when organizational performance is a necessary component of realizing the absolute best clinical outcomes for individual patients.

If a physician's ability to cure or mitigate a disease is governed by both clinical competence and managerial competence—which I believe to be true—then I think we should pay closer attention to managerial competence within the health-care sector.

I am pleased that schools of management are so interested in health care. Not just at HBS but all around the country, schools of management are turning operational management attention to these kinds of questions, and that's fantastic. A whole lot of people are thinking about different components of this basic problem.

Excerpt From designing Care: Aligning The Nature And Management Of Health Care

By Richard M.J. Bohmer

At its heart, health care is the application of a general body of knowledge to the needs of a specific patient. For centuries this knowledge was generally regarded as the property of the healing professions and the individual clinician, not the health care delivery organization. Managerial practice too treated this knowledge as an attribute of the provider, thus focusing on the resources clinicians used as they provided care and on the hotel functions of inpatient institutions. That is, there was a deliberate demarcation between management practice, focused on business processes, and clinical practice, focused on the activities and decisions of diagnosis and treatment.

However, health care delivery has been undergoing a gradual but important change. Patient care, once the domain of the individual practitioner, is becoming the domain of the care delivery organization. The mission of these organizations is shifting. As science, technology, care processes, and care teams have become more complex and diverse, the way in which the activities of care are organized and the institutional context in which they occur have become an increasingly important determinant of the effectiveness and efficiency of that care. Thus the object of management has changed. In response to these changes, health care managers have started attending to the management of the care as well as the management of the institutions in which the care takes place.

The tools used for managing care have largely focused on getting clinicians to do what was known, thus treating the knowledge for care as scientific, static, and a property of the professions and the individual professionals. Consistent with this view of the knowledge for care, management tools such as practice guidelines, performance measurement and reporting, and financial performance incentives for physicians have predominated.

This approach to the management of the care itself has, however, failed to account for several significant changes in the nature of the knowledge for care and the way it is applied in practice to patient health problems. These changes include increasing knowledge specificity and the standardized sequential care processes this has allowed; the experimental nature of some care and the iterative process this requires; the dynamic relationship between iterative and sequential care processes; the interplay between scientific and organizational knowledge in care delivery; and the organization's role in developing and maintaining the knowledge for care, both scientific and organizational.

Accounting for these requires a fundamentally different approach to managing care. Operating systems and processes must be deliberately designed to realize great medical outcomes; past experience suggests that they cannot be presumed to reliably result from existing organizational and operational arrangements. Underpinning these designs is the need for health care delivery organizations to develop their own knowledge bases for solving health problems. And a capacity for learning—creating and disseminating the scientific and organizational knowledge for care—must be deliberately designed. Contrary to individual learning, organizational learning does not happen naturally.

Given the organization's key role in reliably creating cures and preventing errors, the question is not whether to create organizations capable of providing patient relief, but how. Performance improvement in health care delivery ultimately means the better application of medical knowledge and must address three key underlying problems: not knowing what to do, not doing what we know, and not doing it well. This is predominantly a management problem. It cannot, in the final analysis, be achieved by policy means acting at a distance. Policy interventions, such as new financing and payment models or health plan contracts, can only provide an incentive for change. Nor is it simply a matter of adopting wholesale a successful management model from another industry. It is more difficult than this. For improved performance to be realized, managers acting locally need to design processes and organizations that are more effective at executing on the knowledge for care.

Although the previous chapters have described some principles for designing care, and several specific designs, they have deliberately not specified a dominant design, arguably because none exists. Local conditions—for example, patient needs, regulatory constraints, human and technological resources—vary to such an extent that each organization, even when applying the same principles, will likely arrive at a different operating system design. Instead, this book has focused on the design principles of and capabilities for two key operating systems that need to be deliberately designed if they are to perform optimally: the operating system for delivering the care that we know, and an operating system for creating new knowledge about which care to deliver in the future and how to better deliver it. Central to understanding how to design processes and operating systems is an understanding of the nature of clinical processes and the relationship between the medical knowledge, care processes, organizations, and practitioners.

The book has also focused on the dynamic relationship between the above two operating systems. Because each of the four components of a system for delivering health care continues to change, ongoing redesign—that both reacts to, and creates, new knowledge and then implements it in the care of the next patient—will be a constant feature of managers' and clinicians' working lives. Understanding the relationship between the four components, and between the operating systems for delivering care and learning from care, will be essential for care delivery organizations as they think through how they will approach care in the future and how they will cope with this constant change. The capacities to do the redesign work, and to accept the results of the redesign, are perhaps the most important capability an organization can have and value.... [W]ithout deliberate design, health care delivery organizations will continue to disappoint.

About the Author

Martha Lagace is senior editor of Working Knowledge.