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by James M. Anderson

The news is full of sobering reports about the U.S. health care system. An ABC News/ Washington Post survey in 2003 found that for the first time most U.S. residents--54 percent--were dissatisfied with the overall quality of health care in the United States. In 2006, the Commonwealth Fund released results of an international survey that measured 37 areas of health care quality. Despite spending 16 percent of its gross domestic product on health care--more than twice the average of other industrialized nations--the United States scored only 66 out of 100. Other studies have shown that life expectancy in the United States lags behind that of Japan, Italy, France, Canada, Germany and the United Kingdom. Thousands of U.S. citizens die every year from errors in hospitals. Millions are uninsured or underinsured.

Yet hand-in-hand with accepting the challenge of improving the health care delivery system and outcomes such an improvement produces, hospitals and health care providers also must be convinced of the business justification for investing in quality. Cynicism about the business case for quality improvement is an anomaly unique to the health care industry. It's born of a third-party payer system, the lack of a commonly accepted definition of health care quality and how to measure it, and questions about how investments in quality will be rewarded.

We all want the best possible medical and quality of life outcomes for ourselves, our children and our elderly parents. Improving care is a moral imperative, but is it also a business imperative? Can hospitals improve safety and quality and
at the same time contain costs and enhance their positions in
the marketplace? Is there a business case for quality?

A novel approach
Traditionally, hospitals have addressed quality by recruiting talented staff, building new facilities, and investing in state-of-the-art equipment and technology. They haven't, however, invested enough in improving the processes and infrastructure that support the delivery of care.

Hospitals have tended not to look at the quality and value of outcomes and experiences for individual patients with specific conditions. The third-party payment system contributes to this by separating transactions that occur between the patient and the provider. Payers typically have focused on reducing costs by negotiating discounts for large networks, restricting patient and physician choices, and capping reimbursement, rather than improving outcomes for individual patients.

That focus may be changing. Increasingly, accrediting organizations, third-party payers and consumers are demanding improvements in the safety, quality and affordability of care. The Centers for Medicare and Medicaid Services recently announced its desire to eliminate payments for "never events." These are preventable events that should never happen in a hospital--a wrong surgical procedure, an incorrect drug or drug dosage, etc.--which result in unintended injury, illness or death. The Leapfrog Group, a coalition of large private and public health care purchasers, is encouraging public reporting of quality and outcomes and is collecting data on hospital progress toward implementing safe practices.

Case study
Cincinnati Children's Hospital Medical Center believes that the ability of providers to deliver better value--i.e., demonstrable improvements in outcomes and patient experiences per dollar spent--will drive the industry's future. Although the hospital has invested in people, buildings and technology, it also has systematically focused on improving processes, measuring outcomes and spreading best practices within the organization. An infrastructure has been built to support this work, including adding staff with expertise in process improvement and data management. Certainly the hospital has invested substantially in new information technology such as computerized physician order entry, but at the same time, it has analyzed and redesigned care delivery systems so that computerization doesn't simply automate inefficient, error-prone processes. Cincinnati Children's has also sought to learn from other industries--for example, the automobile and nuclear industries--that have proven success in applying reliability and improvement science to create safer, more efficient and effective systems for producing complex products.

Since 2001, Cincinnati Children's has focused intensively on transforming health care delivery. The scope and effect of this work continues to grow. Currently the hospital has 28 specific improvement projects in progress. Work is targeted to address all the dimensions of a quality health care delivery system identified by the Institute of Medicine.

Six principles have guided and will continue to guide this work:

1. Transformational goals. Cincinnati Children's is seeking to make transformational change, not incremental improvement. Dramatic, systemwide improvement starts with setting stretch (i.e., perfection) goals.

2. Institutional alignment. The CEO and the Patient Care Committee of the Board of Trustees set strategic priorities and are accountable for outcomes. Improvement teams for specific improvement projects are formally chartered based on institutional priorities. Each team has a senior leadership champion.

Quality teams are multidisciplinary and are typically co-led by doctors and nurses. The team includes frontline caregivers as well as staff with expertise in relevant disciplines such as infection control, information technology, registration and scheduling, process improvement methodology, and data collection and analysis. Parents or patients are involved from the onset.

3. Rapid-cycle small tests of change. Rapid-cycle small tests of change speed learning. Small tests of change break large goals into manageable units--small, concrete aims. An improvement team might start with one nurse trying a new process on one day with a few patients. The team monitors the outcome of that small test, tries it again, changes it, expands it and involves more people.

4. Real-time measurement. Measurement has been a key to success in the hospital's quality initiatives. Cincinnati Children's has invested substantially in building robust capacity for data collection and analysis. Quality improvement consultants and data analysts are key members of improvement teams. Each improvement team produces a monthly report documenting progress toward goals.

5. Real-time case analysis. Hospitals typically identify infections and other complications of care retrospectively, often after a patient has been discharged. Cincinnati Children's safety initiatives, however, employ real-time reporting of suspected cases and immediate analysis of confirmed cases. Access to immediate information relevant to clinical decision making helps the staff to quickly incorporate recommended changes into practice.

6. Transparency . Cincinnati Children's learned that transparency is a powerful tool to drive change and enhance real-time learning. Examples include posting signs tracking days since the last ventilator-associated pneumonia (VAP) in critical care units.


Financial effect of quality
Quality and process improvement work require long-term investments of time and resources. Are there financial incentives for making these investments? Do they make business sense?

There are substantial financial benefits to be gained, including:

Reduction in overutilization of inpatient space and supplies

Decreased workload caused by eliminating preventable errors

Improved ability to schedule staff time effectively; less overtime

Improved flow to meet growing demand with existing resources

Ability to redeploy existing resources for new patient populations, particularly in tertiary inpatient and surgical services that offer higher revenue and/or margins


Cincinnati Children's has begun to analyze and quantify the financial effects of its strategic improvement projects, starting with an initiative to reduce surgical site infections (SSI). It must be emphasized that, above all, eliminating preventable infections is simply the right thing to do. It spares the patient and family needless pain and suffering. The hospital's quality improvement work to eliminate preventable infections goes to the core of the mission to provide the best outcomes for patients.

At the same time, from a marketing perspective, lower SSI rates help differentiate the hospital's services based on quality. From a financial perspective, preventing SSIs significantly reduces health care costs.

A painstaking review of charts for Cincinnati Children's patients who matched certain criteria determined that, on average, each surgical site infection adds 10.6 days to the patient's hospital stay and $27,300 in costs. By implementing a combination of improved patient preparation practices, environmental changes and process changes, the hospital succeeded in reducing the rate of SSIs from 1.1 infections per 100 procedure days to 0.5. This means 33 fewer infections in one year and a savings of more than $900,000.

Cincinnati Children's recently began a similar detailed analysis of the cost savings resulting from a highly successful improvement project to reduce VAP. In that project, staff in the pediatric, cardiac and newborn intensive care units worked together for the first time to produce systemwide changes and improvements. Physicians, nurses, technicians and respiratory therapists worked as a multidisciplinary team. The team developed a pediatric bundle of care protocols following literature and chart reviews as well as examination of best practices in internal intensive care units. The team purchased equipment that reduced condensation in the ventilator tubing, worked with the vendor to produce a mouth care kit that placed all needed materials in one convenient package, redesigned the workspace around the bedside, created a care checklist and implemented strategies to achieve near-perfect adherence to process changes. The result was a drop in the VAP infection rate from 6.5 to 1.2 per 1,000 ventilator days, resulting in 60 fewer VAPs in fiscal year 2006 than in the previous year. Although the results of the financial analysis of this project aren't complete, it's anticipated that Cincinnati Children's will confirm a significant reduction in use of hospital resources and associated costs.

Although the hospital does experience a loss of revenue from some charge-based payers, it also reduces the strain on inpatient bed space, allowing the reallocation of space and the redeployment of staff to meet growing demands in other areas.

Reducing legal costs
Improving quality and safety also offers the health care system the opportunity to reduce escalating legal and medical malpractice costs. A recent study by Aon, a leading provider of risk management services, found that the average jury award for malpractice increased from nearly $2 million to $5 million from 1993 to 1997. Since 2000, at least six states have seen jury awards for medical malpractice that were in excess of $50 million for a single claim. Three states saw individual claim awards in excess of $90 million. In some areas, physicians are leaving medical practice because of the cost of malpractice insurance, which reduces the availability of services to patients. Cincinnati Children's believes that quality improvement work is an important factor in its ability to negotiate substantially lower medical malpractice insurance rates for the coming year.

These successes demonstrate that investing in improvement offers significant opportunities for both improved quality and reduced costs--addressing both the moral and business imperatives of health care delivery.

As the U.S. health care system continues to evolve in an age of increasingly informed consumers, health care providers must become more innovative and flexible to provide the best value for customers. Now is the time for providers to embrace quality improvement in their organizations. Doing so will improve outcomes, advance learning to spread and sustain those improvements, contribute to the competitive strength of their organizations and over time build financial strength--each an essential ingredient to improving health status in this country.

About the author
James M. Anderson is president and chief executive officer of Cincinnati Children's Hospital Medical Center. In 2006, Cincinnati Children's received the American Hospital Association McKesson Quest for Quality Prize and was named Best Place to Work in the Grand Category (500 and more employees) in a survey conducted by the Cincinnati Business Courier .