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Building Organizational Capacity: A Cornerstone Of Health System Reform
The U.S. health care delivery system is in need of overhaul. Care is fragmented, unsafe, and inefficient. Achieving higher levels of performance requires organizational capacity, including information technology (IT) and specialized expertise, not present in most settings. Organizational capacity is fortified through the benefits of larger scale and clinical integration. The evolution of new organizational structures will open up opportunities to redesign payment programs and invest capital toward building high-performing systems. A comprehensive policy agenda is needed to encourage growth in organizational capacity, including national priorities and goals, performance measurement and reporting, payment reform, community leadership, IT, and public education.
ALTHOUGH COMMON PARLANCE often refers to the U.S. health care "system," it is anything but. It comprises many uncoordinated pieces, lacks a common strategy, and seldom achieves the promise of consistently high performance seen in other sectors of the economy. Eight years ago, the Institute of Medicine’s (IOM’s) Crossing the Quality Chasm report called for fundamental transformation of the way in which health care is organized and delivered. The report concludes: "The current care system cannot do the job. Trying harder will not work. Changing systems of care will."1 Although there are pockets of great innovation and hope, transformation has yet to occur. In this paper we examine the challenge of reforming the health care delivery system, and we make three points. First, stronger organizational capabilities and supports are urgently needed to achieve high levels of performance. Next, as new organizational structures evolve, they will open up opportunities to align payment and capital investment systems with value. Finally, a focused policy agenda is needed that will help cultivate these new supports and structures.
In spite of our best efforts over the past decade, we have seen meager improvements in quality. The Agency for Healthcare Research and Quality’s (AHRQ’s) National Healthcare Quality Report 2007 shows that there is nationwide improvement on a selected set of indicators, but those improvements seem to be getting smaller over time. Indeed, the rate of quality improvement slowed to an annual rate of 1.9 percent between 2000 and 2004.2 There is entrenched overuse, misuse, and underuse of services throughout the health care sector. Gaps in quality, use, and access place disproportionate burdens on minorities, and efforts to close the disparities gap have had little impact.3 Recent efforts to improve quality. To date, efforts to improve quality have been focused mostly at the microsystem level—for example, individual departments within hospitals (such as intensive care units, or ICUs) and small practice settings—and some have been substantial and life-saving. For example, implementation of a simple, five-step checklist within fifty-five Michigan ICUs resulted in a rapid reduction in bloodstream infections.4 However, the health sector lacks the ability to bring these innovations to scale; best practices in care delivery may take years, if not decades, to spread throughout an institution, much less the nation. Moreover, what we have not seen is fundamental reform in the delivery system aimed at the development of new organizational models capable of consistently providing effective, safe, and efficient care across each entire patient-focused episode. System fragmentation. Why has the delivery system been so slow to transform? Part of the answer is that health care is extraordinarily fragmented. There are examples of comprehensive health systems, but they are exceptions to the rule.5 Although younger physicians are overwhelmingly choosing larger group practices, the majority of physicians are still in small practice settings.6 A typical primary care provider (PCP) who sees 257 Medicare patients a year has a network of 183 peers in 108 different practices, which makes it extremely challenging to achieve any reasonable level of coordination.7 Lack of accountability. There is also a lack of accountability within the system for critical aspects of care such as transitions from hospitals to the community. Studies document that one in five patients experience an adverse event within three weeks of hospital discharge, and half of readmissions are likely avoidable if transitions in care are handled appropriately.8 Yet in most communities, no one is responsible for taking action to improve these poor outcomes. Focus on volume rather than best outcomes. Third, fee-for-service (FFS) payment programs encourage a focus on increasing the volume of billable services rather than achieving the best patient outcomes. It is estimated that 30–40 percent of health services represent waste.9 Although many in the health care supply chain benefit from this excess volume under current payment approaches, research documents sizable problems with underuse as well as overuse, especially for the uninsured (approximately one in seven Americans).10 Hence, fundamental reform of the payment system is not necessarily a "zero-sum" game. Rather, to meet the unmet needs of the population without increasing costs in the future, the savings related to reducing overuse must be reallocated to enable investments in services that are underused. This emphasis on volume has also contributed to a paucity of information on patient outcomes. For a sector that consumes more than 16 percent of gross domestic product (GDP), startlingly little is known about the impact of many health care services on patient outcomes or on population health. Measures of patients’ health functioning are not routinely captured as a part of patient encounters. This focus on services rather than outcomes means that we often fail to ask important questions and learn from the answers. For example, only recently have we learned that sizable investments in spine care over the past decade have not been associated with a lessening of the burden of back pain within the population, and there is apparently little difference in six-month outcomes for patients undergoing surgical versus nonsurgical interventions.11 Poor balance between professional autonomy and organized care systems. Lastly, we have failed to strike the right balance between professionalism and organized systems of care.12 One of health care’s greatest assets is the strong code of ethics that guides professional conduct and creates the expectation that clinicians will always make decisions in the best interest of their patients. Too often, however, professional autonomy has served as a barrier to the development of organized systems and well-designed care processes. Serving the interest of patients requires that health care professionals function within a system that offers both appropriate levels of autonomous decision making and strong organizational supports. Principles of professionalism must evolve to address the responsibilities of clinicians to shape organizational missions, governance, cultures, policies, and care processes that are in the best interest of patients. To achieve this kind of cultural transformation, strong leadership will be needed to institute changes within medical education, residency training, and board certification programs and to assume leadership positions within emerging organizational arrangements. Efforts should begin immediately to expand current leadership ranks and to train the next generation.
The IOM’s Quality Chasm report called for new organizational models capable of investing in health information technology (IT); managing new clinical knowledge and skills; designing care processes based on best practices; assembling and deploying multidisciplinary teams; coordinating care; and measuring and improving performance.13 Three streams of evidence point to the need for stronger organizational capacity. First, a growing body of evidence suggests that practice settings with organizational supports perform better than those without them. A synthesis of evidence on the quality and efficiency of multispecialty group practices compared with that of smaller, less integrated practices indicates that more sophisticated organizations outperform smaller, less organized practices and have critically important attributes, including physician collaboration, scale, and affiliation, that provide infrastructure support.14 Second, there is evidence pertaining to specific organizational supports, most notably health IT, which when deployed properly results in significant improvements in quality, efficiency, and costs of care.15 Third, there is evidence that the lack of organizational supports leads to poor quality and inefficient use of resources. Thomas Bodenheimer’s synthesis on the effects of inadequate supports to coordinate care is particularly compelling.16 Greater organizational capacity will also be needed to take advantage of opportunities on the horizon. Continuing advances in genomics and personalized medicine will enable providers to tailor disease detection and treatment to individual patients. However, application of this knowledge and technology requires comprehensive clinical and other information enabled by computer-aided decision support.17 It is this growing complexity of science and health care delivery that led participants at an IOM roundtable to speak to the need for a "comprehensive reevaluation of how healthcare is structured to develop and apply evidence" and to call for a delivery system that is capable of capturing results for improvement.18
As we think about building stronger organizations to support care delivery, two factors are important to consider: scale and clinical integration. Scale. As the complexity of delivering health care has grown, so too have the benefits of larger scale. Greater access to capital and specialized expertise has enabled more than 90 percent of larger multispecialty group practices to transition to electronic health record (EHR) systems, while fewer than 15 percent of small practice settings have such capabilities.19 Scale also enables access to the kinds of specialized expertise that are needed to redesign care processes, such as engineering, clinical informatics, and quality management and to assemble multidisciplinary care teams that bring to bear the expertise of diabeticians, health educators, social workers, and others. Lastly, greater organizational capacity enables the provision of patient and family caregiver supports, such as personal health records. Clinical integration. In addition to scale, clinical integration likely contributes to the achievement of higher levels of performance. Clinical integration refers to the capacity of an organization to provide most of the services that patients with chronic illnesses will need over the duration of the illness, be it a period of months or years. Clinical integration sharpens the focus on value, and the evidence strongly suggests that patients are not receiving the best value.20 Clinically integrated systems of care are better positioned to design safe, effective, and efficient longitudinal care processes for patients with chronic conditions. With clinical integration, performance measurement and improvement can extend across each entire patient-focused episode and can help inform and redesign the whole care process. Finally, clinically integrated delivery systems are better positioned to minimize the overuse of "supply-sensitive" services, which explains much of the variation in per capita spending from one community to another.21 In theory, clinically integrated systems have greater leverage to configure networks that include adequate, and not excessive, supplies of various types of clinicians, specialists, subspecialists, hospital beds, and other services needed to care for the populations they serve. Of course, when these delivery systems are coupled with prepaid insurance options, there may be an incentive in the opposite direction to provide an inadequate supply of certain services. In either case, publicly reporting performance information (for example, waiting times), appeals mechanisms, patient "opt-outs," and other provisions are critically important. Although scale and clinical integration are important to achieving higher levels of performance, clinicians need not practice in multispecialty group practices to reap many of the benefits of scale and clinical integration. There are ample examples of small practice settings’ becoming part of larger organizational arrangements and gaining access to critical organizational supports, without changing their practice setting. For example, Geisinger Health System’s physician group practice includes 200 PCPs who practice in thirty-eight community locations. These physicians enjoy the benefits of a large organization, such as access to cutting-edge health informatics, while remaining within a community practice setting.22
As new organizational models and more sophisticated structures begin to emerge, there will be opportunities to further align payment and capital investment with the goal of producing higher-value care. Under our current FFS payment system, providers are rewarded for volume, not value. FFS payment leads to overuse of services, especially services for which payments are high relative to the resources required to provide them (such as many surgical procedures). FFS payment also results in "voltage drops"—that is, in underuse of services often not included on fee schedules (for example, care coordination, patient education, e-visits) or for which payments are low relative to the resources required to produce them (for example, primary care and comprehensive discharge planning).23 Payment. Options for better aligning the payment system include expanding the list of reimbursable services to fill in the "gaps"; replacing FFS with bundled payments for patient-focused episodes; and using capitation more extensively. All of these payment methods open up opportunities to reward value as opposed to volume, but each should be accompanied by comprehensive performance measurement and public reporting to guard against underuse of services and ensure accountability. Some improvements can likely be achieved by expanding fee schedules to include additional payments to "medical homes" that have relationships with specialists, hospitals, and others, in which all adhere to protocols for care management and exchange of patient information and participate in shared systems for performance measurement and improvement. For example, Community Care of North Carolina (CCNC), a state Medicaid program, resulted in a savings of $231 million over two years while becoming a "driver of health care quality in the state."24 Another option is to institute bundled payments for patient-focused episodes; that is, an "accountable care entity" would receive a single payment for the services that a patient needs over a twelve-month period for management of one or more chronic conditions. Bundled payments would likely be based on evidence-informed case rates: the estimated costs of services recommended by clinical guidelines for treating a patient with a specific condition including services provided in multiple settings and by multiple providers over an extended period of time.25 An example is Geisinger’s ProvenCare package price warranty for elective coronary artery bypass graft, which includes all preoperative work-ups, hospital and professional fees, postdischarge care, and management of complications and rehospitalizations for ninety days following surgery.26 Also, a great deal of work is under way that will contribute to the design of bundled payment programs, but the implementation of such programs depends on the development of organizational arrangements capable of assuming responsibility for the provision of a full set of services for patient-focused episodes and publicly reporting on performance. As organizations with greater scale and clinical integration emerge, there also may be more widespread use of capitated payments. Although capitation has had a very tumultuous history, new forms with stronger accountability are emerging. For example, the Blue Cross and Blue Shield of Massachusetts Alternative Quality Contract combines a global, risk-adjusted fixed payment per patient with incentive payments based linked to quality, efficiency, and patient experience.27 Investment of private capital. As payment programs become better aligned with value, it is reasonable to expect that far greater amounts of private capital will be invested in the ongoing development of organizations capable of providing high-value health care. Building a high-performing organization requires a good deal of capital, and much of it will likely need to come from the private sector. There is no scarcity of private capital invested in health care, but most is channeled toward areas that affect an institution’s financial bottom line in immediate and predictable ways. Not surprisingly, private capital has been readily available to invest in building new surgical suites, starting imaging services, and making other expansions that produce a greater volume of services. By contrast, very little capital has been directed at developing state-of-the-art chronic care management programs. There are early signs that capital markets are aligning their investment decisions with higher quality of care, perhaps in part because of the growth in pay-for-performance (P4P) programs. Bond ratings are higher for hospitals that perform better on measures included in the Hospital Compare program of the Centers for Medicare and Medicaid Services (CMS).28 In addition, a recent analysis by Citigroup suggests that better overall financial performance of health systems is associated not only with scale, but also with clinical integration.29 If corroborated, these results should encourage investment in building organizational capacity to provide high-value health care. But absent fundamental payment reform, we are unlikely to reach a tipping point anytime soon where abundant capital flows toward developing and maintaining high-value health care organizations.
Over the coming decade, all providers will need to develop greater organizational capacity to meet the challenge of creating a high-value health system. Each community and each practice will likely need to take stock of its current capabilities and identify new partnerships to achieve greater levels of scale and clinical integration. Experimentation with a variety of organizational models should be encouraged.30 Stephen Shortell has identified six models of accountable health systems along a continuum.31 There are some models that have been proven to work, such as multispecialty groups. But other models with which we have less experience, such as more loosely structured, virtual networks, may be more likely to thrive in communities with a tradition of small independent practice. It will also be important for each community to consider and take advantage of the organizational capacity that exists within hospitals and health plans. In smaller communities, the best option may be a communitywide approach—such as the one being pursued in North Dakota—that strengthens relationships among all providers and encourages collaboration in building organizational capacity.32 As the health system enters this phase of what will likely be rapid delivery system change, it will also be important to establish processes for monitoring and evaluating the impact of changes under way. The development of new organizational constructs, including likely consolidation in the provider market, will alter the balance of power, and there may be unintended consequences (such as less competition leading to higher prices). Robust performance measurement and public reporting systems, accompanied by health services research and evaluation, will be critical to knowing whether the changes under way are resulting in a more value-driven health system and to mitigating any unintended consequences.
A comprehensive policy agenda should be pursued to encourage all practice settings to develop the organizational capacity necessary to achieve high-value health care. The agenda should include six elements, many of which are already under way.
First, national priorities and goals for achieving high-value health care should be set. In 2007, the National Quality Forum (NQF) established the National Priorities Partnership, a group comprising twenty-eight prominent organizations, which has identified an ambitious set of national priorities and goals for performance improvement (Exhibit 1
Second, major improvements are needed in the nation’s standardized performance measurement and reporting infrastructure to enable assessment of value. To guide the development of patient-focused delivery systems and payment programs, measure sets must be created that address patient outcomes, care processes, resource use, and patient engagement in decision making. The NQF has developed a Comprehensive Measurement Framework for Patient-Focused Episodes to guide the development and endorsement of standardized measures, and efforts are now under way to fill measure gaps.34 Efforts are also underway to establish an infrastructure to aggregate data from multiple sources to provide performance information on patient-focused episodes.35 The third element of this policy agenda is fundamental payment reform. The CMS and other purchasers should pursue multiple approaches. In the near term, conducting demonstrations to test innovative payment approaches and continued evolution of P4P programs will be critical. The CMS has promising demonstrations under way, including an Acute Care Episode (ACE) demonstration, which will test the use of a bundled payment for both hospital and physician services for a select set of episodes of care, and a Care Coordination demonstration, which provides incentive payments for care coordination.36 Others have proposed larger-scale demonstrations to test bundled payments for patient-focused episodes.37 For these and other demonstrations, it will be important to conduct evaluations to build the evidence base on what works and can be sustained and spread to different locations and populations. Fourth, attention should continue to be focused on community-level initiatives aimed at building strong leadership, a culture of transparency and collaboration, local infrastructure to implement public reporting and payment reform, and readiness to change. Two pioneering efforts include the Robert Wood Johnson Foundation’s (RWJF’s) Aligning Forces for Quality project and the Department of Health and Human Service’s (HHS’s) Chartered Value Exchanges.38 In addition to building community infrastructure for public reporting and payment reform, these efforts are also building community-level relationships that, it is hoped, will lead to the development of new organizational constructs. Fifth, strong federal leadership for the development of health IT standards and financial incentives for investment in electronic and personal health records is needed. Health IT is a particularly important organizational support that holds great promise for improving the safety and quality of health care. It can also help enable communication and build relationships among members of the care team and across care settings—relationships that may in turn contribute to the evolution of new and better organizational arrangements. Finally, a targeted public education campaign will be important to the success of efforts to reform the delivery system. Such a campaign should aim to raise public awareness of the opportunities for more responsive, coordinated, and higher-quality health care with new organizational models, and the new roles that consumers, patients, and families can assume in the care systems of the future. There is a great deal of consensus on what needs to happen, but the status quo has always commanded an enduring position in health care reform. Leadership, multistakeholder engagement, strategic intentionality, and consistent execution of policy solutions are needed.
Janet Corrigan is president and chief executive officer of the National Quality Forum in Washington, D.C. Dwight McNeill (dmcneill{at}qualityforum.org) is vice president, Education and Outreach, at the NQF. An earlier version of this paper was presented at the Fifteenth Princeton Conference, "Can Payment and Other Innovations Improve the Quality and Value of Health Care?," sponsored by the Council on Health Care Economics and Policy, 27–29 May 2008, in Princeton, New Jersey. The authors gratefully acknowledge Katharine Torrey and Sarah Callahan for their research and editorial assistance, and they thank the reviewers for their helpful comments.
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