Academic journal article Frontiers of Health Services Management

The Dilemma of Managing Value

Academic journal article Frontiers of Health Services Management

The Dilemma of Managing Value

Article excerpt


The overriding characteristic of the successfully transforming organizations becomes evident when each organization makes a conscious decision to adopt a long-range strategy for creating and managing the value of services it renders. As organizations embark on such a journey, conventional management and clinical practices are tested and ultimately dramatically changed. Such transformed organizations will achieve a higher level of maturity and a patient-centered consciousness that bodes well for their future.

But the journey is hazardous, and there are many swamps and sinkholes to circumvent along the trail. The absence of consensus about health care delivery is a severe handicap. This decade may well be recorded as the decade of confusion. Policy strategists may know where the trip should end, but not the means of getting there. Purchasers of care, when confronted with the immense complexities of the structures, opt for shorter-range solutions that are affordable and understandable, but that guarantee incremental approaches. Providers, harassed from all sides, are torn by the clash of traditional cultures within medicine and the contemporary need to respond to market forces determined by others over whom they have no control. As a result, some providers have become paralyzed while others have made grand and disastrous sweeps into new ventures.

This contest between infinite needs and finite resources has been thoroughly analyzed by Dr. William Kissick (1994). There are indeed very high expectations of health care; the demand is infinite in scope. (Disbelievers only have to experience poor health themselves, or of family members, to understand this set of dynamics.) The resources, however, are finite, and this is becoming increasingly evident to everyone.

Within the organization intent on transformation, the battle between living for the short term and preparing for the future is raging. Leaders may appreciate that continuing excessive consumption of medical resources places the institution at a disadvantage, but they are torn because the short-term accumulation of financial capital through maintaining the status quo helps grow that war chest to build that larger system needed to effectively compete for a larger marketshare. Certainly, advocating a reduction in the use of ancillary services by educating physicians and other health care professionals that some tests need not be done (appropriateness of care)--thereby reducing revenue--seems to fly in the face of conventional logic.

Imagine for a minute an end-of-the-budget-year conversation between the CEO and the chief radiologist in which the radiologist is reporting that the ordering of diagnostic films has dropped 15 percent because of changes in the practice patterns of the medical staff. He or she might be congratulated in a setting of managed care contracting and risk because the bottom line improved because fewer resources were consumed. But if the organization depended on the revenue from ancillary services to cross-subsidize the development of a badly needed primary care network, would congratulations be in order? And in that capitated managed organization, would the CEO be pleased to learn that a new diabetes screening program had increased the costs of preventive care by 15 percent? We would hope so, but are we certain? Note that there was no mention of value in this conversation. That fact only hints at the magnitude of the change process underway.

The trade-off in these over-simplified examples relates to the ability of the organization to balance short-range gains with long-range needs. The test of the transforming organization is whether it (1) recognizes the need for change, (2) has the courage and intent to promote change, and (3) harbors the staying power to make such change a part of a new operating culture.


Conventional wisdom would suggest that one of the following conditions might dominate the health care field within five years:

* The health care marketplace will attain optimal "price efficiencies," and purchasers of care will make purchase decisions based on clearly demonstrated value. …

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