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Abstract

Health care harms too many patients, costs too much, and improves too slowly. Progress in improving value has been slow. Most efforts to eliminate defects in value have been piecemeal rather than systematic. In this article, the authors describe a framework for identifying defects in value and provide estimates for cost savings if these defects were to be eliminated. The authors then provide a framework for how health systems may work to systematically eliminate these defects in value. Finally, they provide an example of one academic health system that embarked on a journey to implement this framework and the initial results and lessons learned. In the current study, the authors found that: (1) the U.S. health system spends in excess of $1.3 trillion per year on suboptimal behavior; and (2) their organization was able to reduce the annual per-member-per-year cost by 9% over the course of 12 months by reducing specific defects in care. Although it is early in the journey and the framework is only 25% deployed, the authors believe that this model offers a hopeful path forward for improving value.

The Need for a Health Care Paradigm Shift

Since the passage of the Affordable Care Act (ACA) and the rise of value-based care, there has been a heightened awareness of the need to measure and reduce low-value care in the United States health system. In 2010, the Institute of Medicine and several other organizations estimated that the total cost of low-value and unnecessary care was approximately $500 billion each year, nearly one-fifth of all medical expenditures.1-4 The inefficient care and expenditures were noted to be the direct results of suboptimal clinical decisions — decisions that are perpetuated, to a large extent, by the invisibility of defects in care and by a lack of alignment in incentives for patients, clinicians, and organizations delivering care. In today’s prevailing health system, patients face co-payments that dissuade necessary care, physicians are systematically incentivized to provide more episodic — rather than better coordinated — care, and most health systems have few incentives to provide high-value, coordinated care when juxtaposed against the incentives to admit more patients and to perform more procedures.5
In recognition of this misalignment of incentives and the need for professional organizations to engage, there has been a series of attempts to reduce low-value care and better align incentives. In 2010, the American Board of Internal Medicine Foundation introduced its Choosing Wisely campaign, which uses lists recommended by specialty societies to provide guidance to clinicians on diagnostic tests and procedures that should never be performed. Together with the advent of alternative payment models such as bundled payments and ACOs, this initiative has stimulated an increasing emphasis on critically evaluating clinical practices on the metric of value.
While these initiatives represent significant, laudable steps, these approaches ultimately are constrained by their incremental step-by-step nature and the lack of a practical systematic framework for improving value. Too often, efforts to improve value simply redistribute income among people, insurers, providers, and employers rather than reduce the annual cost of care and improve value. What is needed is a paradigm shift by which the health system explicitly articulates and holds itself accountable to a goal of zero defects in value. If we could eliminate defects in value, the savings likely would be far larger than the estimated 20% waste in health care, and the benefits to patients would be vast. Importantly, we have selected the word “defect” deliberately to convey an intolerance to suboptimal care and decisions, to convey a cultural shift, and to emphasize that these decisions and results are both preventable and unacceptable.
In today’s prevailing health system, patients face co-payments that dissuade necessary care, physicians are systematically incentivized to provide more episodic — rather than better coordinated — care, and most health systems have few incentives to provide high-value, coordinated care.
Instead of focusing on eliminating the most egregious outcomes, we must develop a systematic framework and perfect processes and align all incentives. Instead of solely relying on a biomedical research approach by which a mechanism is identified and two interventions are compared head to head, an improvement science approach should also be embraced by which policy makers begin with an end point and work backward. In order to learn from the major successes both inside and outside of health care, we must set the right goals, adapt culture, and use a systems approach.
The current article is organized into three sections. In the first section, we outline the potential savings that can be achieved by eliminating defects in value. In the second section, we present a framework for doing so. In the third section, we describe the approach used by one health system to make transparent — and eliminate — defects in value.

The Trillion-Dollar Problem: Potential Savings from Eliminating Defects in Value

What, and how much, is truly at stake? To assess the scale of the problem and the potential for improvement, we examined defects in value from a behavioral perspective of how decisions and behaviors in our system lead to suboptimal care and suboptimal value across all stages of disease, from maintaining good health in the healthy patient, to managing chronic disease in the chronically ill, to treating acute illness both in and out of the hospital (Table 1).
Table 1
Stage of DiseaseSuboptimal BehaviorExamples of Misaligned Incentives
PatientPhysicianHealth System
Staying wellDeveloping and maintaining unhealthy habitsNo financial incentive for losing weight or quitting smokingCompensated more for treatment than preventionCompensated more for treatment than prevention
Underutilizing preventive servicesCoinsurance for office visitsCompensated more for treatment than preventionCompensated more for treatment than prevention
Getting wellNot coordinating careIncentivized against coordinating care, given costIncentivized against coordinating care, given cost
Not providing evidence-based careNo incentiveNo incentive
Getting better/acute illnessUsing suboptimal site of careIncentivized against seeing primary care regularlyIncentivized against providing necessary care, given costIncentivized against optimizing site of care, given activity-based payment
Not providing evidence-based careNo incentive to adhere to recommended guidelinesNo incentive
Not preventing avoidable readmissionsFew incentives to monitor care after dischargeHistorically no incentives to consider postacute care
Lack of Incentive Alignments Underlying Clinical Behaviors and Practice Patterns
Source: The authors.
Then, by drawing from prior literature, we estimated the “cost” of these defects and the potential “savings” that could be realized from correcting them (Table 2). Individual health systems can use this approach to estimate their own defects in value.
Table 2
Suboptimal BehaviorEstimated Total Cost of Suboptimal Behavior per YearEstimated Avoidable Cost of Suboptimal Behavior per YearPotential Impact on Patient Quality of Life if Appropriate Interventions Implemented
Developing and maintaining unhealthy habitsT1,T2$770 billion$75 billionVery high
Underutilizing preventive servicesT3$55 billion$5 billionVery high
Not coordinating careT3$340 billion$50 billionHigh
Not providing evidence-based careT4$100 billion$100 billionHigh
Using suboptimal site of care$10 billion$2 billionModerate
Not providing evidence-based careT5$20 billion$5 billionHigh
Not preventing avoidable readmissionsT6$40 billion$25 billionModerate
Total cost$1,335 billion$262 billion
Cost and Quality Impact of Suboptimal Behaviors
T1. O’Donnell MP, Schultz AB, Yen L. The portion of health care costs associated with lifestyle-related modifiable health risks based on a sample of 223,461 employees in seven industries: The UM-HMRC Study. J Occup Environ Med 2015;57:1284-90 https://doi.org/10.1097/jom.0000000000000600. T2. Goetzel RZ, Pei X, Tabrizi MJ, et al. Ten modifiable health risk factors are linked to more than one-fifth of employer-employee health care spending. Health Aff (Millwood) 2012;31:2474-84 https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2011.0819 https://doi.org/10.1377/hlthaff.2011.0819. T3. Yong PL, Saunders RS, Olsen LA, eds. The healthcare imperative: Lowering costs and improving outcomes: Workshop series summary. Washington: National Academies Press, 2010. T4. Schwartz AL, Landon BE, Elshaug AG, Chernew ME, McWilliams JM. Measuring low-value care in Medicare. JAMA Intern Med 2014;174:1067-76 https://doi.org/10.1001/jamainternmed.2014.1541. T5. Andel C, Davidow SL, Hollander M, Moreno DA. The economics of health care quality and medical errors. J Health Care Finance 2012;39:39-50 https://pubmed.ncbi.nlm.nih.gov/23155743/. T6. Hines A, Barrett ML, Jiang J, Steiner C. Conditions with the largest number of adult hospital readmissions by payer, 2011. Agency for Healthcare Research and Quality. April 2014. Accessed March 22, 2019. https://www.hcup-us.ahrq.gov/reports/statbriefs/sb172-Conditions-Readmissions-Payer.pdf. Source: The authors.

Staying Well: Preventing Illness in the Healthy Patient

Before becoming ill, healthy individuals have the power to avoid unhealthy habits and adhere to recommended health maintenance guidelines designed to preserve health and prevent the onset of disease.
In the United States today, however, three-fourths of adults are overweight or obese, nearly a fifth smoke cigarettes, and one in 10 consumes more than 10 drinks of alcohol per day.6 At the same time, only a fifth exercise regularly and fewer than a quarter consume the recommended amount of fruits and vegetables. A minority of patients receive an annual wellness examination — which is perhaps more important as a sign of engagement than as a cost-effective clinical activity — and many do not receive recommended immunizations and cancer screenings.7 The system today has few direct financial incentives for patients to take their health into their own hands and change these behaviors. Physicians are encouraged to counsel their patients on healthy behaviors, but they are not compensated adequately when they do so and are not held responsible when they do not. Given today’s activity-based payment structures, hospital systems have much stronger incentives to treat rather than prevent disease.
The cost of these behaviors is immense, with the estimated annual cost of modifiable health risks ranging from $761 per healthy person to $2,598 per person with a chronic condition.8 Indeed, 22% of all health care spending is driven by a mere 10 modifiable risk factors.9 In 2017, those costs represented more than $750 billion annually in the United States.
Multiple interventions designed to influence these unhealthy habits have been tested, and several have shown promise. Early trials assessing the impact of financial incentives for smoking cessation10 and exercise,11 for instance, have shown durable improvements. We conservatively estimate that, on the basis of the efficacy of those interventions, the alignment of physician and patient incentives could lead to a 10% reduction in these behaviors and save $75 billion per year.
Too often, efforts to improve value simply redistribute income among people, insurers, providers, and employers rather than reduce the annual cost of care and improve value. What is needed is a paradigm shift by which the health system explicitly articulates and holds itself accountable to a goal of zero defects in value.
Despite the fact that the majority of health insurance plans have offered recommended screenings at no cost to patients since the ACA was passed, preventative services such as cancer screenings and vaccinations still go unused. The major misaligned incentive, therefore, is with physicians, who: (1) have limited direct incentives to provide time-intensive preventive services or to ensure that referrals to such services are acted on; and (2) are often paid more for other services.
While screening and vaccination rates in the United States are relatively high, significant room for improvement remains, and the United States falls short of the Office of Disease Prevention and Health Promotion’s Healthy People goals for 2020. Furthermore, even though preventive services are not designed to save money, several do, and the cost of missed prevention opportunities has been estimated to be approximately $55 billion per year.1
Early attempts at using pay-for-performance programs to improve screening rates have shown mixed efficacy. New models, such as the Hawaii Medical Service Association primary care model,12 the Medicare Comprehensive Primary Care Initiative,13 and the Blue Cross Blue Shield (BCBS) Alternative Quality Contract (AQC),14 all have shown greater promise, with the BCBS AQC showing cost savings of 9%. Therefore, we estimate that 10% of the potential savings could be obtained, representing $5 billion per year. More importantly, these services significantly improve quality of life and should be appropriately emphasized.

Getting Well: Managing Chronically Ill Patients

Underdiagnosis and misdiagnosis are enormous problems in the United States today. One in three Americans is living with either diabetes or prediabetes, resulting in total direct medical costs of $237 billion each year15; 36% of patients with diabetes15 and 88% of those with prediabetes16 remain undiagnosed. In addition, one in three Americans has hypertension, resulting in additional costs of $131 billion per year.17 Again, 36% of those individuals are unaware of their diagnosis and thus are not receiving appropriate antihypertensive medications.18 Additionally, one in five adults experiences a mental health illness each year, resulting in $89 billion in direct medical expenditures,19 but only 43% of those patients receive care.20 Moreover, 35% of patients with serious mental illnesses, such as schizophrenia or bipolar disorder, have not received any mental health care in the past year.20
Even when a proper diagnosis has been established, many patients do not receive adequate treatment to control their condition. Only half of patients with a known diagnosis of hypertension have their blood pressure under control, and a mere 13% of patients with a diagnosis of diabetes have their blood pressure, low-density lipoprotein, and hemoglobin A1C under control. Predictably, many of those patients visit the ED or are admitted to the hospital. In fact, 30% to 40% of all hospital admissions for medical patients could be avoided with better management of chronic illness. Upon hospital discharge, few patients leave with a primary care appointment scheduled within 7 days, leaving them to navigate the complex health care system largely unaided. Experts have estimated that this fragmentation of care costs approximately $340 billion per year.1
Recently, ACOs have attempted to correct this problem by financially incentivizing coordinated care and have attempted to empower care coordinators to reduce the costs of this fragmentation. Early results from Medicare Shared Savings ACOs have shown cost savings of more than $1 billion per year, with increased savings each year.21 The top 10% of performers saved 10%, with the top 10 ACOs reducing costs by 16% as compared with the benchmark. On the basis of the success of these early ACOs, we project that approximately 15% of these costs can be saved by incentivizing providers and health systems to provide coordinated care, representing an additional $50 billion per year.
The estimated scale of low-value care — that is, care that should never be given — is projected to represent 0.6% to 2.7% of total spending,22 or up to $94 billion per year. It should be the aim of every system to eliminate low-value care. Therefore, we estimate that approximately $100 billion per year could be reduced by designing a system in which providers do not perform these services.

Getting Better: Treating Acutely Ill Patients

Acutely ill patients often present to inefficient points of care when they could be cared for in higher-value settings. Moreover, they often receive suboptimal medical care, resulting in costly complications.
Instead of seeing a physician in the office (at a cost of approximately $150 per visit), many patients present to the ED (at a cost of approximately $1,500 per visit). Hospitalization costs even more, averaging $3,000 to $5,000 per day. While estimates of the frequency of improper ED use have varied widely, from as high as 71%23 to as low as 3%,24 there is a general consensus that at least 20% of ED visits,25 and likely 40%,26 are preventable. This pattern of care is driven by misaligned incentives at all levels. Many patients have no incentive to avoid unnecessary ED visits, whereas others simply do not have reasonable access to after-hours care. Physicians, for their part, have little incentive to offer after-hours care or employ after-hours providers, and they are at financial risk if they leave slots open for same-day appointments. Health systems continue to be reimbursed largely for activity in EDs and have even less incentive to reduce improper use. As the United States spends approximately $50 billion each year on emergency services, we estimate that at least $10 billion is avoidable.
Many models have sought to reduce unnecessary ED utilization and hospitalization27 through the use of some combination of interventions, such as using care coordinators for high utilizers, extending office hours to nights and weekends, and providing 24-7 phone access to medical providers. While the quality and rigor of these interventions vary widely and success has been mixed, durable reductions in utilization (ranging from 25% to 60%) have been achieved.28,29 We estimate that broader implementation of such interventions to align incentives could lead to savings of at least 20%, or approximately $2 billion per year.
Ultimately, the prevailing system has resulted in excessive and, at times, inappropriate care. Providers have few if any incentives to continuously update their practice patterns to keep up with the exponential pace of innovations in medicine. According to one study, only about half of patients receive recommended care.30 Other studies evaluating centers of excellence for orthopedic and oncological care have suggested that up to 30% of procedures may be unnecessary and could be avoided.31 Again, these findings are symptomatic of uncoordinated care and a reimbursement system that does not incentivize physicians to provide evidence-based care. Bundled Payments for Care Improvement programs do not include measures of appropriateness and instead assume that any care that is provided is necessary. This assumption can result in direct patient harm by perpetuating the use of unnecessary interventions and can also increase costs by de-emphasizing the use of lower-cost alternatives.
Suboptimal care is the direct result of suboptimal behaviors. If we can identify the underlying misaligned incentives, we can design health systems without them.
In 1999, the Institute of Medicine examined the scale of the problem and concluded that 44,000–98,000 people died each year as a result of medical error. Subsequent updates showed little improvement,32 and the most recent studies have estimated that that number may in fact be as high as 250,00033 to 400,000.34 Hospital-acquired infections alone have been estimated to account for approximately 100,000 deaths per year,35 and serious harm without death has been estimated to be 10 times as prevalent as death.34 Taken together, the direct medical costs of preventable medical errors have been estimated to be approximately $20 billion.36
Several programs that have attempted to reduce these errors, particularly line infections and clerical errors, have demonstrated reductions of 60% to 100%.37 On the broader scale, the Centers for Medicare & Medicaid Services Hospital-Acquired Condition Reduction Program, which penalizes hospitals with high rates of preventable conditions, has been associated with a 21% decrease in hospital-acquired infections and a 42% lower rate of adverse drug reactions. We therefore estimate that at least a quarter of these events can be prevented by properly incentivizing physicians and hospitals, with up to 100,000 lives being saved per year at a potential cost savings of approximately $5 billion per year.
Defects in value continue after patients are discharged from the hospital. Many patients are discharged to skilled-nursing facilities even when they could receive equal and more patient-centered care at home. Indeed, the main benefit of bundled-payment programs seems to be in reducing inappropriate utilization of postacute care.38 In addition, the 90-day readmission rate for many chronic conditions is more than 40%, and many of these readmissions could be prevented if the number of ambulatory touch points (i.e., the dose of ambulatory care) was greater. Approximately 30% of hospital admissions are readmissions of patients who had been discharged within the previous 90 days. Readmissions alone have been estimated to cost approximately $40 billion per year,39 $25 billion of which is readily preventable.

Framework for Moving Toward Zero Defects in Value

While daunting, these systemic inefficiencies are not insurmountable. Suboptimal care is the direct result of suboptimal behaviors. If we can identify the underlying misaligned incentives, we can design health systems without them. Just as central-line–associated bacterial infections were eliminated through a systematic approach,40 so too can these systemic inefficiencies. We can achieve the goal of zero defects in value.
Achieving this goal will not be easy and will require a coordinated effort. It will also require changing the narrative from one in which defects are viewed as inevitable to one in which they are viewed as preventable opportunities for providers, patients, hospitals, and health systems. We need to change the paradigm and focus on eliminating all low-value behaviors and incentives — not just those that are most egregious or visible — in order to have any significant impact and shift the cost curve. If we do not, we are constraining ourselves to marginal change and death by a million paper cuts.
To achieve this shift in focus, health systems must have four fundamental properties (Table 3). First, the health system must achieve alignment around a common purpose and definition of value. Second, there must be a common framework and analytical platform for measuring — and making transparent — defects in value as well as a disciplined management system to reduce defects. Third, incentives must be crafted to fundamentally change the system from one in which multiple stakeholders have uncoordinated incentives to one in which all stakeholders are incentivized toward the common purpose. These incentives include benefit design, cost sharing for the use of health services, bonuses and upside incentives for employees around evidence-based lifestyle changes, and incentives for providers toward value. Fourth, there must be an appropriate population of attributable patients for whom creating this system change and alignment is tractable. In particular, it is important that the entity or organization that is accountable for a given population receives the benefits of the investment.
Table 3
• Align around a common purpose and definition of value
• Create a common framework and analytical platform for measuring — and making transparent — defects in value and a disciplined management system to reduce defects
• Craft incentives to fundamentally change the system from one with uncoordinated incentives to one in which multiple stakeholders are incentivized toward the common purpose
• Ensure an appropriate population of attributable patients for whom creating this system change and alignment is tractable
Key Principles Needed To Move Toward Value
Source: The authors.
To be sure, some organizations have created parts of the ideal system. For example, Walmart has aligned benefit design, incentives for employees, and incentives for providers in its Centers of Excellence program, and Kaiser Permanente has made great progress in controlling blood pressure and eliminating gaps in care41 for its insured population in a cost-efficient manner. Many other organizations have begun experimenting with directed incentives for both patients and providers; for example, the California Public Employees’ Retirement System has implemented the use of reference pricing for high-cost procedures such as hip and knee replacement surgery.
While such programs represent a key step forward, they are not without their limitations. First, most programs to date have lacked a systematic framework for eliminating defects in value and thus have been limited in scope. Many have introduced initiatives to align incentives in one realm (e.g., preventive services or readmissions) while failing to align all incentives across all key categories. Second, emphasis on health behaviors has been minimal even though they account for the largest percentage of avoidable costs each year. Finally, most programs to date have been limited in scale. While individual health systems have had success, no program has been extended beyond its primary geography to achieve statewide, let alone regional, adoption. The next generation of these programs must continue to innovate and focus on eliminating all sources of suboptimal care.
We need to change the paradigm and focus on eliminating all low-value behaviors and incentives — not just those that are most egregious or visible — in order to have any significant impact and shift the cost curve. If we do not, we are constraining ourselves to marginal change and death by a million paper cuts.
So how can this ideal system be achieved? We believe that the employee health plans of integrated health care systems are ideally suited to foster innovation and to align incentives for the purpose of eliminating defects. First, most employee health plans are self-insured and thus have full capitation risk. Second, most plans control their own benefit designs and thus can align employee incentives. Third, most plans deliver care through a single health system and therefore can coordinate physician incentives, care-management programs, and quality-improvement programs for the benefit of all of their patients. Because of the fragmented nature of our health insurance market, with members changing health plans when they change employers and transitioning to Medicare at the age of 65 years, integrated delivery systems may be uniquely positioned to serve as catalysts for the change because of their role as the provider of health care across the continuum, their large and stable employee populations, and their accountability for the health spending of their employees.

One Health System’s Journey To Eliminate Defects in Value

Aligning Around a New Narrative

University Hospitals (UH) in Cleveland, OH, is currently applying this framework to eliminate defects in value for the 37,000 members in its employee plan as well as the 580,000 patients in its ACO, who represent half of the 1.2 million individuals for whom UH provides health care. In 2018, despite having a large ACO, the organization was focused largely on fee-for-service medicine, physician incentives were based on relative value units (RVUs), and executives largely focused on increasing hospital admissions and ED visits. In the fourth quarter of 2018, however, the organization aligned around a purpose of improving value, defined as the quality and experience of care divided by the annual cost of care.
This purpose was communicated across the organization as a new narrative; specifically, that success is defined as keeping people healthy at home rather than healing them in the hospital. To illustrate the shift in narrative, system leaders used the example of a patient named Helen who had had 15 admissions for heart failure and 13 ED visits during the previous year. Many of these episodes were driven by her undiagnosed anxiety and her inability to attend physician visits because she was caring for her disabled granddaughter. Under a fee-for-service model in which success was measured as the number of hospital admissions and ED visits, every one of those admissions and visits would have been counted as a success. Under the new narrative of value, they would all be counted as defects.

Principles and Framework for Eliminating Defects in Value

As part of its adoption of this new framework, UH developed a list of key principles for eliminating defects in value (Figure 1) as well as a checklist for eliminating such defects (Figure 2). UH senior leaders presented this new narrative to board members, leaders, and clinicians across the entire continuum of care, asking employees to think about defects in their own areas and how they might apply the key principles to eliminate them. To break silos across the continuum of care, leaders hosted a value summit with leaders from the following areas: hospital care, care transitions, the ACO and employee health plan, postacute care, primary care, specialty care, behavioral health, palliative care, unplanned and emergency care, data science, IT, logistics and scheduling, and finance. This summit evolved into a weekly clinical transformation operations meeting during which the leaders across the continuum prioritized the largest defects in value and formed work teams to eliminate them.
Figure 1
Key Principles for Eliminating Defects in Value
Source: The authors
Figure 2
Checklist for Eliminating Defects in Value
Source: The authors

Management System To Eliminate Defects in Value

UH created a common analytical platform, integrating claims, electronic medical record (EMR), and scheduling data, to make defects in value visible to clinicians. This platform allows clinicians and managers to evaluate utilization rates, patient cohorts, and provider performance. UH had full claims data for some of its ACO patients, and the percentage of UH ACO patients for whom we have full claims data is increasing over time. Our population health, data science, and IT teams integrated the EMR, claims, and scheduling data into a data warehouse and then used analytics (Alteryx) and data visualization (Power BI) tools to create dashboards for defects in value. This clinical transformation team prioritized several areas of focus for improvement, including reducing per-member-per-year spending in our employee and ACO plans, reducing readmissions, increasing the percentage of patients discharged to home, increasing the use of our in-network skilled-nursing facilities, and increasing the use of annual wellness visits.
While we applied these efforts to all ACO patients, data varied across some of our plans. To ensure that these projects realized their goals, we implemented a standard management framework based on published literature and our experience with leading large-scale quality-improvement projects (Figure 3).
Figure 3
Management System for Eliminating Defects in Value
Source: The authors
To eliminate these defects, we: (1) worked to align incentives among employees and clinicians; and (2) created a management system to guide our efforts. We encountered many challenges during this process, partly because of the different cycle times for changes as well as the different reporting structures for specific responsibilities. For example, the lead time for changing a benefit design can be more than a year, and the individuals who oversee benefit design are not necessarily the same as those who design physician incentives. In that scenario, we would seek to achieve alignment by: (1) eliminating employee co-pays for annual wellness examinations; and (2) providing financial incentives for physicians to increase annual wellness visits.
We also looked for opportunities to align both nonfinancial and financial incentives. For example, we provided three free primary-care visits for our employees while also adding a financial incentive for our primary care physicians to complete 60% of their annual wellness visits for patients in the employee and Medicare populations. As another example, we instituted $0 co-payments for newer diabetic drugs (sodium–glucose cotransporter 2 and glucagon-like peptide-1) while also providing physicians with a financial incentive tied to the percentage of their patients with diabetes with a hemoglobin A1C of <9.
UH also sought to ensure and optimize an appropriate population of attributable patients for whom we could work to improve value. It is difficult to improve value in patients who lack a primary care physician or receive care in multiple health systems. As such, our value efforts focused on two of the four populations we serve: those we employ and those we insure. To help ensure that our employees were attributable to a physician, we reached out to all employees who had not seen a primary care provider (PCP) in the past year, reminded them of the health benefits of primary care, and encouraged them to schedule an appointment. We did the same for patients in our ACO. We also expended considerable effort in improving the accuracy of patient attribution and implemented a team to continuously improve attribution. In our ACO, approximately 20% of patients were misattributed to a physician, confusing patients and frustrating physicians.
Under a fee-for-service model in which success was measured as the number of hospital admissions and ED visits, every one of those admissions and visits would have been counted as a success. Under the new narrative of value, they would all be counted as defects.
UH used our integrated database to provide real-time feedback on and performance monitoring of efforts to eliminate defects in value. For instance, UH PCPs receive monthly dashboards outlining their performance on a variety of performance measures, including the percentage of patients without an annual wellness visit and the percentages (and names) of patients with uncontrolled physiological values, such as elevated blood pressure, high blood sugar, and high cholesterol, among others. Similarly, UH hospital providers receive weekly reports on a number of metrics (including the percentage of patients going home after discharge, the percentage with a PCP follow-up within 7 days, and the percentage using in-network skilled-nursing facility and home health services) as well as monthly reports on the number of readmissions. UH is also beginning to include the percentage of patients being managed with evidence-based regimens for common conditions such as diabetes. We also send weekly “tips” emails, one for primary care and one for hospital care, that focus on a key principle of value and what we are doing to improve. These communications are an integral part of our management system (Figure 3). This diffusion of real-time, patient-level process and outcomes data has allowed for the rapid identification of defects in value, has increased buy-in from providers to address the defects, and has led to the development of specific interventions.
To help acutely ill patients get better, UH focused on discharging patients to home rather than to skilled-nursing facilities and on reducing 90-day hospital readmissions. The readmission efforts focused on ensuring evidence-based care transitions and scheduling follow-up visits, prior to hospital discharge, with a PCP or specialist within 7 days. When we started this effort in December 2018, we did not yet have a data system in place to measure performance, but an audit demonstrated that 6% of patients had a follow-up with their PCP after discharge. This percentage had increased to 72% in 2019 and to 85% by June 2020. With this success, we are now working to further increase the number of ambulatory visits (the dose of ambulatory care) by having patients with chronic disease be seen once a month for 3 months.
The effort to reduce the use of skilled-nursing facilities was iterative. In December 2018, an audit demonstrated that 62% of patients were discharged to home. The decision to discharge the patient to home was largely made on the basis of an assessment by a physical therapist, who prescribed the discharge destination rather than the degree of therapy. In addition, we found that many patients were sent to a skilled-nursing facility because it was thought that home care was not able to provide that service. However, home care staff were not present in these discussions and when asked, they said they could provide these services. To address this disconnect, we formed an interdisciplinary team, comprising representatives from home health, therapy, nursing, and care transitions, as well as the attending physician, to make the discharge decision. The default was set that patients should go home. The decision process began with the question, “Why not home?”, and any answer other than “home” had to be justified to ensure that the required care could not be provided at home or in the community.

Initial Results Eliminating Defects in Value

The results associated with this framework for 2019 compared with 2018 are presented in Table 4. The annual per-member-per-year cost of care for our employee plan increased by 6% from 2017 to 2018 (prior to this effort) and decreased by 1% from 2018 to 2019. As we continued to implement this framework in 2020, these costs were further reduced by 13% from quarter 1 2019 ($491 per member per month) to quarter 1 2020 ($429 per member per month). We limited this analysis to quarter 1 to avoid cost distortions from Covid-19 and to ensure we had more than 3 months’ follow-up to account for all claims. Among our 57,000 Medicare Shared Saving Program beneficiaries, the per-member-per-year cost decreased by 9%, whereas the cost of care for the United States increased by approximately 6%. Contributing to these cost reductions, hospital discharges decreased by 15%, skilled-nursing facilities admissions decreased by 31%, length of stay decreased by 28%, postacute spending decreased by 32%, and ED visits decreased by 13%. The percentage of patients with a PCP follow-up scheduled within 7 days of hospital discharge increased from 25% in 2018 to 61% in 2019, and, by 2020, this percentage had increased to 72%. The percentage of patients discharged to home increased from 66% in 2018 to 80% in 2019; by 2020, this percentage had increased to 85%. In addition, ED visits decreased by 13%, and annual wellness visits increased by 82%. The 90-day all-cause any-hospital readmission rate decreased 16%, from 32% to 27%. Among our 52,000 Medicare Advantage (MA) beneficiaries, hospital admissions decreased by 22% from 2018 to 2019, ED visits decreased by 44%, and 30-day readmissions decreased by 30%. Nevertheless, a substantial number of defects in value remain, and additional interventions such as behavioral health, palliative care, and increasing the number of ambulatory touch points are being implemented.
Table 4
Quality Program20182019Improvement
Annual total spending in employee plan (employer and employee contribution)$6,118.00$6,081.00−1%
Annual total spending per Medicare beneficiary$10,389.00$9,459.00−9%
Percentage of patients discharged to home with or without home health services66%80%21%
Percentage of patients scheduled for follow-up with PCP within 7 days after discharge25%61%144%
Hospital discharges per 1,000 members330281−15%
Skilled-nursing facility discharges per 1,000 members8357−31%
Percentage of patients referred to in-network skilled-nursing facility35%66%89%
90-day all-cause any-hospital readmission rate32%27%−16%
ED visits per 1,000 members123108−12%
Percentage of completed wellness visits28%51%82%
Length of stay (days) in skilled-nursing facility through 90 days postdischarge3626−28%
Skilled nursing total spending per beneficiary$950.00$645.00−32%
Admissions per 1,000 MA members245191−22%
ED visits per 1,000 MA members400224−44%
30-day hospital readmission rate for MA members10%7%−30%
Impact of Quality Programs 2018 to 2019*
PCP = primary care provider, MA = Medicare Advantage. *Insurance plan names have been de-identified to adhere to data use agreements with payers. Data for performance analysis were obtained from both claims and EMR sources. EMR data were needed as a validation check to the claims data and to fill in any missing values or data discrepancies that may be contained within different claim sources across payers. Source: The authors.
Table 5 describes the performance of multiple bundles in the Bundled Payments for Care Improvement program. There is limited evidence that the bundled payment program has reduced costs in medical diseases. Our results demonstrate reductions in cost for most medical bundles, including 9% for congestive heart failure, 20% for pneumonia, and 14% for percutaneous coronary intervention (PCI).
Table 5
Bundle TypeNumber of EpisodesTarget PriceAverage Cost per EpisodePercent Savings Rate
Acute myocardial infarction190$29,053.79$25,470.2612
Congestive heart failure92$30,045.01$27,270.549
COPD449$21,699.07$20,962.343
GI hemorrhage254$21,769.48$22,355.73−3
Outpatient PCI116$17,126.15$15,914.747
PCI47$44,450.79$38,434.3014
Sepsis67$35,163.15$32,272.698
Simple pneumonia311$29,360.74$23,544.8920
Bundled Payment Performance October 2018 Through December 2019
COPD = chronic obstructive pulmonary disease, GI = gastrointestinal, PCI = percutaneous coronary intervention. Source: The authors.

Reflections on Our Journey To Eliminate Defects in Value

We recognize that this effort had several limitations. Because we used an observational study design, we cannot make causal inferences regarding the relationship between our interventions and improved outcomes. We conducted our efforts in one academic health system, and our results may not be generalizable to other settings. Our interventions drew upon improvement science and evolved on the basis of what worked, and our data systems improved over time. Finally, our data use agreements and the varying cost data that we had from some payers limited our ability to report by plan. Nevertheless, our results suggest that the framework that we developed offers hope for eliminating the 30% of health care spending that is wasted and thereby improving value.

What We Learned on Our Journey

We learned several lessons in our journey to eliminate defects in value:
1.
It was helpful to lead with purpose on the basis of key principles, rather than technology or data, and to have a framework for organizing the work. The UH community galvanized around a new narrative of keeping people healthy at home rather than healing in the hospital and used the defects-in-value framework and key principles to guide their work. It is essential not only to focus on the technical side of leading change, but also to be humble and curious and to revise these frameworks over time as needed.
2.
It is helpful to create a structure in which leaders from across the continuum can regularly meet, learn, and improve together. For this purpose, the clinical transformation team has a weekly meeting and quarterly retreats. As relationships and trust grow among leaders across the continuum, previously invisible defects become visible and opportunities for improvement grow. We use the “fractal” management system,42 in which we create structures to connect people from board to side, vertically and horizontally. This structure helps build trust by providing the ability to cocreate goals and provides horizontal connections for peer learning and vertical connections for accountability.
3.
It is essential to have the data infrastructure to identify defects, segment populations, and produce dashboards to emphasize the focus on value. In order to do so, health systems need to integrate claims and EMR data. As such, health systems seeking to improve value should seek to grow their attributed patients in an ACO or other arrangement.
4.
It is essential to have the necessary human capital infrastructure to improve value. We sought to ensure that every employee felt that they had two jobs: the job that they were hired to do and the job of improving value. We also built human capital in primary care. For example, when we started this effort in January 2019, all of UH, with the exception of one practice, was on an RVU model and lacked office staff to support a primary care medical home. We deployed an advanced primary care model in six practices and will implement this model in more practices in the near future. We also found that the biggest defect in the areas of behavioral health and palliative care was the limited access to these essential resources within the community. We are implementing interventions to address this defect in both of these areas.
5.
It is difficult to ask practices to implement different interventions for different payers. When we sought to implement specific interventions for our employees, such as improving the care of patients with diabetes and cardiovascular risks, the ACO working with cardiology reached out to patients.
6.
Significant benefits can be achieved if we can align benefit design, incentives for patients, incentives for physicians, and care-management programs. Although we have made some progress, much work remains.
7.
We used a framework that included defects in value, key principles, and a management system to realize results. We also attended to the “softer” side of change by energizing, empowering, and inspiring people to eliminate defects in value. Both the technical and the adaptive components of leading change are important.
8.
We recognized the importance of pausing in retreats, taking stock, celebrating what has been accomplished, and refocusing energy on eliminating defects in value.

Hopeful and Humble: The Ability To Significantly Improve Value and Reduce the Cost of Care

The U.S. health system has a trillion-dollar problem, with $1.3 trillion being spent on suboptimal behaviors each year, but it has been unable to make substantive and scalable improvements in value, especially in annual costs of care. By eliminating specific defects in care and aligning incentives across the board, our organization was able to reduce the annual per-member-per-year cost by 9% over the course of 12 months. Although we remain humble because we are early in the journey and the framework is not yet fully deployed, we believe that our model offers a hopeful path forward for other organizations that are ripe to innovate for the purpose of improving value.
Editors’ Note: John W. Urwin and Peter J. Pronovost are co–first authors.

Notes

Peter J. Pronovost, John W. Urwin, Eric Beck, Justin J. Coran, Mark E. Schario, James M. Muisyo, Jonathan Sague, Susan Shea, Patrick Runnels, Todd Zeiger, George Topalsky, Andrew Wilhelm, and Sandeep Palakodeti have nothing to disclose. Abirammy Sundaramoorthy works for and has equity in Somatus, Inc., a company that works to improve quality and overall value of care for patients with or at risk of developing kidney disease. Amol S. Navathe has received grant support from Hawaii Medical Service Association, Anthem Public Policy Institute, The Commonwealth Fund, Oscar Health, Cigna, Robert Wood Johnson Foundation, The Donaghue Foundation, Pennsylvania Department of Health, Ochsner Health, UnitedHealthcare, BCBS of North Carolina, and Blue Shield of California; personal fees from Navvis Healthcare, Agathos, Inc., Nava Health, Yale New Haven Health Services Corporation/Center for Outcomes Research and Evaluation, MaineHealth Accountable Care Organization, Maine Department of Health and Human Services, National University Health System-Singapore, Ministry of Health of Singapore, Elsevier, Medicare Payment Advisory Commission, Cleveland Clinic, Embedded Healthcare; and other fees from Integrated Services, Inc., outside the submitted work.

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Information & Authors

Information

Published In

NEJM Catalyst Innovations in Care Delivery

History

Published online: January 1, 2021
Published in issue: January 1, 2021

Topics

Authors

Affiliations

Peter J. Pronovost, MD, PhD
Chief Clinical Transformation and Quality Officer, University Hospitals, Cleveland, Ohio, USA
Case Western Reserve University School of Medicine, Cleveland, Ohio, USA
Frances Payne Bolton School of Nursing, Case Western Reserve University, Cleveland, Ohio, USA
Weatherhead School of Management, Case Western Reserve University, Cleveland, Ohio, USA
John W. Urwin, MD
Clinical Fellow in Medicine, Beth Israel Deaconess Medical Center, Harvard Medical School, Boston, Massachusetts, USA
Department of Medical Ethics and Health Policy, University of Pennsylvania, Philadelphia, Pennsylvania, USA
Leonard Davis Institute of Health Economics, University of Pennsylvania, Philadelphia, Pennsylvania, USA
Eric Beck, DO, MPH
Chief Operating Officer, University Hospitals, Cleveland, Ohio, USA
Justin J. Coran, PhD, MPH
Senior Data Scientist, University Hospitals, Cleveland, Ohio, USA
Case Western Reserve University School of Medicine, Cleveland, Ohio, USA
Abirammy Sundaramoorthy, MD, MBA
Senior Vice President, Clinical Innovations, Somatus, Inc., McLean, Virginia, USA
Mark E. Schario, MS, RN, FACHE
Vice President, Population Health, and President of University Hospitals Quality Care Network, University Hospitals, Cleveland, Ohio, USA
James M. Muisyo, MSc
Data Scientist, Analytics, University Hospitals, Cleveland, Ohio, USA
Jonathan Sague, MSN, RN
Vice President, UH Ventures Clinical Operations, University Hospitals, Cleveland, Ohio, USA
Frances Payne Bolton School of Nursing, Case Western Reserve University, Cleveland, Ohio, USA
Susan Shea, FAA, MAA
Senior Actuarial Analyst, University Hospitals, Cleveland, Ohio, USA
Patrick Runnels, MD, MBA
Chief Medical Officer, Population Health-Behavioral Health, and Director of Population Health Education, University Hospitals, Cleveland, Ohio, USA
Case Western Reserve University School of Medicine, Cleveland, Ohio, USA
Todd Zeiger, MD
Vice President, UH Primary Care Institute, University Hospitals, Cleveland, Ohio, USA
George Topalsky, MD
Vice President, UH Primary Care Institute, University Hospitals, Cleveland, Ohio, USA
Andrew Wilhelm, PhD
Analyst, University Hospitals, Cleveland, Ohio, USA
Sandeep Palakodeti, MD, MPH
Chief Medical Officer, Population Health, University Hospitals, Cleveland, Ohio, USA
Amol S. Navathe, MD, PhD
Assistant Professor of Health Policy and Medicine, Corporal Michael J. Crescenz VA Medical Center, Philadelphia, Pennsylvania, USA
Department of Medical Ethics and Health Policy, University of Pennsylvania, Philadelphia, Pennsylvania, USA
Leonard Davis Institute of Health Economics, University of Pennsylvania, Philadelphia, Pennsylvania, USA

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    Fostering an Innovation Culture
    to Reimagine Care Delivery

    A collection of forward-thinking articles from NEJM Catalyst on innovative approaches to the biggest problems facing health care.