Healthcare – The Business Case For Quality

Healthcare has had a difficult time demonstrating the business case for quality because of the complexity of care and difficulty in capturing the real fixed and variable costs of caring for patients. Other industries have long accepted the theory that improvement in quality leads directly to a decrease in cost. Better quality results in less rework, fewer mistakes and delays, and a better use of time. Productivity improves as a result. By improving quality, the industry captures the market with better quality and lower price, is able to innovate in the business and clinical practice of medicine, and so can provide more jobs.

The difficulty in demonstrating the business case in healthcare may be the result of healthcare not having yet reached the level of quality that triggers these results. Healthcare lags significantly behind many industries in rates of errors and the ability to capture the measures that permit maximal management of the complex healthcare process. The ability to provide timely and detailed measurement in healthcare is time and personnel intensive because of insufficient real-time information technology. In fact, as overburdened as healthcare workers feel while manually gathering quality-related data, we are obtaining and using only a small fraction of the information necessary for maximizing the management of high-quality care.

What is the cost of quality? Does it raise the price of goods and services? Are huge savings possible by implementing continual improvement efforts? These questions are not easy ones, but quality is becoming increasingly measurable as are its costs. In healthcare, the failure to prevent serious complications, such as a hospital-acquired infection, may cost the patient his or her life, prolonged disabilities, and thousands of dollars in treatment. Avoidable surgical complication may prolong hospitalization, result in disability or death, and cause great expense and repeated procedures.

Healthcare organizations, however, have been reluctant to implement improvements because better quality has not been accompanied by better payment or improved profitability. The most recent business case for quality has been driven by employers and third-party payers seeking value-based purchasing. Serious doubts about the long-term sustainability of rising healthcare costs, the accelerating numbers of uninsured, and the double-digit increases in healthcare premiums are driving employers and health plans, as well as federal and state governments, to demand cost-effective, safe, and patient-centered care. Both Physicians and hospitals are being assessed with a combination of quality and efficiency (cost) measures and these measures are being used to include or exclude both hospitals and physicians from healthcare plans.

The current business case for quality is straightforward. Access to the patient ( both by volume and payment level) is being determined by demonstrating high quality and cost efficiency. A clear understanding of the history and development of the concept of quality patient care and the ability to understand, identify, and utilize the key principles will help create successful healthcare organizations.

There has been a change in healthcare since the mid 1990s that will shape the future of the industry. Ten years ago, no one was talking about patient safety. A few years ago, before the IOM (Institute of Medicine: To Err is Human) report, a small number in a few pioneering places had developed a strong commitment, but its impact was limited and most of health care was unaffected. Now, the majority of health care institutions are involved to some extent and public awareness has soared.

Many exciting changes have occurred in the industry because of the increased focus on safety and quality. Some of these changes may be short-lived, but some will truly revolutionize the way healthcare is provided. Quality and safety are important factors shaping the future of the industry for hospital and medical care providers. Quality metrics will shape physician practices as well as the processes in place at the hospitals in which they practice. Quality will define both success and failure for physicians, hospitals, and the executives who lead in the healthcare industry.

Esther Diez is a journalist for Health Insura

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Healthcare Reform, Key Initiatives – Timing and Implications

Healthcare Reform Overview

The Patient Protection and Affordable Care Act will have a profound effect on healthcare providers, including reductions in reimbursement to hospitals and physicians; focus on value based purchasing – higher quality and lower costs; financial incentives and penalties tied to clinical quality outcomes and a transition away from fee-for-service payment to bundled payments and Accountable Care Organizations (ACOs).

Healthcare Providers: Recommended Responses

Healthcare organizations developing plans to respond to reform initiatives must create a path for the organization that:

Aligns the board, executive staff, medical staff, and clinical staff
Implements measurement, monitoring and benchmarking systems for costs and quality
Streamlines processes to enhance clinical outcomes and reduce costs
Integrates information technology, including electronic health record technology, with clinical and administrative processes to support care management across all settings
Focuses on improving clinical performance through evidence based medicine
It will be critical for organizations to get a clear understanding of their strengths and weaknesses relative to each reform initiative.

Thriving under reform initiatives will require organizations to evaluate the entirety of their business, optimizing operations in all areas to enhance net revenues and reduce labor, supply, drugs and other costs. The goal should be to achieve or beat ‘best’ quartile performance.

Hospitals must continue to improve quality while increasing cost effectiveness.

Hospitals should undertake an in-depth evaluation of what service lines are crucial for their success – and which lines might be scaled back or divested based on funding limitations.

Healthcare reform will forever alter the landscape of medical care in the U.S.

Hospitals will have to align medical staff to address quality of care and comprehensive performance improvement under healthcare reform measures.

An organization’s ability to collaborate with physicians to redesign clinical processes, minimize unnecessary services, lower readmission rates, and reduce hospital acquired conditions will be critical to their success under reform.

Hospitals now not only need margins to meet their missions, they need margins to meet the demands of reform.

Short-term and long-term savings from critical performance improvements will help position organizations to succeed under reform and beyond.

While many of the ramifications of healthcare reform and its effect on hospitals remain to be seen, one thing is certain: there will be less money in the system to go around.


Wellspring+Stockamp, Huron Healthcare is the premier provider of performance improvement solutions for hospitals and health systems. By partnering with clients, we deliver solutions that improve quality, increase revenue, reduce expenses, and increase physician, patient and employee satisfaction across the healthcare enterprise.

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