Safety, risk, and quality — the CFO’s other problems

By Mark Crockett, M.D., CEO, Verge Solutions

For successful hospital systems, one strategy cuts through the confusing and distracting changes in healthcare: Play defense. Protect the patient to win — clinically and financially.

As I reviewed a recent Johns Hopkins report 1 about medical errors rising to become the third-leading cause of death in the United States, I thought about a hospital CFO I worked with long ago whose health system had 5 percent margins on commercial insurance. His credo was, “There is no room for an adverse event that costs $5,000.” Given this number and reality, his primary strategy was simple: “Don’t screw up.”

Success requires defense

In my experience, the leaders in patient safety are at the top because they see the clear link between clinical success and financial success. Perhaps even more critical, they take a systems approach that integrates safety, risk, and quality.

If population health and new revenue sources are offensive plays for hospitals, then playing defense is about defending the patient and your hospital’s margins. It means not spending hard-earned resources to pay for adverse events, catastrophic claims, and broken relationships after systems have failed to keep patients safe.

Offensive tactics to improve population health and bring in money have an essential role. In my mind, though, playing defense in healthcare also has big advantages. Why? Because a systematic approach to patient safety delivers a strong return on investment and protects facilities from the high costs of adverse events. How?

• With a bundled payment model, or in “at risk” value-based care contracts, the effects of an error are especially significant. Errors extend a patient’s length of stay, create direct costs to the system, and increase friction with patients. And in value-based care, all those costs belong to the provider.
• Even in fee-for-service medicine, playing defense to keep patients safe works like a charm financially.
• Finally, it’s easy to gain alignment with your physicians and nurses who see the human costs to patients and the litigation risks of medical errors as something to be avoided “at all costs” (a phrase a CFO normally might find rather irritating). More of us in healthcare are recognizing adverse events for what they are: a threat to financial survival and an opportunity for negative publicity.

The new world: Investing in quality and safety

Investing in the system of care with EMR platforms to document and facilitate care is relatively new. Investments in quality and safety platforms in hospitals to improve the efficacy and safety of the care delivery process are an even newer concept.

Now some of the larger healthcare systems, particularly those with a tight relationship between payer and provider, are using quality management solutions similar to those leveraged by manufacturing companies. Quality systems like ISO 9001 are the backbones of global companies such as BMW, Cadillac, and Johnson & Johnson. These systems decrease variability, leading to consistently safe, quality products — and that means success clinically and financially.

I’m neither surprised nor panicked about medical errors becoming the third leading cause of death. As a defensive player, I have the good fortune to work with systems that keep patient safety at the forefront. Investing in safety, quality, and risk is a clinical strategy that makes both our financials and our patients secure. It’s a simple game plan that delivers daily rewards, which makes it easy to feel good about the results.

Featured in Health Management Technology
JULY/AUGUST 2016: Doctor Perspective: Medical Errors
By Mark Crockett, M.D., CEO, Verge Solutions

REFERENCES:

Johns Hopkins study suggests medical errors are third-leading cause of death in U.S.