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What an 18th-century clockmaker can teach us about cost control. (Really.)

By David Willis

December 5, 2018

    In our more poetic moments, health care consultants like to talk about how health system leaders must "navigate rough waters." We usually mean something rather more prosaic: that CEOs must steer their hospitals through mega-mergers, declining margins, and so on.

    Why so many early sailors were lost at sea

    It's difficult to overstate the peril of traveling by sea during much of human history. In just one day in 1707, four Royal Navy ships sank off the Isles of Scilly, killing as many as 2,000 sailors—simply because the ships' navigators had lost their way.

    The Scilly disaster was far from unique. Until the mid-18th century, sailors at sea often didn't know where they were on the globe.

    Navigators weren't totally lost; they'd known for centuries how to find their latitude. But as Dava Sobel writes in her terrific book Longitude, there was no practical way to determine how far east or west they'd sailed. Navigators relied on techniques such as dead reckoning that amounted to educated guesswork.

    At best, a lost ship might show up weeks late to its intended destination. At worst—catastrophe.

    How John Harrison solved the longitude problem (and what it means for health care)

    So how did European navigators finally find their way home? It turns out you can calculate longitude using a technology that, these days, we take for granted: an accurate clock. But the pendulum-based timepieces of the 18th century were all but useless on a storm-tossed ship.

    Sobel's book tells how John Harrison, a British carpenter and clockmaker, spent decades perfecting a remarkably accurate chronometer to keep time at sea—a tool so extraordinary that it remained standard equipment until the advent of satellite communication.

    Harrison wasn't the only tinkerer working on the longitude problem. In fact, the British Parliament had offered a reward equal to more than $1 million for an answer. So how did Harrison succeed where so many great scientists of the 17th and 18th century failed?

    I see three key lessons in his success—and they remain relevant to health care leaders centuries later as we confront the margin problem facing us in 2018.

    1. Sometimes, you don't need extraordinary strategies. You just need consistent excellence.

    When Western Europe battled for global maritime supremacy in the 16th and 17th centuries, the great powers focused on strategies such as exploration, opening trade routes, and developing superior naval forces.

    But at the risk of overstating the importance of Harrison's invention (and exposing my limited knowledge of European history), I'd argue that the simple act of being able to measure longitude at sea gave Great Britain a key operational and strategic advantage.

    How did Harrison do it? He didn't know much about military strategy, but he was simply the best clockmaker on the planet. His operational excellence enabled him, and his country, to achieve something unprecedented.

    In health care, I often hear leaders describe the tension between leading with growth strategy or achieving operational excellence. I'm compelled by the words of one executive: "Operational excellence is my strategy."

    2. Achieving the extraordinary requires going the last mile.

    Other 18th-century clockmakers had made substantial improvements in timekeeping accuracy, with some building timepieces that were accurate to within a second per hour. That's impressive, but nowhere near good enough for ships traveling for months at a time. Only Harrison went the last mile to develop a timepiece that could keep time to within one-third of a second per day.

    The analogy for health systems is clear. Many of the tactics required for exceptional cost performance are already in place to some extent. But don't assume that just because you have implemented a practice that you are necessarily achieving best-in-class results. The difference between good and great is entirely in the last mile.

    As just one example, tactics such as position control don't achieve their goal when managers know all the ways to game the system (as all savvy managers do). The health systems that are best at maintaining healthy margins set themselves apart by systematically hardwiring best practices, elevating accountability at all levels, and reducing or eliminating exceptions.

    3. You have to gear up for the long haul.

    John Harrison took decades to solve the longitude problem. Had Parliament insisted on an answer in six months, or a year, it's likely any "solutions" provided would have been bandages at best.

    Similarly, some of the biggest drivers of health care costs will take years to fix, not weeks or months. That doesn't mean we should wait to take action, but it does mean we need a long term plan, not a six month goal. Leaders must build and sustain a culture where every individual, at all levels of the organization, is committed to the goal of creating sustainable margins—where cost control is seen not as a mandate from on high, but as everyone's job, every day.

    In the 18th century, John Harrison fundamentally transformed maritime navigation and opened a path for centuries of progress. One hopes that, when the history of American health care in the 21st century is written, we'll be able to say the same thing about the leaders of today.

    Achieve sustainable cost control and revenue growth

    sustainable cost control and revenue growth

    Many hospitals and health systems appear healthy from afar. But with their operating expenses now outpacing their operating revenue, they may be headed downhill.

    We built out a financial model of an average health system to illustrate the magnitude of this challenge. Absent intervention, our model system will have a –4.2% operating margin in 2025.

    Check out our infographic to learn how this model health system—and your organization—can reverse course to ensure a bright and sustainable future.

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