In my recent series of blog posts, I've explored the idea of "systemness" from multiple angles. First, I examined the growing body of evidence that M&A is dilutive, not accretive, to margins—a finding that suggests few systems are achieving the benefits of M&A they hope for. Then I shared one possible reason why: Many health systems are "SINOs" (Systems in Name Only), functioning more as a confederation of individual parts than as a unified entity.
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More recently, I've started to unpack "systemness," using a four-part framework my Advisory Board colleagues developed. In my last post, I laid out first-level systemness, which we define as being able to use scale effectively to build operational advantage. Today I want to continue to level two of the framework, examining systems that achieve clinical advantage by reducing unwarranted variation in all patient-facing processes, including scheduling, patient communication, and clinical care.
Level 2 of systemness: Clinical advantage
Organizations achieve "level two" systemness when they leverage their scale to deliver maximum value in all patient-facing processes—most importantly in the delivery of clinical care. Achieving this level of systemness requires an organization to take on—and be highly successful at—the thorny task of care variation reduction (CVR). CVR is a vast and complex topic, and a complete discussion of it would be beyond the scope of this blog post. But in summary, the barriers to effective CVR are numerous and well-studied, including:
- Developing consensus around standards of care;
- Deciding what is appropriate vs. inappropriate variation from those standards;
- Measuring, reporting, and addressing care variation in a timely way (with data that are accurate, risk-adjusted, and verifiable); and
- Creating a communication mechanism to address variation in a way that engages, and is respectful to, physicians, nurses, and other clinical professionals.
CVR initiatives can go awry on any and all of these fronts—but it seems self-evident that as organizations grow larger, success becomes more challenging. Think about accomplishing the tasks above, and it becomes clear that it's likely more difficult to coordinate CVR efforts across different care settings and parts of the organization. In other words, there may be diseconomies of scale to reducing care variation.
That said, larger health systems should certainly have some advantages with CVR: the ability to deploy advanced information technology and data mining, a deeper pool of clinical leadership talent, and more skilled managerial talent to support those physicians.
The core components of successful CVR
Successful CVR is not just theory. My colleagues have published a number of case studies and best practice profiles on systems achieving CVR in recent years (see here, here, and here for three of my favorites). The latter piece is definitely worth reading; it shares the "inside story" on achieving CVR from executives at some of the most progressive health systems in this area. In particular, I'm impressed with Banner Health's success in achieving CVR at-scale, across multiple states, and with a mixed medical staff. More detail on the Banner model, including a number of informative videos, can be found here.
Rather than dig into the mechanics of CVR, I want us to think more about the type of leadership that makes it successful. I pose two questions to leaders reading this post:
- Have you created the necessary and sufficient conditions for CVR to occur at your organization?; and
- Are you willing to address difficult issues with your medical staff, or is the relationship with your physicians so tenuous that even discussing CVR is enough to send them (or their referrals) to your competitors?
Overcoming the tension about these issues is key to success. One hallmark of the organizations leading the way on CVR is that they have moved so far past the "difficult" conversations around that topic that it is the medical staff themselves—employed, affiliated, and independent—who are taking the lead in driving the initiative forward. That is enviable.
In a recent interview with my colleague Eric Larsen, Howard Kern, CEO of Sentara Health System, addressed this issue head-on. I find this statement very compelling:
We spent a lot of time developing a mission statement that says, "We need to drive best practice, and we need to take out unwanted variation."
And our physicians were critical; physicians from every part of the company worked together to establish a clinical leadership council. I knew that if we were ever going to get quality and performance where we need them, we had to get clinicians to drive it. And ultimately, we're going to drive cost too—but I knew we were never going to get credibility with clinicians unless we had quality first.
We had a very important saying about quality of care benchmarking: "Your quality is only getting better to the extent it is improving at a rate equal to or faster than other top performing health systems in the market."
I think Howard's remarks make two important points. First, they reinforce the idea that the medical staff must lead—not just be "on board with"—quality efforts to push CVR forward. Second, they reinforce an often-overlooked reality: If your organization is not leading your market in CVR, you cannot credibly claim to be serious about clinical quality, nor can you credibly claim to be a patient-centered organization. To put it bluntly: If you are not leading your market in this most essential of areas, why should patients, employers, or payers choose you to provide their care?
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How your organization can achieve 'systemness'
Many health systems are only scratching the surface of the potential their scale offers. But today’s market leaders are leveraging purposeful integration and cohesive effort—what we call "systemness"—to streamline operations, deliver more reliable and coordinated care, rationalize fixed costs, and even transform entire delivery models.
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