40 What Is Quality, Who Wants It, and Why? MANAGED CARE QUARTERLY/AUTUMN 1999 Leonard H. Friedman and David B. White The health services literature is replete with examples of the failure of total quality management to produce significant change in organizational performance. Some authors suggest that incremental quality improvement be abandoned in favor of structural reengineering. However, these naysayers ignore the critical impact of environmental change, managed care, and customer service as primary organizational drivers that demand an enhanced focus on continuous quality improvement. Coupled with these factors is the movement towards the creation of learning organizations. At the core of any learning organization is a commitment to quality and the empowerment of employees to identify and improve quality. Key words: environmental change, learning organization, managed care, quality Managed Care Quarterly 1999; 7(4): 40–46 © 1999 Aspen Publishers, Inc. 40 Pressure and Response There is no question that health service organizations (HSOs) of all types, including managed care organizations (MCOs), are being confronted with pressures that are forcing executives to rethink the fundamental business theories that have governed their operations for at least the past 40 years.1,2 Among the pressures are constrained resources resulting from prospective payment and capitation, the growth of elderly populations, state and federal government health care reform, and increased competition among providers. Recent reports from the Health Care Financing Organization (HCFA) suggest that the Medicare Trust Fund will be broke by 2001. While the growth in total health care spending is the slowest in recent memory, over $1 trillion was spent in 1996 and pressure continues to control spending.3 Concurrent with pressure to impose rigid cost controls has been the demand to maintain a high level of service and improve clinical outcomes. However, the difficulty has been to arrive at a satisfactory definition of quality. Traditionally, those closest to the process (typically physicians but sometimes nurses) were charged with informing both consumers and payers as to whether or not clinical success had been achieved. Successful outcomes equated to high-quality care regardless of cost or the perceptions of the ultimate recipient of service. Generations of providers were trained to see themselves as the final arbiter of quality. According to this rationale, restraining autonomy and demanding accountability would lead to diminished quality and bad medical outcomes. Leonard H. Friedman, PhD, MPH, is Associate Professor in the Department of Public Health, Oregon State University, Corvallis, Oregon. David B. White, PhD, MPH, ACSW, RODP, is Associate Professor in the Department of Education and Health Services, Saint Joseph’s University, Philadelphia, Pennsylvania. What Is Quality, Who Wants It, and Why? Despite the insistence of providers that they continue to be afforded sole control of the process of health care delivery, a gradual change began to take place. Berwick (1989)4 surfaced the idea that methods of continuous improvement could be incorporated in health care organizations. A physician with the Harvard Community Health Plan, he suggested that continuous improvement could improve clinical decisions, lower costs, and enhance patient satisfaction. Earlier, Shortell (1982)5 also challenged the conventional wisdom that cost and quality were synonymous. He argued that methods to control costs may actually improve quality given a cooperative involvement of administration and provider. These messages struck a resonant chord with reformers, who rushed to try and implement these wondrous new ideas. Many attempted to exploit the concept that quality was predicated on the belief that you needed to listen to the customer, create multidisciplinary teams of quality, have complete support from senior administration, and analyze outcome data. Hospitals, group practices, managed care plans, public agencies, and other payers and providers jumped onto the quality bandwagon. This isomorphic behavior toward quality has been driven partly by both the Joint Commission on Accreditation of Healthcare Organizations (the Joint Commission) and the National Committee for Quality Assurance (NCQA) to make systemic quality part of virtually every health care provider in the nation. However, there appears to be unease regarding the original passion for quality improvement in some quarters. There are a growing number of reported failures of quality improvement and in many cases, it has been abandoned in favor of an effort to reengineer the organization. One article suggests that employerinstituted quality improvement programs may be a violation of National Labor Relations Board (NLRB) rules.6 Counte and colleagues postulate that the success of quality improvement in hospital settings is uncertain given the unique organizational problems that hospitals have in contrast to non–health care related industries.7 This leads us to ask whether quality improvement (QI) is dead (or at a minimum lies in a comatose state) in health service organizations? The answer resides in an examination of both the health services and business literature, combined with anecdotal reports from health service executives. This article proposes to 41 achieve four purposes. First is to briefly trace the literature on QI in HSOs. Second is to ask why QI appears to fail and to examine the likelihood that health care executives were not confusing QI with QA or organization development. Third is to see if, as Will Rogers stated, “The reports of my demise are greatly exaggerated.” Is QI actually dead, or at least, on its way out? Are there legitimate cases of successful implementation or is QI simply a means by which the Joint Commission and NCQA can impose an added “hassle factor” to an already overregulated industry? Finally, we intend to examine some of the future challenges with the realization that HSOs must be able to provide high quality at a reasonable cost. Overview of Organization Improvement and Quality in HSOs Historically, the prevailing wisdom suggested that HSOs, although in dire need of intervention, had a natural aversion to organizational change efforts. The characteristics of this sector presented obstacles even for seasoned professionals. The literature is replete with examples of the difficulties of organization improvement. Weisbord8 pessimistically concluded that organization improvement efforts were not effective in medical settings because they have few of the formal characteristics of industrial firms (where research was largely based). Weisbord asserted that providers in such settings were socialized to be autonomous and to initiate professional judgment rather than to be team players. Early on, Kaufman9 specified a variety of obstacles that impeded organizational improvement (most of which, he concluded, characterize health care organizations) to include professional autonomy, routinization of procedures and behavior (status quo), opposition to change, specialization/division of la- Historically, the prevailing wisdom suggested that HSOs, although in dire need of intervention, had a natural aversion to organizational change efforts. 42 MANAGED CARE QUARTERLY/AUTUMN 1999 bor, sunk costs and resource scarcity, and excessive regulations. Goodstein10,11 advocated a systems approach for consulting to human service organizations, but he urged caution and characterized HSOs as bureaucratic, goal ambiguous, conflict avoiding, noncompetitive, and unresponsive to feedback concerning mission attainment. Warner Burke,12 in reviewing the efforts at organization improvement in bureaucracies, declared that “very little or no fundamental change is occurring in bureaucratic organizations” (p. 429). Burke predicted that bureaucracies and their organizational imperative would prevail for the foreseeable future. Tichy,13 in a strongly negative critique, concluded that organizational development (O.D.) (which is a process complementary to Quality Improvement) still has limited application in large health systems. The reasons are due to inadequacies in the field of O.D., and to the special nature of managerial and organizational problems in large health systems. Although by no means exhaustive, this brief overview of the pessimistic literature concerning organizational improvement in health and human services reflects that many analysts historically perceived the obstacles to outweigh the possibilities. However, there are notable exceptions to these negative assessments. Berwick and colleagues in their groundbreaking work took the findings of the National Demonstration Project on Quality Improvement in Health Care and argued that TQM methods could successfully be used in health care organizations.14 Margulies and Adams15 cited many contributors who have succeeded regarding organizational improvement interventions in health care institutions, usually in hospitals. Boss16 traced the challenges and barriers to interventions in an operating room, nursing services’ division, and city hospital-medical center and provided an optimistic analysis concerning the chances of success. His review of the literature supports the positive results of team building, management development, action research, role clarification, and structural changes in a wide spectrum of health organizations. Keys17 and Heyssel 18 reported on successful organizational improvements in an urban, human service agency and a major teaching hospital respectively. Specifically related to team building, Boss and Boss19 summarized a successful confrontational team building effort with nurse managers and concluded that the intervention resulted in “statistically significant increases in organization climate and group effectiveness” (p. 252). Cope and Cox20 reported on a very successful intervention in a psychiatric hospital, and Shani and Eberhardt21 provided an exhaustive case study of the successful development of a parallel organization in a midwestern medical rehabilitation hospital. Wieland22 noted that although there are considerable problems regarding organizational interventions in health care (particularly physicians’ perceptions of intervention and interdependence as a threat), there are notable successes, including teamwork development in health centers, improved culture in HMOs, and collaborative efforts in hospitals to reduce patient length of stay. In a multi-institutional study, Boerstler and colleagues23 reported that while organization-wide change rarely occurred with the implementation of total quality management (TQM), specific departments can enjoy considerable benefit. Freeman and Penrod24 reported on a successful team-building initiative between physicians and nurses in a midwestern hospital. They analyzed the synergism of the TQM techniques and the O.D. processes noted above in their positive intervention and concluded that change opportunities are numerous in health care. Charns and Tewksbury25 likewise elaborated on the philosophical similarities between O.D. and TQM and provided numerous examples of successful implementation in the field—in hospitals, medical centers, and health service centers. Brill and Pierskalla26 concluded that adhering to the basic tenets of O.D. leads to a variety of benefits to the organizations and their administrations. More recently, Johnson and Boss,27 after studying cases where O.D. interventions were effective, concluded that “health care professionals are willing to consider options and accept change when needed” (p. 717). Griffith28 has noted that TQM requires an environment that has shared responsibility for care that is of the utmost importance to all health care providers. White also reviewed the literature on organization improvement interventions in health and human service agencies, as well as educational institutions, and found that success was established through consistency of purpose, committed leadership, empowerment strategies, and quality assessment.2 Although only a brief summary of the optimistic conclusions, these citations reflect a substantial body of knowledge What Is Quality, Who Wants It, and Why? sharing a positive consensus of contributions and potential. Impact of External/Contextual Factors Complicating the mixed assessments of impact have been the major economic changes that have profoundly altered our society. These “new realities”1 for HSOs mean a paradigm shift from unlimited access to care to more efficient and low-cost managed care, from cost-based reimbursement to prospective payments based on diagnosis-related groups.29,30 We observe that the “provider driven” cost-be-damned era is being replaced by a “consumer-oriented marketplace” atmosphere where fiscal solvency realities predominate. As noted by Freeman and Penrod,24 “the pressure on health care organizations to control costs and improve quality has provided a strong incentive to focus on improvement opportunities” (p. 61). Additional evidence for this cost-based transition is seen in the rapid growth and development of integrated delivery systems.31 It would appear that there are considerable challenges and opportunities for organizational improvement, that can have a positive effect on organization and management efficiency, effectiveness, and responsiveness.1 Change will undoubtedly be the dominant theme well into the next century.30,32 Given the events noted, adapting the organization to external and internal stimuli may be the most difficult challenge facing managers who now truly have to manage, lead, and strategize, and not just administer.33 Such a crisis represents a challenge, as well as an opportunity, for continuous quality improvement. In their totality, the incidences of success cited in the literature reflect opportunities. All are the impetus for increased improvement, management efficiency, organizational adaptability, and strategic planning.34 In summary, external and internal realities for all HSOs have changed dramatically. Many of the managerial problems, organizational influences, sector characteristics, and obstacles cited have been resolved or partially resolved or tempered due to the events noted; and perhaps more importantly, economic incentives have changed precipitously. If one wants to change behavior, one must change the economic incentives that drive or at least support that behavior.35 Given the massive changes that have beset HSOs, this has most 43 assuredly occurred and continues. Consequently, organizations previously unresponsive to improvement interventions may be more receptive as a direct result of a willingness to try something new, so as to adapt and survive in a “challenging era.”2 In short, necessity is often the mother of invention. What Is Quality? Who Wants It! Why? So if one is to assume that the utility, if not necessity, of continuous quality improvement in HSOs is very much alive, where are we now? Recent evidence would suggest that part of the difficulty of assessing continuous quality improvement is in the multiple definitions, varying perceptions, and even demands for quality improvement. O’Conner and Bowers36 anticipate that consumers, third party payers, and government will all place increased emphasis on quality. As competition (driven by market reforms) continues to grow, there will be increased pressure and expectations for quality and services. As noted by O’Conner and Bowers, the link between an organization’s internal marketing, satisfied employees, and service quality becomes manifest. Noteworthy is that this is the essence of TQM/CQI noted by none other than Edward Deming.37,38 Helping to answer the question of who wants quality, one need look no further than their appropriate regulatory or accrediting agency. The two leaders in this drive are without question the Joint Commission and the NCQA. In the early 1990s the Joint Commission revised its accreditation rules to recognize and promote a quality improvement approach for every organization it visits.39 The Joint Commission specifically speaks both to doing the right thing and to doing the right thing well. In order to achieve this goal, the Joint Commission includes the elements of process design, performance measurement through data collection, analyzing current performance, and improving and sustaining improved performance.40 More recently, the NCQA has worked to develop a set of quality standards that, since 1991, would apply to the accreditation of managed care organizations. While a significant number of variables are measured, over 40 percent of an MCO’s total score is a function of quality management and improvement. There is a great deal of pressure exerted by large payers for managed care plans, HMOs, and managed behavioral health care 44 MANAGED CARE QUARTERLY/AUTUMN 1999 organizations to submit themselves for NCQA accreditation. Their work on the Health Plan Employer Data and Information Set (HEDIS) represents an attempt to develop a uniform set of standards by which health plan quality will be measured and judged. The relationship between employee satisfaction and patient satisfaction is also key in implementing TQM/CQI programs. Lawrence and Packwood41 and Morrison, Mobley and Farley42 clearly demonstrate that the effort is a holistic, humanistic oriented program. They evaluated interrelationships not only among coworkers, but also between employees and patients. They concluded that the focus is on process and product. O’Conner, Shewchuk and Carney43 astutely point out that patient satisfaction with service quality is correlated with retention in treatment: larger market share. Aharony and Strasser44 likewise note that patient satisfaction is crucial, but link that outcome to compliance with treatment, better communication between patients and providers, and improved outcomes. The idea that patients need to be satisfied with quality care should not seem all that revolutionary, but surprisingly the literature points to evidence that there is a wide gap between provider perceptions and patient expectations. O’Conner, Shewchuk and Carney43 observe that patients place value on empathy and responsiveness in their providers when assessing service quality, but that physicians in particular are unaware of and need sensitizing concerning this fact. By closing this gap, positive outcomes such as profitability and market share will accrue to the institution. As pointed out by O’Conner and Bowers,36 providers have traditionally defined service quality, but in the current environment patients/consumers and payers are the ultimate arbiters of quality. This is not to say that technical/clinical quality is not important, but rather that there is a socioemotional dimension to quality care as well. Are not most other products/ commodities/services so judged? Why not health care? Consumers who experience more positive, interactive quality have higher levels of satisfaction and rate quality higher. Currently the weakness lies in our inability to measure patient satisfaction and quality with any validity and reliability.44 As we begin to view continuous quality improvement as an organizational commitment to humanitarian patient care and service quality, the need for reliable indicators of outcome are critical. It is not that CQI is dead, but quite the contrary: the demands of the paradigm shift in HSOs have outpaced the ability of administrators and providers to adapt. We have much to learn from other service industries. Managed Care/Quality Improvement Due largely to market forces, competition, and the pressure from business and third party payers, managed care and capitated payment systems are becoming the norm. In spite of resistance and criticism by many, integrated delivery systems, managed care networks, and the pressure for efficiency and effectiveness will continue.2 Quality improvement efforts will be of particular importance as integrated health networks (IHNs) continue to grow in response to heightened environmental and competitive pressure among both payers and providers. Quality is not merely a function of charting the number of complaints and suggestions posed by “customers.” IHNs will need to define quality in terms of outcomes-based measures that need to be applied to the entire organization. One of the inherent difficulties attached to this process has less to do with the information system and more to do with the culture and values of the member organizations connected to the IHN. There is evidence that the success of IHNs will be primarily determined by aligning mission, vision, and values (including quality) and less on economic incentives and compensation packages.45 The demands on HSOs and MCOs will thus persist. Cooperation between providers and managers will be the key to providing safe and efficient care of the highest quality within the constraints of cost containment and managed care.2 The need to manage quality is central to organizational success. Lathrop46 asserts that service quality (not clinical quality) will become the most common competitive dimension pursued and marketed by integrated delivery systems. As clinical protocols evolve and third party pressures demand a high standard level of clinical quality in the managed care environment, consumers/patients will make purchasing decisions based on other factors such as service and customer satisfaction. HSOs will have to determine what consumers want and meet their expectations: quality service at a reasonable price. What Is Quality, Who Wants It, and Why? Cooperation between providers and managers will be the key to providing safe and efficient care of the highest quality within the constraints of cost containment and managed care. There is considerable evidence to support this contention and to demonstrate what consumers mean by service quality. A recent study of patient satisfaction in hospitals conducted by Press, Ganey and Associates found that “interpersonal issues such as attitude, interactive skills, caring behavior . . . [and] staff response to patient’s needs to be informed, treated with respect and shown concern for personal stress were most associated with overall satisfaction and likelihood of recommending a facility.”47 O’Connor and Bowers36 believe that the future portends an increased concern for quality and patient satisfaction with the need for management to overcome their inaccurate perception of expected service, and internalize service systems that emphasize a culture of service quality. They contend that very little is known about service orientation in health care and they explain the definition as “disposition to be helpful, thoughtful, considerate and cooperative.” It is a set of attitudes and behaviors that affect the quality of the interaction between health care employees and patients. The accumulating evidence indicates that “service quality” as defined by customers is the future in MCOs—if not in all industries. In effect, perception is reality and customers who are not satisfied will in a short time no longer be customers.48 As expressed by Press, Ganey and Associates, the one million plus patients surveyed in their study have vividly declared that they “care more about what’s done to them and what’s told to them than other aspects of their stay . . . we ignore them at our peril.”47 This needs to be repeatedly emphasized to administrators and providers alike. The challenge is to learn as much about service quality as possible and apply it to HSOs.49 A change in process and culture is what is sorely needed. It will be an evolutionary, not a revolutionary, phenomenon, 45 but it has to happen for organizational survival. 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