Waste is a $3 trillion problem in the U.S. Fortunately, quality improvement theory (per W. Edwards Deming) intrinsically links high-quality care with financial performance and waste reduction. According to Deming, better outcomes eliminate waste, thereby reducing costs. To improve quality and process and ultimately financial performance, an industry must first determine where it falls short of its theoretic potential. Healthcare fails in five critical areas: Massive variation in clinical practices. High rates of inappropriate care. Unacceptable rates of preventable care-associated patient injury and death. A striking inability to “do what we know works.” Huge amounts of waste.

1. Healthcare Quality Improvement:
A Foundational Business Strategy
HEALTH CATALYST EDITORS

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BRENT JAMES, MD
Former Vice President and Chief Quality Officer
Intermountain Healthcare
This report is based on a webinar presented by Brent James, MD,
MStat, on November 6, 2019, entitled, “Making Quality Your Core
Business Strategy: A Foundational Element.”
Healthcare Quality Improvement

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While delivering high-quality clinical care to
patients is a familiar value and motivator among
healthcare professionals, quality is an equally
powerful business strategy with real influence
on the overall health of an organization and its
financial performance.
Healthcare delivery waste (i.e., any consumption
of resources that doesn’t optimally benefit the
patient) drives higher costs and worsening
outcomes for patients.
Organizations can curtail waste, and improve
bottom line, with clinical quality strategies.
Healthcare Quality Improvement

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According to W. Edwards Deming, the
father of modern quality theory and the
science of process management, higher
quality outcomes eliminate waste, and
value is the best quality result at the
lowest necessary cost.
In other words, Deming taught that by
adopting the appropriate principles of
management, organizations can increase
quality and simultaneously reduce costs.
Healthcare Quality Improvement

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The key to Deming’s strategy is to practice
continual improvement and think of the
manufacturing or business process as a
holistic system, not as separate departments.
In healthcare, this holistic system is known as
team-based care, a collaborative, goal-
oriented approach to patient-centered care
with a direct impact on a health system’s
bottom line.
Healthcare Quality Improvement

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According Deming, process management has three
classes of outcomes:
1. A physical outcome: the product or service.
2. A service outcome: the interaction between the
producer of a product or service and its consumer
(in the care delivery experience, patient satisfaction).
3. A cost outcome: the resources used to operate
the process.
Three Classes of Outcomes Drive Quality

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Adding cost as an outcome was unique when
Deming was working in the mid-20th century.
He then started to explore the relationship
between physical outcomes and cost outcomes.
He showed that, in many instances, improving
the attributes of the physical outcomes
(i.e., quality) caused the cost of
operations to drop.
Three Classes of Outcomes Drive Quality

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Quality theory in healthcare has an additional
element when it comes to process management.
Every health professional shares a duty to pass
along better quality and processes than they
found at the start of their careers, producing
better professionals for future generations.
In healthcare, quality improvement centers on
reducing waste and improving the operational
areas that contribute to this waste.
Three Classes of Outcomes Drive Quality

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The first step—the opportunity—in improving quality and process is determining
where an industry falls short of its theoretic potential. Healthcare falls short in
the following ways:
Five Healthcare Quality Improvement Opportunities
1. Massive variation in clinical practices (making it
impossible that all patients receive good care).
2. High rates of inappropriate care (where the risk of harm
inherent in the treatment outweighs potential benefit).
3. Unacceptable rates of preventable care-associated
patient injury and death.
4. A striking inability to “do what we know works” (crime of
omission).
5. Huge amounts of waste, leading to spiraling prices
that limit access to care.

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#1: Variation in Care
Five Healthcare Quality Improvement Opportunities
Variation, the first opportunity area above,
has been such a common problem in
healthcare that it’s impossible for all
patients, even those with full access to
the best care, to be getting good care.
Addressing variation alone can drive
down costs by about 30 percent while
improving clinical outcomes.

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#2: Inappropriate Care
Five Healthcare Quality Improvement Opportunities
The industry considers inappropriate care, the second
opportunity area, care in which the risk of treatment
outweighs any potential clinical benefit to the patient.
Though research isn’t conclusive, inappropriate care
likely overshadows variation in care as a driver of
waste and poor quality. A conservative estimate puts
inappropriate care at 20 to 25 percent of all care
delivered globally.
It’s not just the costs of the care that represent waste,
it’s the consequences of inappropriate care—in many
cases, healthcare professionals will have to deliver
more care to try to recover the initial harm.

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#3: Preventable Care-Associated Patient Injury and Death
Five Healthcare Quality Improvement Opportunities
In November of 1999, the National Academy of
Medicine (formerly the Institute of Medicine) and its
Committee on Quality of Healthcare in America
released its report, To Err Is Human.
With estimates that between 44,000 to 98,000 people
die in U.S. hospitals each year or die from avoidable
treatment-related harm, the report triggered a patient
safety movement around the world.
Subsequent research has demonstrated the 1999
estimates were conservative; the real toll is about
210,000 preventable deaths per year.

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#3: Preventable Care-Associated Patient Injury and Death
Five Healthcare Quality Improvement Opportunities
Even though U.S. healthcare outcomes are
largely positive, adding an average of three
and a half to seven years of life expectancy to
every citizen, the industry can do better.

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#4: The Inability to “Do What We Know Works”
Five Healthcare Quality Improvement Opportunities
While patient harm is an injury of commission
(because the care actively harms the patient),
healthcare must also look at its injuries of
omission, in which clinicians fail to execute
on interventions they know work for certain
conditions (i.e., highly reliable care).
A large national study determined that, on
average, U.S. adults receive highly reliable
care just under sixty percent of the time.

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#4: The Inability to “Do What We Know Works”
Five Healthcare Quality Improvement Opportunities
If U.S. healthcare can achieve miracles
(e.g., adding years of life expectancy)
executing correctly roughly half the time,
what kind of miracles could the system
realize if it delivered care correctly all the
time, or close to all the time?
From this perspective, the healing
professions have the ability and control
to change their approaches to care.

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#5: Waste
Five Healthcare Quality Improvement Opportunities
The top four areas above in which healthcare falls
short of its theoretic potential are clinical opportunities.
Together they produce the fifth, waste.
The waste opportunity is huge. At least 30 to 50
percent of all healthcare resource expenditures are
quality-associated waste, connected to the following:
Recovering from preventable foul-ups
Building unusable products
Providing unnecessary treatments
Simple inefficiency
>
>
>
>

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#5: Waste
Five Healthcare Quality Improvement Opportunities
In 2019 the U.S. will spend $3.6 trillion on
healthcare and still produce unsatisfactory
healthcare delivery. Two trillion dollars of
that may be recoverable waste.
For health systems this means that waste
in current care delivery operations is by far
the biggest financial opportunity leaders
will see in their lifetimes.

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Tracking finances in a collaborative, goal-
oriented team-based care approach
shows that when a care team’s primary
goal is improving quality of care, the
improvements reduce a system’s waste
and save millions of dollars.
Figure 1 shows savings with team-based
care at a third-generation patient-centered
medical home.
A Team-Based Care Approach Reduces Waste

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A Team-Based Care Approach Reduces Waste
Team-Based Care
(3rd generation patient-centered medical home)
Emergency
Room Visits
Hospital
Admits
Other
Avoidable
Visits and
Admissions
PCP
Visits
Urgent
Care
Visits
Radiology
Tests
-11%
-22% -21%
-11%
+4%
+13%
An investment of $22 per-member-per-
year (PMPY) decreased medical
expenses by $115 PMYP
Reiss-Brennan B, Brunisholz KD, Dredge C, Briot P, Grazier K, Wilcox A, Savitz L, and James B. Association of integrated
team-based care with health care quality, utililization, and cost. JAMA 2016; 316(8):826-34 (Aug 23/30)
Figure 1: Team-based care impact and ROI.

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In the above example of about 200,000
patients, ED visits dropped by 11 percent,
hospital admits by 22 percent, and other
avoidable visits and admissions (mostly
specialists and outpatient procedures) by
21 percent.
Not surprisingly, primary care provider
visits went up a tick, which is the goal.
Urgent care also went up, which is
preferable over ED visits.
A Team-Based Care Approach Reduces Waste

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Overall, the investment in a team-based approach produced
better care at reduced expense (specifically, a conservative
investment of $22 per-member-per year [PMPY]).
For every dollar spent, the team-based approach earned $5
back for a total savings of $115 PMPY, mostly by reducing
hospital admits, other avoidable specialties,
and outpatient procedure care.
A Team-Based Care Approach Reduces Waste

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As an example of the financial impact of clinical
quality improvement, Intermountain Healthcare
aimed to keep its price increases lower than
consumer price index (CPI) inflation plus 1 percent.
The health system wanted its services available
on a broad scale to the community.
• The blue line (going up) in Figure 2 represents
Intermountain’s expected costs on a conservative
projection as it grew as a system.
• The black line represents the target—CPI plus one.
Financial Impact of Clinical Quality Improvement

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Intermountain dropped its total cost of operations
by 13 percent—almost $700 million out of its cost
of operations—showing that improving financial
performance through clinical quality is an
achievable reality.
In most cases, better care is cheaper care, and
the path to financial success leads through clinical
management.
This is the full financial foundation for a major
international trend called pay for value.
Financial Impact of Clinical Quality Improvement

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Financial Impact of Clinical Quality Improvement
Figure 2: Financial Impact of clinical quality improvement.

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The key factor for success in the future care
delivery world is an ability to manage clinical
care delivery up and down the entire
continuum of care.
The rate of change in healthcare delivery
continues to accelerate, but the business
remains clinical care delivery.
Leaders in clinical change must speak the
language of the key players—the physicians,
nurses, pharmacists, therapists, and
technicians who show up to make that care
happen every day.
Building the Culture Around Clinical Quality

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Healthcare professionals already have a
foundational culture to drive effective clinical
change within their own organizations.
But how do change leaders tie the pieces
together at the core of what it means to be a
physician, nurse, pharmacist, or therapist
down at the core of what it means to be a
care delivery system?
Organizations can build on endemic
healthcare culture by teaching quality
improvement theory and directing
education at frontline care teams.
Building the Culture Around Clinical Quality

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The goal is to build a widespread organizational
culture layered on top of healthcare professionals’
shared values.
Quality improvement theory education would also
teach solving important strategic problems—
driving real change for things that matter on a
large scale.
Building the Culture Around Clinical Quality

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Quality improvement theory education teaches the following:
1. Creating an effective change leadership/implementation team.
2. Building a widespread organizational culture.
3. Solving important problems.
4. Showing real ROI.
Building the Culture Around Clinical Quality

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This education would be costly up front, as
it would pull high-paid individuals away from
other work.
But when organizations track these
projects, they see not just the clinical
outcomes of the project, but the financial
savings of approaching quality improvement
from an organization-wide culture.
This training builds a set of colleagues to
help set the culture that drives quality.
Building the Culture Around Clinical Quality

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This article started by discussing Deming’s waste-
based quality techniques, which changed the
manufacturing world and life for all by delivering
higher quality products at more affordable prices.
Today, as healthcare moves into pay for value,
the industry needs to echo this strategy and
continuously improve clinical quality to lower
expenses—delivering best care at lowest cost.
Health systems can target waste reduction
through clinical quality improvement strategies
and building quality improvement-driven cultures.
Transforming Healthcare with Wasted-Based
Quality Techniques

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For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

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More about this topic
Link to original article for a more in-depth discussion.
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Health Catalyst Editors

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Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Clinical Professor, Stanford University School of Medicine Member, National Academy of
Medicine (contributor to most IOM/NAM quality and patient safety publications) Health
Catalyst, Senior Advisor and Director, Mastering Clinical Quality
Brent James is known internationally for his work in clinical quality improvement, patient
safety, and the infrastructure that underlies successful improvement efforts, such as culture
change, data systems, payment methods, and management roles. View Dr. James full bio
Brent James, MD

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Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
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