Drucker on the Dial
Interviewees: Paul O'Neill, Rob Curry Episode: Good Medicine Release Date: January 8, 2013 [00:00:00] BEGIN EPISODE [00:00:52] BEGIN PAUL O'NEIL INTERVIEW P: [Introduction]...Paul On'Neill, welcome to Drucker on the Dial. [00:02:12] P: I'm glad to be with you. Thank you. P: A good part of our audience will know you and you in President George W. Bush's administration, and some others will know your reputation as an executive with your work at Alcoa. Tell us a little bit about your background before you were posted in Washington and then why you've since specifically turned your attention to health care. [00:02:36] P: Sure. It's interesting. I've been interested in and involved in health medicare issues for a very long time. In fact, when I was going to Claremont Graduate School in 1961 I got recruited into what was then called the Management Intern Program in Washington and had offers from a number of different departments and agencies, and the one I decided to accept was at the Veterans Administration where they were wanting someone with an economics and operations research program to come in and help them with improving operations. I think in those times 178 veterans hospitals that are across there benefited administration system, and as an inducive they offered at the time something that seemed interesting and valuable to me - an extended period of time going through system analysis and computer programming school at IBM as an introduction to the B.A., and so beginning in 1961 I had been fascinated with it and [unintelligible] a lot of different ways and helped medical care issues. When I got recruited into what was the Bureau of the Budget in January of 1967 my first assignments in fact were in the health activity that the Bureau of the Budget which had oversight responsibility for the - also the press lived(?) on everything that was going on in the government in health medical care, and one of my first assignments was to figure out all the different things that were going on in the U.S. government having to do with health medical care. It was shortly after we passed medicare and medicaid. So I found there were 28 departments and agencies of government that had something or a lot to do with health medical care and began to create kind of a, some people understand this terminology, a production function thought process for how to allocate resources in health medical care. More recently actually in the late 1990s when I was the chairman CEO of Alcoa I was asked to co found in Pittsburgh something the Kennedy called the Pittsburgh Regional Healthcare Initiative where we were engaging all of the interested parties, caregivers, insurance companies. For some of these users, all of the [unintelligible] medical care, labor unions, big and small employers, the media, and in an activity to demonstrate what was possible and help the medical care that wasn't being achieved here or anyplace else. For example eliminating hospital acquired infections. So when I went to the Treasury early in 2001 I had to give up my co chairmanship of Pittsburgh Regional Healthcare Initiative, but when I came back in early 2003 they asked me to rejoin, which I did, and in one way or another I've been involved both at the national policy level and working with local institutions to apply concepts of continuous learning and continuous improvement, because I believe from my own observation and work that I've done that the sector of our society involved with health medical care, which is now 16 or 17% of our GDP has the largest potential for improving outcomes and simultaneously reducing costs, and I believe as we could do across the country perfectly what has been demonstrated can be done in a few places around the country that we could have a vast improvement in outcomes and simultaneously save a trillion dollars a year out of the 2.7 trillion dollars we're spending. P: You mentioned that there are some places that are doing it well. I feel like we hear examples of excellence everywhere. What do you think is in the way of getting it right more broadly? Why is excellence so hard to scale? [00:07:16] P: At the top of my list is the lack of people in leadership positions who understand the potential of leading an organization in such a way that it learns, that the organization and the people in it, learn everyday from anything gone wrong by analyzing the things gone wrong to root cause and modifying systems and procedures so you don't relearn the same lesson over and over and over again. It seems to be the unfortunate plight of those self medical care institutions. They observe something gone wrong, and they patch the problem rather than installing systemic fixes, and so they repeatedly learn the same lessons over and over again. An example of that is hospital acquired infections. In work that we've done in different places around the country we've demonstrated that it's possible to practically eliminate hospital acquired infections and publish the results in refereed journals, and yet everyday in this country by a best [unintelligible] count there are 4576 people in the country everyday who get an infection in a healthcare institution that always glaze their discharge, and unfortunately too frequently it kills them. Alright? So we know that's not necessary, and in fact in Pittsburgh when we created a different regional healthcare initiative we set our sights on the first instance to reduce or eliminate hospital acquired infections related to so called central lines, which are placed in a patient either for nutrition or medication or fluids or whatever, and in about 18 months the 44 hospitals that were part of our recent healthcare initiative reduced central line infections by more than two thirds. So it is possible. It's possible on a scale basis, but unfortunately we haven't gotten where we need to in this and many other areas in health medical care. P: You mentioned earlier that you studied at what was then known as Claremont Graduate School... [00:09:35] P: Exactly right. I still have the habit of calling it that. P: ...and I understand that you knew Peter Drucker. Would you share with us whether you have any sort of specific management lessons that you took from Drucker's teachings and that you've now taken into your work around healthcare reform? [00:09:52] P: There's a lot of fundamental ideas that came from Peter Drucker that I would say are a part of my own model, and there's an intermix with what I think about subjects of leadership and high performance organizations. It's hard to untangle them, and in some ways in order to communicate ideas with broader audiences I would say I blended some of Peter's ideas into things that I say that I'm sure he would agree with. For example almost everywhere I go when I'm asked to speak about leadership and high performance organizations and about functional topics like health medical care and education and the environment and energy and things like that I almost always find a way to say to people in an organization with a potential for greatness everyone in the organization can say yes to 3 questions everyday without any reservation or hesitation. So the first of those questions that people need to be able to say yes to everyday is I'm treated with dignity and respect everyday by everyone I encounter and without regard to race or gender or ethnicity or national origin or my pay level or my rank or any other discriminating characteristic. I'm treated with dignity and respect everyday by everyone I encounter. I have to tell you there are not a lot of organizations where people can say that truthfully everyday in their organization. So I'll tell you the second and third questions and then I'll tell you what's important about them. The second question is people need to be able to say I'm given the things I need, encouragement, tools, money, education, training, whatever, so that I can make a contribution to my organization that gives meaning to my life. There are not a lot of organizations where people can say yes to that question. The final question is people need to be able to say yes everyday I'm recognized for what I do by someone I care about and respect. So those three things I would say and submit to you are not possible unless whoever the leader is is committed to producing those conditions. The people in the organization can never say yes to those things and so for me one of the essential things for a leader to do in every kind of organization is to establish the conditions which only the leader can do that will make it possible for everyone in the organization to say yes to those 3 questions, because I don't believe you can get the potential energy insight, engagement, and contribution from people unless they can say yes to those 3 questions. To go back to health medical care for a moment I have to tell you in most health medical care organizations in our country the cultures are unfortunate all the way to toxic. For example there are not a lot of places where people understand and act on the idea that the people who clean the hospital rooms are as important as the surgeon, but they are, but they're not often treated that way, and so for me all of these things go together, and if you can find a place where leadership creates those conditions then you need to start adding on what I call non negotiable aspirational goals that no one can disagree with. For example to say and mean it that in a great organization the people who work there should never be hurt at work. Never. In great organizations it's true that people don't get hurt at work or the numbers are so small they're two places behind the decimal point. So in health medical care across the United States 5 out of 100 people who work in health medical care in this country every year have an injury that's so called OSHA recordables - that is it takes more than first aid to deal with what happened to the individual, and it's fascinating to me to be able to go into health medical care institutions and ask the supposed leadership what's the injury rates of your people here and to get a curious response like "well I don't really know what you're talking about." It's just unbelievable. In great industrial companies, I'm sure you've seen this. You drive by the plant gates, and there's a sign out front that tells you how many days or years it's been since they had an injury. Right? In health medical care that's not the case. It's unbelievable how little regard leaders seem to have for the people who do the work in health medical care institutions. P: I know that Drucker often used exemplars for some effective management practices. For example he saw them as a great prison for sideways communication where you have to have all these specialists and experts that have to be able to communicate with one another, but are there any management practices today you think in the health medical care industry that provide examples for managers outside medicine? [00:15:15] P: I think there are some really good examples of health medical care institutions that have learned from outside, and I'll give you two examples. One is the Virginia Mason Clinic in Seattle, Washington where Gary Kaplan, Dr. Gary Kaplan, he and his leadership team have basically imported the Toyota productions system and call it the Virginia Mason Production System, and the results they have produced and the cost savings they have produced are wonderful. I was going to say amazing, but they're not amazing if you understand the potential of engaging everyone in your organization in a way I've suggested and have a well understood shared set of ideas about how to learn everyday from everything that goes on in your institution. It's a wonderful example of a place that has dedicated itself to the proposition that it's going to be excellent everyday in everything that it does and get better everyday so that what they considered excellent yesterday is just a base for being even better tomorrow. It's a great place. It's been written about, and so it's available to people. There's a book by Charles Kenny that talks about Virginia Mason. There's a similar kind of a place based in Appleton, Wisconsin called Pheda Care that when they began their journey to be better everyday at what they do. Dr. John Toussaint was the leader. He now is running an institute in Appleton trying to spread these practices across the country, and they got their basic learning by partnering with a manufacturing operation not far away from Appleton and began to learn the ideas of what people call remanufacturing, and it's really interesting to go there and see how everyday they practice the notions of continuous learning and continuous improvement, and again their results are amazing. Their outcomes are better, and for example when you look at their capita cost for medicare patients, the difference between what they do and the average practice and the rest of the state of Wisconsin is the difference between say $5700 and $7500 with better outcomes. So yes there are really good examples of the practice of these ideas where leadership has taken the responsibility to create a system of continuous learning and continuous improvement, and I again I think all of these things are derivatives if not outright theft of ideas from Peter Drucker and the successors to his intellectual contribution. P: You talked a lot about how significant major changes in society never start with politicians, right? The political responses are just kind of the eddies on the surface but rather that the deep currents in the water are what really produces meaningful social change - big ideas like urbanization or industrialization. So given how sort of politicized the healthcare issue has become, what would you say are the deep currents - the larger issues about healthcare and what we're going to need in our society that are not subject to legislation or politics that'll need to be addressed no matter what political entity carries out those changes? [00:18:58] P: I guess I would start with a general proposition, which is that the way for societies to get forever better is fundamentally through productivity improvements. I don't mean that in a Lucille Ball cake production facility sales. I mean it in the sense in getting forever greater value out of resources consumed. In health medical care as I said earlier, I think there's someplace between 35 and 45% of the money we're spending we don't need to spend if we were really productive of what we do. So as an example if you go across the country, and you look at the time spent by an average nurse 50% of that average nurse's time is spent doing in quotes "non value added" work. It doesn't mean it doesn't need to be done, but it means that it doesn't really add value to the outcome for the patient or for the institution so as an example you can find in most medical care institutions something around 25% of an average nurses time is spent on what we call hunting and fetching. That means trying to find things that aren't where they're supposed to be when they're needed or if you find them they haven't been serviced for use. So things like that are IV poles. It's something that's needed, but unfortunately most organizations have not applied a well known what I would call industrial techniques to how they organize the work flow. It would be kind of equivalent of a manufacturing plant to having 2 or 3 hour lunch breaks. Right? It's almost like that, and so one of the things that needs to be done I think is to call clearer attention to what's going on, because I believe that as a principle that transparency is the friend of productivity. So I called on the president to no avail to go on television and announce that he is going to cause the VA hospitals and the US based military hospitals to begin posting on the internet every morning at 8 am local time the newly identified hospital acquired infections that happened in their facilities, the patient falls that occurred in their facilities, and the medication errors that occurred in their facilities. By the way they're with best estimate 300 million medication errors in our country every year and that after a 2 month grace period is going to require all of the private sector and public sector health medicare facilities in the country to do the same thing, which I believe would actually be startling to a lot of the institutions, because they don't really keep track of or know all the things gone wrong in their institutions, and I think the institutions would begin to notice very quickly that there are places like the two that I've mentioned and others that don't have the same sort of disastrous results that others do typically, and they will begin to be questioned by people who would use their facilities about why should I come to your place if you're hurting people at these rates, and I think it would cause a huge shift in attitude and expectations, and I think some of these things are such low hanging fruit that in a fairly short period of time we could see a remarkable transformation in these kinds of things that go on in health medical care institutions, and we would not be facing this same kind of dilemma we're facing now where people implicitly accept what's going on as an unavoidable baseline and are endlessly talking about how to redistribute the financial responsibility among individuals and institutions instead of figuring out how to solve "the problem" in quotes by achieving a massive improvement in the productivity and the resources we consume in health medical care. P: So the attention is really in the wrong place you'd say? [00:23:16] P: Right, right. By accepting the current condition as a necessary state we're conceding an unbelievable opportunity for improving the condition of our society. P: Tell us a little bit more about some of your concrete suggestions. You mentioned transparency obviously being a really core step. [00:23:37] P: Well I think allied with the idea of transparency is another thing I think leaders need to accept as their responsibility, which is take away all the excuses why not. So one of the excuses why we shouldn't post all that information on the internet everyday is because it will create a bloodhound trail for the lawyers to come and sue the hell out of everybody for malpractice. So one of the things we ought to do, I've believed this a long time and testified to congress to this effect that we should eliminate the ideas of medical malpractice, because the fact of the matter is there are things that go wrong in health medical care, but it's very hard to find deliberate, intentional things that hurt people that were done with malevolent intent. So yes there are things done wrong, and so after that we've created this massive industry about medical malpractice, and it's actually caused individual providers and institutions to go underground, because they don't want to be sued. Right? So they don't admit or acknowledge mistakes that are made. So I believe we've got to turn all of that around and basically say we, the society, are going to socialize the cost of things gone wrong. We're going to require medical practice individuals and institutions to publicly acknowledge things gone wrong so we can learn from every one of them, and when they do go wrong we're going to create arbitration panels that have medical expertise and a representative of the community, no lawyers, and they are going to be permitted to make an economic judgement of the cost of harm to an individual and award those funds to the individual from the general treasury of the United States so that what would be criminal behavior in the future would be a failure to report, and we would take away the excuse why people don't want to be transparent. P: We're now in the era of Obama Care that's caused a lot of conflict and controversy, etc. People are on all sides of this issue, but would you say that there are some aspects of the plan that are actually smart and great that no one's really paying attention tom that we should be thinking about? [00:26:00] P: I tell you I believed for a long time that we as a society should say and now have said although in a little bit of a conditional way that if you're fortunate enough to be in this country that you will have financial access to the health medical care that you need. I think we should state that as an explicit value of the American society, but we should say at the same time, which I would say feel really strongly that the president did not do the right thing in saying along with that value everyone should understand you're going to have to pay for your own. There isn't anyone else to pay for it now. There are ways to mutualize the risk of health medical care needs that people have, but at the end of the day the government doesn't have any money it doesn't take away from the people in the first instance, and so everyone needs to understand you're going to have to pay for your own, and in addition to that if you happen to be better off than most not only are you going to have to pay for your own, but in order to make good on the settlement that everyone will have financial access to health medical care if they need for people who have lower incomes or no income or no wealth accumulation, the rest of us are going to have to pay for theirs. I think we would have been so much better served if the president had said those things that clearly. P: ...What do you want to be remembered for? [00:27:41] P: That's a really good question. Making a difference in the society and in the lives of people in the society on a narrower basis. When I was the CEO of Alcoa I did say that Alcoa would become an institution where people were never hurt at work, and we substantially achieve that objective. When I was there there were 143 thousand people, and our injury rates were behind the second decimal point. It's interesting as I go around the country and talk with people the things that I did at Alcoa people talked to me about. There's a book written by Charles Duhigg called the Power of Habit, and the fourth chapter of his book is about habitual excellence and safety in the workplace leading to habitual excellence in everything, and I think there are more and more places where people are striving for that, and I would take a little bit of credit for that. P: Thank you so very much for joining us today on Drucker on the Dial... [00:28:54] END PAUL O'NEILL INTERVIEW [00:28:55 - 00:34:47] RICK WARTZMAN [00:34:48] BEGIN ROB CURRY INTERVIEW P: [Introduction]...Rob Curry, welcome to Drucker on the Dial. [00:35:37] R: My pleasure. P: In our introduction earlier I told our audience a little bit about the incredible turn around story that Citrus Valley Health Partners is. I just want to talk a little bit about what has changed. Four years ago you guys were suffering from poor clinical quality, the patient experience was pretty spotty, sounds like you were bleeding red tape. What was the fundamental problem there at that point? [00:35:58] R: I think Phalana that the real fundamental problem was if you will a sense of apathy within the organization. Healthcare was changing dramatically, and Citrus was just kind of ignoring what inevitably had to change. So it was just that apathy in a word. P: What had been some of the keys to the turnaround? to getting you to the point where you are today, which is incredibly different? What sets of core principles and practices did you focus on to bring about a change and kind of move past that apathetic state? [00:36:28] R: Well I think it was a change in the senior management. It was a change in the culture. The culture became focused on one of accountability and results orientation, and thirdly it was a sense of trying to get more pride in who we are, what we do, and what difference we make in the community that we serve. P: I learned that one of the earliest moves that you made when you came in was to end a long standing practice of physicians being compensated almost $1000 a day to be on call. Tell us about why you identified that as an early important symbolic and real gesture. Why that thing? [00:37:06] R: The symbolic gesture was just simply that entitlement is no longer acceptable in healthcare. There has to be an exchange that's mutually beneficial, so that's the symbolic side of it, but on a more functional side so much depends on how quickly a patient is evaluated in terms of A, the health benefits to the patient and B, the benefit to the hospital. Obviously we don't get paid for long lengths of stay anymore. We don't get paid on a basis of anything other than pure productivity. So functionally as soon as somebody was presented in the ER and was then scheduled for admission, the sooner the intervention the better the intervention, the more evidence based that intervention is, the better the hospital and the patient does. So that's the functional side of that decision. P: Citrus Valley's been pushing to really meet industry best practices and standards....What are some other mechanisms, some other ways that you are working to improve outcomes there?[00:38:19] R: Well again one is aligning physician behavior outcomes with desired results. So for example we probably have well over 300 protocols that are all evidence based, that are populated in what we call our meditech, our electronic health records system, and conditions are cued then to think around those best practices and to order that which is proven having the most efficacy in the treatment of the disease, and then we are monitoring so many other metrics. Many promulgated from CMS, The Center for Medicare and Medicaid, whether it's surgical site infections or pressure ulcers or the like, but we want to make sure we're offering the safest and the highest quality in terms of the environment. P: Were you met with any great resistance to this kind of change in culture and change in practices when you came on board? And what have you done and what are you continuing to kind of overcome that or gather support and consensus around the shift? [00:39:22] R: Yes, what comes to mind is a few decades ago when I started in this career. There was a whole argument that physicians were the captain of the ship. Now it is so evident in research literature and just in action that physicians are part of a caregiving team. So the resistance was moving from the captain to a member of the team, and that is not an easy mental or attitudinal shift, but that said I think the results speak for themselves. The physicians now see that care is much more coordinated, that their patients are receiving better efficient care because we have a great team surrounding them in their practice of medicine. P: What do you think are going to be some of your great challenges moving forward? What are some things that you see on the horizon that you're still kind of grappling with or that the organization's grappling with? [00:40:15] R: You just have to go back a few days and think of the fiscal cliff, and while things have been perhaps evaded for a certain time like in some cases two months and some cases a year like physician reimbursement, those issues are still on the present, and it's going to be pressuring healthcare organizations in the months and years ahead. My biggest fear is that the attitude within government will be just a necessity to role back on funding, not realizing the unintended consequence of what it means on service delivery, and that probably keeps me awake at night more than anything else. P: Your center serves about a million people in the region kind of just east of Los Angeles and Southern California, and a large part of the community you service is of fairly modest means. I think a lot of your patients are on medicare or medical programs. Talk to us a little bit then about the role that your hospital plays in that community and then what that looks like maybe going forward with the advent of Obama Care and some of the budget issues that you're discussing. What does that feel like and look like for that community? [00:41:24] R: Yeah, we do serve about a million people in the San Gabriel Valley. Any given day we probably have about 250 patients in our emergency departments seeking care as a point of entry. We probably have over 2000 outpatients seeking care and about 600 patients in our inpatient beds. So yeah, that's a busy hospital scenario. I think what's going to change though is that healthcare will not be hospital centric in the years ahead. What we need to do is have a much more robust [unintelligible] strategy. I mean the buzz words of medical homes and accountable care networks and the like have to take some form and substance in the months and years ahead. So we see our role to be in of a partner and making sure that we are aligned within the community, that to have perhaps the likes of a congestive heart failure clinic and a diabetes prevention program, an obesity intervention in schools program, and the list will go on and on and on trying to keep people healthier, out of the hospital in a much more economical setting with their healthcare needs. P: You mentioned earlier some of the kind of cultural shifts there included things like evidence based practice. In our work at the Drucker Institute we know that Peter Drucker himself was really focused on measuring outcomes and tracking results to improve performance and effectiveness, and he wrote at one point that the real strength of feedback information, the major reinforce is clearly that the information is the tool of the worker for measuring and directing himself. Could you talk to us a little bit about some of the ways that you all track results there, track performance measures there and then feed that back to practitioners, to doctors and to staff and how that's impacting your performance and effectiveness? [00:43:14] R: Yeah, let me start by saying the government has already pronounced what needs to be reported back in terms of value based purchasing, that is in regard to how the patients perceive their experience number one and number two, how we as a hospital and our clinicians meet certain benchmarks. So we are constantly, actually month to month, giving that feedback to our physicians in real time and physician specific data. We wanted five physicians. So they get their own report card, and it's hard to argue with those metrics that are as I say promulgated within the federal government. We then have our own internal benchmarks based on evidence based medicine. Our chief medical officer for example this past year made a very good case statement around blood utilization, and you might say well that's kind of a passe sort of thing, and people that need blood transfusions get them. Well the fact is that it's a liquid transportation of an organ, of blood, and when put in that context it's like physicians have a different if you will gestalt about their ordering patterns. So now we have very specific cues in the ordering of blood products. So it's not only reduced the spend by a couple of million dollars of blood products in a year, but more importantly it has averted what could be reactions within patients causing harm or even death. So people are far more astute now about what each decision is with respect to that evidence and the feedback they get when they don't comply with that evidence. P: You've mentioned that you've been in this arena for 30 years or so. Tell us a little bit about your background and what attracted you to Citrus Valley, to this place or this challenge? Are you someone who seeks out challenge stories, and what brought you there? [00:45:15] R: Yeah, 30 plus years ago I fell in love with healthcare. I was one of the first trained EMT medics in the country. We started back in Pittsburgh, and I was in and out of every hospital in my hometown and just fell in love with healthcare. What brought me here specifically was I saw the potential. I mean you can organically just sense it. You can palpate it, but we are a mission and values driven organization that really could be doing a better job around the outcomes, and that's why I got my degree in healthcare management at the University of Pittsburgh in graduate school public health. That's why I've stayed in this career and have only been at not for profit hospitals during 3 plus decades, and what attracted me here was I knew we had all the potential. We had the right ingredients. We just needed a little infusion of some direction to succeed at a higher level. P: ...What do you want to be remembered for? [00:46:28] R: I want to be remembered first and foremost as somebody who loved his family, and that might sound again trite, but that's what's really important to me, but beyond that in terms of a career just that I did everything that I potentially could to do what was right. This is a very difficult job in terms of its complexity of regulation and complexity of very highly technical skills and technical deliverables, but when you come right down to it as a CEO the job's pretty simple. It's doing what's right, and that flag(?) post keeps me remembered as somebody who tried to do that, I will feel that I succeeded. P: Thank you so much for taking some time to chat with us on Drucker on the Dial... [00:47:59] END EPISODE
