A New Song

Modern Healthcare in its May 13 issue contained yet another article about what makes an organization a “health system”.  It looked at what is now a decades long process of local hospitals being swallowed up by larger hospital chains, both nonprofit and for profit, to form much larger “systems”.

The article said that one pundit feels that “to qualify as a system, the organization must actively managed the cost of care by minimizing waste and eliminating avoidable clinical complications.”  It is the McDonald’s approach—-minimize costs and produce a consistent degree of quality.  Whether forming large hospital chains accomplishes that is debatable.

There is no question that when hospitals merge the excuse is always it will result in better care provided more cheaply.  After all, who would propose decreased quality at a higher cost?   Most of the time, though, what you are looking at is simple empire building and great opportunities for hungry consultants who feast on these arrangements.

There is a coterie of pundits who for the past twenty years have been making the case for big is better even though many of the bigs continue to struggle. The song has not changed nor have the singers. Time perhaps for a new song and new singers.

The May 15 issue of that prestigious medical journal, USA Today, contained an article about  the grades assigned by one pundit-laden organization to hospitals based upon care outcomes.  The methodology used by this organization is always a little shaky but I thought one finding was interesting.  Using the familiar A-F grading scale many of us endured before participation awards took their place, there were eight hospitals in the greater San Francisco Bay Area who earned a “D”.

A closer look at those eight  hospitals showed that five were part of large multi-hospital chains.  The other three hospitals were county hospitals.  There are in the Bay Area several relatively small and excellent healthcare systems which serve very limited geographic areas.  They had better grades than the large guys.  Nothing scientific about that finding but still kind of interesting.

My thesis for many years has been that locally based and focused healthcare organizations do a better job of meeting community health needs than the big guys and have a better chance at prospering even in a rapidly changing economic environment.

When you are subject to corporate offices with corporate  rather than local goals, you cannot do what needs to be done to best serve the community.  Maybe adopting the McDonald’s approach makes sense to central planners who don’t have to burden themselves with local conditions but it is detrimental to effective healthcare.

Furthermore, these big chains become burden by overgrown bureaucracies and absurd mission creep away from the core business of healthcare.  Their top managers become virtue seeking ambassadors of good will rather than focused managers.  The bigger the organization, the more this is so.

I had other comments on the fallacy of “bigness” in my “Big Blobs” entry here in January.

So what is the answer?  I believe that many of these larger healthcare organizations, particularly in the nonprofit sector, need to be unwound.  The fact that they even happened represents a failure of management and governance.  The lack of evidence to justify these increasingly complicated and odd-looking organizations speaks to that.

You can get quality care at a reasonable price but it needs to be a bottom-up, not top down approach.  The smaller and more locally based the healthcare system, the more likely this is to happen.

Small is better. That should be the new song.