Category: Special Articles

Value Creation in Emergency Departments: in search of sustainable management paradigms for Medicine


Europe faces intense pressure to cut health spending while patients demand higher quality medical treatment. Thehealthcare system must be reinvented and reengineered (Porter & Olmsted Teisberg, 2006).

Emergency departments (EDs) can make a significant contribution to creation of value often by reorganisation rather than throughinvestment in new technologies.

The patients’ view of value in emergency medicine is often unrelated to the quality of medical care but on the speed of treatment. (Hogan, Rasche & Braun von Reinersdorff 2012). The ED canprovide the value the patients seek and the value hospitals and the wider healthcare systems seek by systematic reorganisation.

EDs can also make a significant contribution to creation of value in the heathcare system by breaking down the silo organisation of hospitals and creating inter-disciplinary working between centres of excellence.

10 Special Articles Italian Journal of Emergency Medicine - Novembre 2012 Value creation in emergency departments: in search of sustainable management paradigms for medicine Barbara Hogan, MBA Director Emergency Department - Asklepios Hospital - Hamburg - Altona MBA Master of Business Administration Past-President German Association for Emergency Medicine - DGINA e. V. President Elect, European Society for Emergency Medicine - EuSEM Andrea Braun von Reinersdorff General. Business Administration, Hospital management Human Resource Management, Hochschule Osnabrück, Germany Christoph Rasche Dr. rer. pol. habil., University of Potsdam, Germany Abstract Europe faces intense pressure to cut health spending while patients demand higher quality medical treatment. The healthcare system must be reinvented and reengineered (Porter & Olmsted Teisberg, 2006). Emergency departments (EDs) can make a significant contribution to creation of value often by reorganisation rather than through investment in new technologies. The patients’ view of value in emergency medicine is often unrelated to the quality of medical care but on the speed of treatment. (Hogan, Rasche & Braun von Reinersdorff 2012). The ED can provide the value the patients seek and the value hospitals and the wider healthcare systems seek by systematic reorganisation. EDs can also make a significant contribution to creation of value in the heathcare system by breaking down the silo organisation of hospitals and creating inter-disciplinary working between centres of excellence. Keywords: emergency department, value creation, organisation, First View, value in emergency healthcare What is value in emergency healthcare? Value creation in emergency health care hinges on providing acute medical treatment, rapid diagnosis, patient focusedmanagement and a cost-effective, economic focus. Patients mostly do not see themselves as customers or medical cases but as receiving their right to competent treatment (Hogan, Singh & Rasche, 2011). Patients resemble hybrid cases from a marketing standpoint sharing features of customers and care takers (Herzlinger, 2007). Patients also judge value in terms of rapid treatment, courtesy, empathy and also seek customer focus, convenience and service focus (Porter & Olmsted Teisberg, 2006). EDs will have to pay special attention to the dual pressures of providing high quality medicine, marketing, management and cost saving as key factors in value creation. The following line of argumentation reflects predominately the German healthcare system but which is typical for most of continental Europe, since demographic change, rising state welfare costs, strengthened patient rights are faced by increasing demands for high medical quality, safety and service focus and reduced costs for healthcare (Rasche, Margaria & Braun von Reinersdorff, 2011). Medical value creation EDs must undertake immediate diagnosis, immediate treatment and interdisciplinary coordination with other departments. Correct decisions and treatment in EDs do not only save lives, but also save treatment costs for the rest of the hospital and the overall healthcare system (Porter & Olmsted Teisberg, 2006). Unfortunately in Germany and in other countries medical value creation in EDs is hampered because of evident emergency medicine expertise deficits. Unlike many other countries, Germany often lacks highly qualified emergency doctors and Germany has no emergency medicine specialty. Medical value creation in terms of outcome to cost ratios is very high in EDs as the first stage of care has a major impact on overall treatment costs and quality of treatment outcome (Hogan, Rasche & Braun von Reinersdorff 2012). Christoph Rasche [11/20/12] Gianpiero: Andrea Braun v. Reinersdorff Italian Journal of Emergency Medicine - Novembre 2012 Special Articles 11 With age structure of the population changing and patients getting older, there are changes in the illnesses EDs must treat, with increases in multi-morbidity, heart and circulatory illnesses, tumours, musculoskeletal sickness, mental health problems, diabetes etc. There is also a trend towards more out-patient treatment in Germany and elsewhere. A study from the German Institute of Economic Research forecast patent numbers by illness in 2050 in comparison to 2005. The institute forecasts a 160 % increase in the number of patients more than 80 years of age. The existing ED organisation is overdue for critical reflection for value reasons. Managerial ED value creation Unfortunately many EDs miss are degraded to pure cost centres instead of being positioned as strategic value and competence centres. Value creation in EDs is vital for the success of the structures and processes for high-standard healthcare delivery (Glouberman & Mintzberg, 2001a/b). Hospital management is too often seen as a cost cutting discipline focusing on rigid budget control. But service outcome is also critical (Porter & Olmsted Teisberg, 2006). This encompasses not only medical outcome but the other benefits a patient receives during the stay in the ED – ranging from short waiting times, patient focus, courtesy and correct communication (Walls, 2003). Managerial value creation is a matter of planning, decision making, implementation and control under ED conditions of risk, uncertainty and complexity. Strategic and operational management in EDs hinges on forecasting the capabilities to meet market demand with corresponding capacities and investments. Poor ED infrastructure, poorly qualified personnel, lack of expertise and ill-defined structures culminate in massive value destruction. Lack of coordination raises internal transaction costs and also leads to poor ED outcome (North, 1990). The higher the expertise in the ED value chain, the lower are overall costs for the hospital as illnesses are correctly diagnosed and a time-plan for treatment can be created. EDs suffer from core rigidities in the heathcare system. These include entrenched malpractices deeply rooted in false structures, governance and wrong interpretations of the ED’s role (Rasche & Braun von Reinersdorff, 2011). Hospitals have until now generally operated with their specialty departments functioning as silos working alone. These silos have their own leadership and are like islands inside the hospital ignoring everything else and concentrating on their own work. This means the silos are regarded as cost centres, seeking cost control instead of profit generation. If they are orientated towards profits they are an isolated profit centre and not focused on raising the performance of the hospital as a whole. These should be changed to centres of excellence such as the emergency department: Centres of Excellence have specialist expertise but unlike silos cooperate with other departments. The ED generates and actively implements trans-sectoral networking between the hospital departments. This breaks down the silo organisation and creates more network management between departments and creates significant benefits towards improving strategic production. EDs are not viewed as valuable assets which attract patients to hospitals which then save money by creating an efficient course of treatment. ED managers need generalist competencies and specialist competencies and expertise in ambidextrous management processes to harmonize both hemispheres (Tushman & O’Reilly, 1996). ED competencies have huge potential to create medical and economic value. But ED work is undervalued because other hospital departments receive the credit for work the ED has done if there is no accurate internal hospital calculation of performance (Hogan, Rasche & Braun von Reinersdorff, 2012). Value creation for payers, players and patients Value creation can be achieved right at the beginning - with a process-orientated design for the building of the ED, as 70 % of all the costs a building generates are laid down during the design phase. The ED should be designed by the physician leading the ED, or the senior physician must at least be involved in the design. Too many EDs are designed by architects without consultation with physicians or consideration of workflow practices. An ED should be designed to provide a structure in which patients flow through. Far too many fundamental errors are made with the basic ED design. When patients arrive they should have a clear point to “check in” before they actually enter the ED process where the triage should be made. The ED should have an Acute Area in which all patients are seen and initially examined. Patients with minor illnesses can be sent to a Fast Track Unit for rapid treatment and discharge. Patients needing further diagnostics move into a Clinical Decision Unit for further examinations and possible transfer into the hospital. Special patient 12 Special Articles Italian Journal of Emergency Medicine - Novembre 2012 categories can create a need for other units such as Observation Units where patients intoxicated with alcohol are treated and isolation units. The Shock Room is positioned at the end of the ED process because patients coming into the shock room will mostly be admitted to the hospital as an in-patient. Creating such a structure unlocks value by creating the basis for fast, patient-focused work, which is one of the core issues of healthcare outcome in Porter’s value logic which calls for a complete redesign of entrenched healthcare systems. What does this mean in economic terms: Patients may be clients, customers or cases and serve as the reference point of service delivery (Herzlinger, 2007). Depending on their health status they behave either passively as cases or as clients or customers. Patient-focus demands respect, courtesy and empathy, proper care delivery, professionalism and adherence to standards and benchmarks. Since patients’ value judgements often succumb to information asymmetries and distorted perceptions severe quality gaps may arise (Milgrom & Roberts, 1992). Medical quality is evaluated by means of service and convenience standards instead of in terms of the technical medical quality of the healthcare provided. What does this mean in the daily work of the ED: Patients want speedy treatment. They cannot judge if the medical treatment they have received is good but believe they have received high value if the treatment was rapid without long waiting times. Patients demand extreme levels of polite behaviour by doctors and nurses as part of their value judgement. EDs face different pressures: They have to meet the interests of patients as well as payers such as governments and health insurance companies. Unfortunately, the ED’s bargaining power against internal and external stakeholders is weak in Germany and other European countries. ED services are deliberately undervalued in their overall contribution to value creation as can be seen in DRG calculations. Since bargaining power often corresponds with market(ing) power, EDs will be challenged to position their services strategically (Rasche, Margaria & Braun von Reinersdorff). Value creation for shareholders and owners Privatisation of hospitals challenges medical personnel to create financial value for shareholders. Applying financial value management to hospitals shifts power to managers seeking achievement of financial targets by means of healthcare processes underlying a tough rationing, rationalization and prioritization logic (Rasche, Margaria & Braun von Reinersdorff, 2010). Social welfare objectives conflict with this. Private hospitals may face pressure to discriminate against value destroying patients, treatment and services. The same standard of healthcare may not be provided in all areas of a country. Profitable “cherry picking” of the most profitable patients may be the result of privatisation although “cherry picking” of ED patients is in many countries not possible for legal reasons. Since financial investors are often unforgiving, hospitals cannot resist market forces and must be braced for the survival within the medicine, management and moneymaking triangle. This may create positively entrepreneurial pressure for change and better performance but, but the need to raise profits may conflict with caregiving value professionalism (Braun von Reinersdorff 2012). Ambidextrous value management Caregiving expectations often conflict with profit expectations. Balanced hospital management is a call for ambidextrous capabilities to meet all expectations (Braun von Reinersdorff, 2007). Tipping the balance in one direction may provoke organizational instability but can trigger necessary change to avoid inertia and self-complacency. Farsighted leadership excels in the definition of the right dose of stability and destruction to gain and sustain change momentum (Scheck McAlearney, 2006) while not overstressing hardware (infrastructure and equipment), software (systems and process architectures), brainware (knowledge architectures) and peopleware (competencies and human capital) (Kaplan & Norton, 2001). Italian Journal of Emergency Medicine - Novembre 2012 Special Articles 13 Characteristics of value creating ED leaders Innovation focus Healthcare professionals are often not challenged to be truly innovative, but to be rule-abiding for the sake of operational efficiency (Christensen, Bohmer & Kenagy, 2000). Innovation cannot be “commanded” but only “cultured”. Innovation in health often involves a steady flow of small improvement measures which when combined to create high value (Deci, 1971). The ED leader can create value by becoming a leader of change. The attitude that “we have always done worked in this way” does not mean that the working method is correct. An ED leader can create value by creating the atmosphere that new ideas will be introduced, that new ideas about working processes are welcome. There will be problems with ED leadership: Lack of ED infrastructure and lack of medical equipment, inadequate DRG assessment, lack of emergency professionals and a lack of ED reputation. The process problem areas, the interface management, include the Work Flow Management and patient flow control. Creating value though innovation means in turn having the capability to push innovation forward against resistance. “Culturing” change to create value means an ED leader must be able to handle conflict with ED colleagues and leaders of other hospital departments resisting change. In daily work this means the will power to push new concepts forward to create value in the face of passive non-cooperation, direct refusal to cooperate up to personal insults and abuse of the ED leader by colleagues and other departmental leaders. The psychological ability to handle conflict over long periods is essential for an ED leader seeking to create value in the ED through change and innovation. Lessons learned from industrial value chain management Industrial value chain management techniques are a central part of many industries but are often unknown in healthcare. EDs must handle huge flows of patients in numbers which cannot be planned (Collins & Muthusamy, 2007). Naturally, patients and are not industrial products. But patients will gain from increased efficiency achieved from using industrial workflow management techniques. Standard operating procedures (SOPs) should be benchmarked against the industrial workflow techniques to guarantee speed, quality assurance and cost effectiveness. Building and harvesting the dynamic capabilities of EDs There are two ways of handling the unknown numbers of emergency patients. EDs can simply gather over-capacities and redundant overlapping structures. This is not affordable in the long run. Or high-risk organizations such as EDs may focus on dynamic capabilities. Dynamic capabilities display the capacity to respond to disruptive events in a quick and professional manner. They enable organizations to proactively relocate strategic resources towards the arenas of highest value creation by means of competent decision making (Teece, Pisano & Shuen). Dynamic capabilities reside in the ED department as an organizational centre of excellence as well as in teams or even singe professionals that perform excellently on the resilience dimension of planning, deciding and acting. Designing and implementing best practices: The first view concept One example of value creation by changed organisation is the First View concept introduced in Germany. The First View concept brings the most experienced physicians in the ED forward to the first patient/doctor contact. The most experienced physicians undertake a first initial examination of the patient. Aim is that within 15 minutes of ED arrival patients have senior physician contact. This physician then decides which treatment and workflow is most appropriate for the diagnosed or to-be diagnosed illness. Scarce ED resources are directed according to the value imperative. Bringing the physician with the highest level of expertise to the first stage of the ED process means a clear plan for treatment is created and reduces the large number of diagnostic tests commonly requested by junior physicians making the first examinations of patients. After the First View, unior physicians then undertake treatment and diagnostics tests are requested. The senior physician then reviews the results of tests and makes a decision about patient admission or discharge. Fast door-to-doctor time, a major standard for patient value, is achieved (Hogan, Singh & Rasche, 2009). 14 Special Articles Italian Journal of Emergency Medicine - Novembre 2012 Towards a workflow-driven clinic governance: The strategic role of EDs Systematic workflow concepts are needed in hospitals with departments working together instead of alone as silos. The EDs have a key role in the entire hospital workflow. The ED can help hospitals improve workflow by making correct decisions about which department a patient should be sent to, by making a correct initial diagnosis and by recommending a treatment pattern (Rasche, Magaria & Braun von Reinersdorff, 2010). From service units to centres of excellence Conventional healthcare doctrines pays much attention to specialties such as cardiology, heart and visceral surgery or neurology. Other departments such as the ED, radiology and laboratories are often regarded secondary service units to for specialist core departments. EDs are increasingly controversial because their strategic contribution to overall value creation was underestimated for decades. As hospitals are privatised or face closure because of cuts in health spending, EDs emerge as centres of excellence as they generate large numbers of patients which are then sent to specialist departments after being triaged, diagnosed and stabilized. These functions are not appendix-like but meet the requirement of the specialist departments to get a rapid grip on the therapy workflow without delays or redundancies. From appendix status to apex status strategic message should be the strategic definition of the ED role (Hogan, Rasche & Braun von Reinersdorff, 2012). From care to case, client and customer management EDs cover a broad range of services ranging from concrete interventions under conditions of extreme risk, uncertainty and complexity to rather low priority cases due to their elective status not qualifying them for fast-track treatment. Nevertheless patients to create value the goal should be a door-to-doctor time of 15-30 minutes for reasons of discriminatory risk stratification. To be sure that the right patients are treated right on time and sent in the right in the treatment process, the application of the First View concept is needed as it is patient, cost and time focused and also value-focused because it meets the need to match all relevant caregiving vectors in a professional manner while also meeting the need for possible trade-offs (Herzlinger, 2007). The business model of EDs must be braced for strategic change because of the increasing number of non-acute patients which cannot be rejected for legal, political medical and ethical reasons. Since many of these cases have non-emergency illnesses a First View-first-out-strategy may be very helpful to avoid undue resource absorption. After having been triaged and diagnosed the case could be re-channelled to a non-acute service area where they can benefit from lower profile but high convenience care with respect to convenience issues. But what may be the barriers of this dual business model: Firstly, general practitioners may feel they are being replaced. Secondly, EDs will have to receive proper payment for the time and resources used for such patients which will need complex contracts with insurers and other payers. Cases evolve into clients and customers. Some patients may be willing to pay an extra financial fee for a 24 a day/7 day a week ED business model that assures good healthcare services on demand. “Healthcare to go” could be the slogan for EDs that enter the consumer goods arena (Stubblefield, 2005). Conclusion and outlook Improvements to value in the healthcare system are too focused on technology and organisational improvements are often neglected. EDs can contribute to raising their own value creation and the value of the hospital as a whole by improved organisation and inter-disciplinary working. To sum up, many healthcare systems are not “underfinanced”, but just “under-managed”. EDs are challenged to amass, harness and relocate strategic resources for value creating purposes. Management, medicine and money making form a strategic triangle and do not mutually exclude each other. They foster entrepreneurial energy, market focus and business model innovation. 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Itjem is the official italian scientific review for emergency medicine.

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