incentives Archives - Page 2 of 4

Canadian Chaos: Medicare’s Misaligned Incentives

Imagine a professional hockey team where some players earned income by scoring goals, and their teammates were paid just for showing up to play for games even if they did not score. Assume that both groups love hockey.

Imagine there are separate coaches and budgets for each group. One coach looks after goal-paid players; the other coach looks after game-paid players. The first coach pays players for all goals scored with a flexible budget. The second coach pays players for time spent on the ice with a fixed budget.

Which players would:

Try to keep scoring goals after games officially ended?
Push themselves for extra goals?
Hold back from scoring to avoid penalty or injury?
Take sick days and miss the game completely?

Which coach will:

Want shorter games?
Let the other coach play in overtime?
Try to save money by limiting his players’ duties and time on the ice?

Welcome to Canadian hospitals.

Misaligned incentives create chaos. Just because players wear the same jersey, does not mean they are a team. Winning teams have aligned incentives and drive toward the same goal.

All healthcare providers and administrators want to help patients. It’s why they entered healthcare. But the system makes them pull in different directions.

Canadian Chaos

Nurses get paid for hours of work.

Physicians get paid for work accomplished.

Nurses get paid from the hospital budget.

Physicians bill the province.

Nurses negotiate contracts specifying duties, hours of work, benefits, and grievance processes.

Physicians negotiate contracts specifying billable services.

Instead of hiring staff, hospitals save money by making MDs do non-medical tasks. Only Medicare would make its most skilled, highest paid workers do clerical work.

Hospitals spend money to help more patients.

Physicians earn money to help more patients.

Helping patients must be the only objective that matters in healthcare. Incentives must be aligned towards one goal: helping patients. All providers must be rewarded for helping patients and how well they do so.

Medicare providers wear the same jerseys, but are they a real team?

(Photo credit: GetItNext Hockey)

How to Fix Medicare: If Publicly Funded, Then Privately Run

Parents guilt children into eating vegetables with, “You should be happy; kids starve in Africa!”

Canadians guilt patients into accepting long waits and no care options with, “You should be happy; medical bills bankrupt Americans!”

Indeed, we should always be grateful. Looking for better ways to do things doesn’t imply ingratitude. It demonstrates commitment to excellence.

Designed to Fail

Great organizations meet customer needs. Great companies offer outstanding products and service at a competitive price… and treat their employees well. In these companies, CEOs support management to help staff serve customers.

Medicare does the opposite; it serves system needs and sees patients as cost centres. In publicly run organizations, CEOs support management to help staff spend as little as possible by providing good enough care to avoid revolution.

Politicians and their bureaucrats create regulations and controls that leave administrators and front-line professionals little room to innovate, or incentive to do so.

Good People

Politicians and bureaucrats are good people. They get loads of criticism no matter what they do well. I’m thankful that quality people still run for office and work in political bureaucracy.

Politicians and bureaucrats are intelligent individuals caught in a poorly designed system with perverse incentives.

Motivation

If we consider a businesswoman operating her own store, she must keep customers happy with great service, selection, and quality, or she will go under. No matter how well she manages everything that goes into running a store, if she stops valuing customers she will shut down.

If our businesswoman worked for Medicare, her most important job would be to keep her superiors happy. More than anything else, she must manage those above her. If she does not, she risks her position and hopes for promotion. This is true for every level of Medicare, from front-line providers up through every level of manager and bureaucrat.

Job security motivates administrators; they have to keep bureaucrats happy.

Job security also motivates bureaucrats; they have to keep politicians happy.

Elections motivate politicians. They have to keep voters happy. Voters respond to marketing and handouts, not tough decisions that might disrupt the status quo. Better to make no decisions than to risk making a poor one that will upset voters.

When politicians, and by proxy, bureaucrats, control Medicare, the focus becomes staying in office – winning elections, keeping their jobs – not serving customers.

Inefficient

We do not need more money; we need less regulation. (See How to Fix Healthcare: Let Leaders Lead) For the same cost, government corporations that go private produce 47% more, and are 27% more efficient, than privately run corps. (Download Fraser Institute 2009 report)

We need to let professional care providers figure out creative ways to meet patients’ needs at a local level.

We need to unleash the creative energies of individual nurses, physicians, and allied care providers. We need to support them and reward them for creative ideas that improve patient service and efficiency.

Our Own Fault

Until we redesign the system so that good people – politicians, bureaucrats, and administrators – get free of having to pursue perverse results, we will never have a great healthcare system.

If system leaders aim for anything before great patient service and outcomes, we will never improve things; we will always suffer from a system governed to produce job security.

Let’s put patients – service, results, and quality – back in the spotlight. Let’s stop thinking about elections, job security, or anything else, before patients.

Photo credit: www.gomomentum.com

How to Fix Healthcare: Let Leaders Lead

Everyone knows Canadian healthcare cannot continue without significant change. No one debates the need for it.

People Look at Two Things:

Inputs: funding, expenses, cost cutting, efficiency, policy change, contract negotiations, etc.

Outputs: quality, performance, results patients get from the system.

Inputs get most attention, but more sophisticated observers have started focussing on outputs. A few inside the system talk about ways to remove waste (LEAN, Gap analysis, etc.).

No one talks about control inside the system.

Funding Should Follow Governance

People make the imminent demise of our bloated healthcare system an issue of funding or spending, but it’s neither. Whether money comes from taxes collected by the government or ‘taxes’ collected by insurance companies, the issue is not about money.

The debate must shift from how money comes in to who’s in control of how money gets spent.

Everyone demands accountability from the system, but no one gives those in the system the freedom or authority to truly change outcomes. There are too many self-interested outside stakeholders trying to control the system all at the same time. They all think they know what’s best for patient care, but very few actually provide care.

Authorities make major decisions outside the system and then expect those within the system to operate after all the rules have been set; all the room to lead has been removed.

For example: the government negotiates contracts with nurses and then tells hospitals to be accountable to quality and efficiency within a contract that has zero productivity incentive.

We can still rescue publicly funded healthcare if we look at pockets of innovation where providers are given the chance to structure creative incentives that encourage clinicians to work differently.

We need to give the professionals inside the system a chance to show what can be done to improve patient access, quality, and service. You can’t demand accountability without giving people freedom to control and deliver what’s being asked of them.