One more time.

Does anyone else feel it’s ground hog day?

In my last post I said that in regard to the marked variations in cost and quality we are at fault, we caused them, essentially it’s our collective fault.

But who is “we”?

Did “we” all make it so?

Maybe we are just players; but if so what are the rules and is there a game?

I think it’s because of our management rules.

I think we need to talk about the management game and yes there is one.

I think it’s played like this.

My experience of health management is that it is routine and localised. It is strongly based on a belief that cost and clinical outcome can be managed by cost measurement and management which is why corporate managers always want considerable freedom and reporting flexibility on everything.

Those who produce the clinical outcomes interestingly often just need clear, consistent and meaningful performance information, trended over time, within existing benchmarks as part of a sound QI model.

Why the difference? Let’s just touch on production economics for a moment. I think the extent and flexibility needed in corporate management reporting is created in the belief that input adjustment is continually needed in the underlying production systems in order to manage them and that this can only be done by this approach.

This management by input and usage requires stability and authority and is of course a considerable input cost itself. Most of this administrative information is in a specialist form with its own specialist jargon and needs translating. It is not understood by the service providers and is often disregarded.

The clinical providers have their own specialist systems and jargon that too needs translation. It isn’t understood by the corporate managers as is often disregarded.

Each “side” in this game has some boundaries and flexibility to make trade-offs. As a direct result of this divided management practice and local system variation and design, and in the absence of a unifying process to change it, this has slowly created a situation where there is now marked variation in cost and outcomes across service providers and within services themselves.

Neither approach can fully manage an organization but the dominant measure of money is more widely understood, resourced and developed. The two paradigms although necessary have their own limitations and are in constant opposition; and this has become normalised. It is however sub optimal and I believe persists in spite of its known difficulties due to no clear alternative. The inefficiencies caused by unnecessary expense and poor quality are continually covered over by additional funding. There is no other game.

The inefficiency in Australian health expenditure is now in the order of 15% or $18 billion. For the US healthcare administration costs are the highest in the developed world and can make up to 30% of the total cost of a medical bill[1]. However these funds aren’t available to be shared between funders and providers because they are needed to run the system as is.

Most services do not know what their outcomes are comprehensively but they most likely know their costs; but does anyone truly know what is the optimal cost and outcome relationship? Where are the sweet spots that get the best possible outcomes as efficiently as possible? Interestingly there are often cheaper pockets of excellence in parts of organisations created by those who are far enough away from traditional control but big enough to test and innovate. Very interesting indeed.

Without wanting to get too abstract again, if for a moment, we were to look at it from the service production view instead, if they could stabilise their underlying outcomes; wouldn’t it make the input side also stabilise and need less fiddling with?

What if…the clinical staff not only knew what their clinical outcomes were in real-time but they also knew their costs, then maybe the two conflicting paradigms of… I manage my outcome and you manage my cost (the old separated cost versus quality approach), might be solved and managed jointly at the service level according to “Value”?

How about that for an idea!!

In my experience that has generally proven to be considerably better. I think ownership is high; and cost and quality can be managed as part of a well-functioning governance & QI framework.

I think that those who can organise their information systems around this within a trended and benchmarked system with culturally respectful behaviours will be able to thrive; by managing to what is the essence of value based care. There are a lot of benefits to share if you can get to them.

We are looking for innovation partners who are prepared to help explore these opportunities. If you are interested please join the conversation or contact us to see how we can assist you.


Dr Chris Farmer
Clinical Director, Metrixcare