THE BLOG
09/20/2009 05:12 am ET | Updated May 25, 2011

Co-ops, the Unconventional and Healthcare Innovation

The health care reform debate moved into a new phase over the weekend when Health and Human Services Secretary Kathleen Sebelius said a public insurance option was "not the essential element" of any overhaul, and non-profit cooperatives could also fulfill the White House goal of creating more competition on insurance.

So, what's a co-op? Now the pundits on all sides of the spectrum are in a frenzy of prognostication and analysis. The result, so far, is much like the rest of this health care debate -- it depends on whom you talk (or listen) to. The answer varies from: 'They don't make any difference,' to 'they are a great idea' or 'they are a terrible idea.' Pick your poison.

Perhaps, as Mr. Shakespeare said, it's just more "Sound and fury, signifying nothing." There certainly has been no lack of sound and fury lately as health care reform bumps its way through our polarized political system.

But there could be something here and, personally, I am intrigued. Here's three reasons why.

My 40 years experience as a physician, health care executive, academic scholar, advisor, and most importantly, a patient, leads me to believe health care reform will be driven by organizations that can, from the start, focus on just one thing -- getting patients exactly what they need at continually lower cost.

Secondly, that focus will have one defining, transformational result -- patients will receive much more care, for much less cost.

Third, counterintuitive to conventional wisdom, the advantage of co-operatives is that there are not many co-operatives in existence.

That's an advantage because there are no well-defined, widespread models to copy and implement. Therefore, we won't be tempted to put a bunch of experts in a room with the charge of designing and implementing "the co-op reform."

"But, wait," you say. "That's not good, that's bad! We have to have lots of best practices and big companies to copy and implement!" That is the conventional wisdom, "not enough to copy, too small a sample, it's just Group Health in Seattle and a few others; no dice for co-ops."

That's why conventional wisdom is conventional. As a Visiting Scholar at Harvard Business School, I studied those few companies that successfully innovated and transformed their industries. One thing all those companies had in common was that they were all unconventional. Secondly, those companies and the innovations that powered them were not designed and implemented; they were made through rapid cycles of test, validate and improve.

As readers of my past columns know, I believe our current dilemma is the direct result of all the past "solutions" we have implemented in health care over the last 30 years.

The culprit in this dilemma is not a shortage of money, bad planning or too many
mean-spirited people. Rather it is our antiquated approach to change in health care.

We commonly institute change by gathering lots of data, analyzing it carefully, having lots of meetings and then implementing expert decisions back down on the point-of-care. Data up/implement down. Unfortunately data up/implement down starts to fail when complexity and the speed of change increase.

It's not that the experts in the meeting rooms are not smart. Rather it's that they can't get enough data up fast enough, to analyze and implement quick enough, to keep up with what's happening now.

Viewed in this light, our current system is not broken or dysfunctional. In fact, it's perfectly designed to deliver exactly what it delivers, less care at more cost. To get the transformational performance that will deliver much more care at much lower cost, we will have to do something different.

Fortunately, "something different" is not rocket science. It is the focus of my forthcoming book, Designed to Adapt: Leading Healthcare in Challenging Times, available this September from Second River Healthcare Press. Instead of moving information to decision-makers in meeting rooms, the transformation of health care will be led by organizations that create new critical-thinking skills and develop and coordinate
state-of-art decision making where the information is, close to the patient at the point of care.

The methods, skills and tools that deliver on this promise are called "adaptive design," and they have been tested and validated in many health care organizations over the past 12 years. Adaptive design is a combination of the strategy of disruptive innovation, with the knowledge management methods of a few great companies, like Intel and Toyota, who adapted and prospered when others failed to change. Here are some adaptive design health care results of more care at less cost:

A Massachusetts hospital increased surgical volume by 16 percent while decreasing surgical staff overtime by 14 percent. A Minnesota hospital nursing unit won the award for most improved patient satisfaction in a 17-hospital system as they simultaneously generated $1.7 million in savings to the hospital. A Colorado hospital pharmacy made it simpler for patients to get the medications they needed while decreasing drug costs by $1.9 million.

That's getting much more for much less. The methods that created these results are available, we just need a flexible framework upon which to build. Perhaps the
co-operative model offers that opportunity.

What's the co-op advantage? -- There aren't very many of them so we will have to make them! And that's the only way to produce the transformational results that will get patients exactly what they need at continually lower cost. And without those results, we won't fix healthcare.

Dr. John Kenagy is a former Visiting Scholar at Harvard Business School and the author of the forthcoming book Designed to Adapt: Leading Healthcare in Challenging Times (Second River Healthcare Press, 2009)