CMS "never events": Are we rewarding the right thing?

A while ago I promised to write more about my thoughts inspired by Dan Ariely's Predictably Irrational. I still plan to do this, but in the meantime, this blog post by him made me think of medicine, and more specifically our incentives structure to prevent hospital-acquired complications (HACs). I am sure that by now everyone has heard of the "never events", so named because in the view of the Centers for Medicare and Medicaid Services (CMS) they should never happen. CMS is so convinced that they can be eradicated completely that they have eliminated payments for these complications in their effort to get hospitals to get serious about prevention. I do not have to tell you that hospitals these days are in dire financial straights, and every penny counts; so CMS is really getting them where it hurts. Here is the current list of never events, and it is likely to grow over time:

In fact, these very events are now being publicly reported as well, to help healthcare consumers navigate the quality labyrinth.

While waging an all out assault on these HACs is the absolute right thing to do, the question remains: Is it reasonable to expect zero rates of these complications? Well, for some definitely, while others I am not so sure. Take for example an object left inside the body during a surgery. Or how about amputation of the wrong limb? Or what about getting the wrong unit of blood intended for another patient? All of these examples are egregious consequences of human and systems error, and it is completely reasonable and even desirable to expect them never to happen. On the other hand, complications such as catheter-associated UTI or catheter-associated blood stream infection may not be as easily eliminated, and in fact may be impossible to eliminate completely. Why? Here is where Dan Ariely's analysis comes in.

He starts off by presenting a scenario of a soccer player kicking a ball with his eyes closed. It is clear that in the absence of intervening meddling from the wind or a playful dog (Fluffy, if you must know), the player can quickly perfect his aim despite not seeing the goal. However, it is these unpredictable events that interfere with the direction of the ball that are precisely the point, and can be applied to a business situation:

The problem is that there’s plenty of random noise in competitive strategic decisions. Predicting where the ball will go is equivalent to deciding whether to open a chain of seafood restaurants on the Gulf Coast. The dog running off with the ball is the BP oil spill. When the board reviews the manager’s performance, they’ll focus on the failed restaurants. The stock is down. The chain lost money. Since the manager’s compensation is tied to results, he’ll incur financial penalties. To save face and appear to be taking action, the board may even fire him—thus giving up on someone who may be a good manager but had bad luck.

So, in business what is rewarded or punished is not a systematic approach to decision making, but that random noise responsible for either getting the ball into the goal or alternatively diverting its trajectory. And this of course says nothing about either the soccer player or the business manager.

This situation is certainly analogous to the incentive structure for never events, where the hospital becomes the soccer player with its eyes closed aiming for the goal, but gets derailed by Fluffy, in this case in the persona of the patient's susceptibility to infection, say, and gets dinged for something that is completely random and not in the control of the clinician. In fact, Ariely unequivocally states something rather startling:

The oil spill example is an extreme case. In the real world, the random noise is often more subtle and various—a hundred little things rather than one big thing. But the effect is the same. Rewarding and penalizing leaders based on outcomes overestimates how much variance people actually control. (This works both ways: Just as good managers can suffer from bad outcomes not of their own making, bad managers can be rewarded for good outcomes that occur in spite of their ineptitude.) In fact, the more unpredictable an environment becomes, the more an outcomes-based approach ends up rewarding or penalizing noise. [emphasis mine]

Unpredictable you say? What can be more unpredictable and filled with uncertainty than the interaction of human biology with disease and external interventions? This repositioning of the argument really confirms for me that demanding never events is really just window dressing. For a long time there has been a joke among health services researchers that, over the next few years, these events will disappear, but not because these events actually disappear. Sophisticated hospital coders will simply stop putting these outcomes in their documentation to the payers. And will this achieve better care or just better looking documentation? I think you know what I am driving at.

What is the answer? Well, here is what Ariely suggests:

We can’t entirely avoid outcome-based decisions. Still, we can reduce our reliance on stochastic outcomes. Here are four ways companies can create more-sound reward systems.

1. Change the mind-set. Publicly recognize that rewarding outcomes is a bad idea, particularly for companies that deal in complex and unpredictable environments.

2. Document crucial assumptions. Analyze a manager’s assumptions at the time when the decision takes place. If they are valid but circumstances change, don’t punish her, but don’t reward her, either.

3. Create a standard for good decision making. Making sound assumptions and being explicit about them should be the basic condition for getting a reward. Good decisions are forward-looking, take available information into account, consider all available options, and do not create conflicts of interests.

4. Reward good decisions at the time they’re made. Reinforce smart habits by breaking the link between rewards and outcomes.

And even though this advice is aimed at business leaders, it can be easily adapted to medicine. If we heed this warning, we may avoid having to wring our hands in another 10 years about the "unintended consequence" of losing critical data needed to understand how we are really doing with improving healthcare outcomes.

I will end with Ariely's own words, since I can do no better to summarize (you can substitute appropriate healthcare related terms for the business ones):

Our focus on outcomes is understandable. When a company loses money, people demand that heads roll, even if the changes are more about assuaging shareholders than sound management. Moreover, measuring outcomes is relatively easy to do; decision-making–based reward systems will be more complex. But as I’ve said before, “It’s hard” is a terrible reason not to do something. Especially when that something can help reward and retain the people best able to help you grow your business.