Quality improvements: Rewarding the signal and not the noise

In my post yesterday I questioned whether our current incentives are truly promoting quality or just prettier looking documentation. I used Dan Ariely's discussion on the fallacy of rewarding outcomes in the world of business as a jumping off point. But today it occurs to me that some of his suggestions about changing course to start moving in the direction of best achievable quality need to be further adapted to healthcare environment. So, I will try to do it here, and would love feedback, if you have any.

Here are Dan Ariely' recommendations on how to start rewarding the signal instead of noise:

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.

I think that I need to deconstruct some of them to make them applicable to healthcare. So, here are my healthcare equivalents of culture and incentive change, so that we can start focusing on better care.

1. Change the mind-set -- This applies to public reporting of never events. Tracking these on a large scale, say, city, state, country, is necessary so that we know how we are doing at not inflicting harm. However, at the level of an individual institution, there is so much variability in events such as infections, mortality, etc., that using them as a public humiliation tool is not sensible.

2. Document crucial assumptions -- We can adapt this to a healthcare setting to reflect how we build our systems to maximize prevention efforts. That is, in the setting of perpetually imperfect and oftentimes substandard evidence, in addition to tremendous inter- and intra-patient variability, a sensible evaluation of how best to approach each patient in the context of preventing complications is needed. If the evidence for interventions is valid, but the circumstances of how we understand the patient's condition change, we should not either reward or punish the provider or the institution for the associated outcome.

3. Create a standard for good decision making -- This is pretty easily adapted to our setting. Transparency, being up to date on the evidence, as well as the information on the particular patient, considering all that is reasonably available, and without conflicts of interest, are all part of the mandate for intentional quality improvement and individualized care. This also sets the criteria for what good decision support should look like.

4. Reward good decisions at the time they are made -- No translation necessary here, I think. The only thing I want to say is that there are ways other than financial to reward good performance, and we need to understand how they can be used to promote desirable behaviors among clinicians.

So, public lashings for having blood stream infections, ventilator-associated pneumonia and similar complications are not sensible. Relying on them simply reinforces the God complex in medicine and punishes the wrong link in the chain of events.

In general, it is time to let what we are learning in behavioral and cognitive sciences about what makes us tick help effect good behaviors at the bedside (and in the executive suite).          

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.     

What motivates us

If we think that money is the way to get us to do anything, think again. The carrot and the stick may be as outmoded as a horse and buggy, yet traditional economic theory clings to them as if for dear life. Here is an enlightening look at how we can achieve our best. This dovetails nicely with my post on medicine' social contract.

Restoring medicine's social contract: Lessons from Dan Ariely

One of the treats I look forward to when traveling is buying a pop science book at the airport and devouring it during my flights. It provides a welcome change from my daily immersion in the highly technical lingo of my profession. Usually I am drawn to single verb titles, such as “Blink”, “Nudge”, Bonk”. But today was different, as I succumbed to the expository wiles of my favorite behavioral economist Dan Ariely and his “Predictably Irrational”. It is a great read for anyone who still holds on to the Cartesian illusion that man is the most rational being on our planet. So, there will be a few posts inspired by what I have learned, or rather how my thinking about certain aspects of our existence has been enriched by Ariely’s work.


A few words about behavioral economics. It is a field born not so long ago from the work of Nobel laureates Daniel Kahneman and Amos Tversky, who applied cognitive psychology to how we make decisions under the conditions of risk. Traditional neoclassical economic theory maintained (and still does to a large extent) our rationality with vigor, yet something was amiss. If we were so rational, why did some of our most basic choices seem not so?

The current generation of behavioral economists, like Ariely, sits firmly at the nexus of economics and behavioral sciences, and through creative and telling social experiments are extending our knowledge of human nature not only in the economic sense, but in our social and professional interactions as well. “Predictably irrational” is geek brain candy, in which the author describes his personal and academic quest with poignancy and self-deprecating humor. His journey started abruptly with a devastating accident that left him with burns on 70% of his body. Through the ensuing three years of recovery he suffered many painful moments, leading him to question the assumptions made by his experienced clinicians about pain trade-offs. This tragedy turned into a boon for the rest of us by thrusting his creative mind into this exciting and burgeoning field.

I will not try to talk about each and every concept in his book; for this I urge you to purchase it yourselves – it is a terrific read. I do, however, want to apply some of his ideas to what I know and care about, and that is our healthcare system.

One aspect of Ariely’ research has focused on understanding the nuances of what he refers to as social vs. market interactions. That is, social interactions being ones where we interact without any overt financial incentives, while market interactions explicitly involve an exchange of money. One fascinating experiment Ariely and coworkers performed illustrated several aspects of these interactions. This experiment took place at a daycare center in Israel, where at baseline the parents occasionally would be late picking up their children without any penalty other that the guilt associated with keeping the teacher late. To discourage this behavior, a scheme was imposed, whereby the parents were allowed to be late, but at a monetary cost commensurate with their lateness. The change in their behavior was profound, wherein, instead of the desired effect of reduced lateness, they now felt entitled to be late as they were now engaged in a commercial relationship justifying this behavior. Even more striking was the effect of reversing the decision and going back to the guilt as the driver of the desired behavior: the parents’ lateness behavior of the market interaction persisted even into the realm of what had now reverted to a social contract. Ariely sees this as an illustration of the difficulty with restoring a social context to what had been a market interaction, however briefly or temporarily.

Other examples of this distinction are described, where companies that try to promote social interaction with their employees are better off using gifts rather than checks or cash to incentivize performance and loyalty. Although the difference between such vehicles seems subtle, as it turns out cash invariably turns things in the direction of market interaction, fostering a sense of entitlement that overwhelms good will.  

Let us now apply this to medicine in the US. Over the last century medicine went from a community-based cottage industry to a multi-trillion dollar behemoth. Back then it was not unusual for the doctor in the community to service his patients’ needs not for a formal payment, but for a chicken or a sac of flour. So, in a sense, although not exactly gifts, these ways of payment avoided the formal exposure to dollars and cents. And this perhaps maintained the relationship as a hybrid of market and social interaction.

Today, the idea of bartering for medical services is laughable. The bureaucracy supported by healthcare financing, viewed by many pundits as a reliable engine of economic growth, would not do well with such a model. And as there is more and more scrutiny of individual clinician performance, there is also more and more talk about rewards and punishments, both of which take monetary shape. Extending the social vs. market dichotomy to this phenomenon, it becomes obvious why there is such rampant discontent in the ranks of the physicians in particular: when money is the only feedback, the amount becomes a proxy for the worth of the service, and even one’s sense of self-worth. Once this interaction is set up, the amount of the payment will determine not only what kind of a service is provided, but how appreciated the clinician feels. No wonder many are so cynically eschewing Medicaid patients, and threatening to do the same with Medicare as their reimbursements dwindle.

But imagine for a moment a different system of healthcare. In this system the doc does not need to worry about maximizing her income. In this system there is a well-established floor and a well-established ceiling of salaries, with not too much distance in between. Having taken this financial wild card out of the interaction, the clinician’s reward can now become the practice itself. If reimbursement no longer serves as the proxy for one’s worth, perhaps the therapeutic relationship can now enter the realm of a social, rather than market, contract. In this construct, the clinician can focus on achieving good relationships with her patients, and on promoting good health outcomes.

Am I oversimplifying? After all, how does such a system ensure quality and efficiency? Well, again, it is possible that rewards can come in the form of restored social status rather than zeros on a check. You will concede that there is a misperception that physicians are paid too much for what they provide. The same field of behavioral economics tells us that these judgments are not made in a vacuum. Perhaps we are setting up an erroneous comparison group. Do Fortune 500 CEOs get paid too much? I think so, yet, we are in no way ready to limit their looting practices with regulation. Yet those executives’ incomes would make any self-respecting doctor blush. As a corollary, are these executives providing a vital service to the society? We can certainly argue about this, but there is no argument whether docs do. So, how much is too much? You tell me. My only point is that if we set a reasonable salary for our physicians (and reasonable would be defined not by government and industry bureaucrats in isolation from the physician community, but arrived through vigorous and transparent debate) then these highly skilled individuals can go back to prioritizing their therapeutic relationships above all other incentives, thereby regaining their own sense of social self-worth and their status within the community. 

You may say that I am naïve in thinking this. I do not think so, especially having understood better our predictably irrational ways. What can I say, even the name of the phenomenon, predictable irrationality, suggests that this scenario, so implausible to some, may be the very remedy that we all need to restore medicine's social contract.