Human Capital Briefs

Health Care in America: Lessons from The Mayo Clinic

December 09, 2013

Please join us for our March Book Discussion webcast, featuring David Sirota and Douglas Klein, as they discuss their latest book, The Enthusiastic Employee, on March 4th, 2014.

 

"That any sane nation, having observed that you could provide
   for the supply of bread by giving bakers a pecuniary interest in
 baking for you, should go on to give a surgeon a pecuniary
 interest in cutting off your leg, is enough to make one despair..."   

~ George Bernard Shaw
 

The debate that has raged in Congress and elsewhere about the Patient Protection and Affordable Care Act (“Obamacare”) has focused almost entirely on its participation provisions, such as the requirement that the purchase of health insurance be made mandatory, and, most recently, on the failures of its website.  What is rarely discussed are other, perhaps more important features of the Act which aim to reduce the cost and improve the quality of health care in the United States.
 
For example, the Act seeks to gradually modify and perhaps eventually do away with the fee-for-service system described so succinctly in the quote from Shaw above. Fee-for-service has long been portrayed as providing perverse incentives  (to give more care because it is lucrative to do so rather than because it is needed) that greatly inflate the cost of health care in the United States. Instead, the Act provides for paying healthcare personnel a bonus for fewer procedures, hospital stays, and emergency room visits – which is exactly the opposite of what doctors have traditionally been paid to do. The bonus means that providers share in the savings.
 
The quality and cost-reduction improvements are to be achieved  in a number of ways, such as a much-heightened emphasis on preventive care, greatly increased use of information technology, and, most comprehensively, in the establishment of Accountable Care Organizations: networks of hospitals and doctors that provide coordinated, rather than fragmented, care. The Act appears to be having some impact.  For example, as of October, 2013, more than 370 Accountable Care Organizations had been formed in the U.S., comprising 14% of patients nationwide (whether the patients know it or not).
 
In campaigning for the Act before its passage by Congress, administration officials, including President Obama, frequently referred to world-renowned healthcare institutions such as Mayo Clinic and Cleveland Clinic as exemplars of the kind of health care the Act was designed to promote. "There are some places, like the Mayo Clinic …(that) provides outstanding care, some of the best in the world,” the President said in a speech.  “People fly in from everywhere to go to Mayo Clinic to get treatment. It turns out Mayo provides care much more cheaply than a lot of other health systems, even though it's better care."
 
It is fascinating to us as observers of organizations that healthcare institutions such as Mayo have achieved their renown for excellence despite being subject to the same financial pressures and temptations – such as the fee-for-service system – as their healthcare counterparts throughout the country.  How was this achieved?  The answer lies in their culture.
 
We do not know how successful Obamacare will be. With regard to its quality and cost-reduction objectives, however, we maintain that its success will in considerable measure be determined by the degree to which the financial incentives offered are undergirded by a culture compatible with it.  After all, if it is only financial incentives that are used to motivate and direct people, many ways can be found to “game” the system so that the bonus keeps flowing without much genuine change in care.  Or, the care may change but in a negative direction, as providers cut corners on quality to reduce costs.  Human beings are extraordinarily adroit at gaming systems and this will happen – no matter how many external controls -- in organizations with countervailing cultures.
 
The Mayo Clinic culture is discussed in detail in the recently-published second edition of The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want, by David Sirota and Douglas A. Klein.  The Mayo case study is found in Chapter 12: The Culture of Partnership.   A major theme of the book is that a “partnership” culture tends to be characteristic of organizations with sustained high performance.  The Mayo Clinic is an outstanding example of that performance and that culture (as are for-profit companies such as Southwest Airlines and Costco). We assert in the book that it is the partnership culture – people working collaboratively in the service of the customer -- that is fundamental to understanding Mayo’s renowned accomplishments.
 
The senior author of The Enthusiastic Employee, Dr. David Sirota, published a paper in 2010 about the Mayo Clinic. He wrote it because that time was the beginning of the intense debate about healthcare reform, and, as noted, the achievements of Mayo had direct relevance for a number of provisions of Obamacare.  Dr. Sirota’s paper, amplified and updated for the book and presented below, does not comment directly on the pluses and minuses of Obamacare.  Rather, it seeks to demonstrate how critical the culture of an organization is --yes, it takes more than legislation and financial rewards and penalties -- for true organizational excellence.
 
What’s So Special About Mayo Clinic?
Core Values Are What Count
 By David Sirota
 
Amid the cornfields of south central Minnesota, in the small city of Rochester, stands, improbably, the largest and founding location of Mayo Clinic, one of America’s premier healthcare institutions. Established in 1889 by two physicians, brothers Charles and William Mayo, the Rochester location employs 33,000 and each year provides services to hundreds of thousands of patients from throughout the world. It would not be surprising to find an institution of this size and renown bordering the East River in New York City. But Rochester, Minnesota? That’s just the beginning of the anomalies. (The other two Mayo facilities are in Jacksonville, Florida, and Scottsdale, Arizona, and were established in 1986 and 1987, respectively.)
 
Mayo Clinic received a lot of attention, including frequent accolades from President Obama, in the course of the debate over the Patient Protection and Affordable Care Act (“Obamacare”). The care Mayo provides is demonstrably among the highest in the nation but, anomalously, the cost of that care is among the lowest. The outcomes at Mayo belie the conventional wisdom that quality is necessarily expensive and the Clinic’s methods have therefore been of considerable interest to those seeking to reform the nation’s healthcare system. The goals of Obamacare include a significant reduction in the rate of increase of healthcare costs and an improvement in healthcare quality.
 
Skeptics argue that the challenges Mayo faces are very different than those of healthcare institutions elsewhere, especially those in large urban centers where patients are poorer, sicker, and less-well educated. Mayo, however, is but one of a number of health care institutions with outstanding performance and they are in quite diverse settings. Cleveland, Ohio, for example, hardly resembles Rochester, Minnesota, but that is the home of Cleveland Clinic, an institution that closely resembles Mayo in its practices and results. Other similarly successful institutions frequently cited are Geisinger Health System in Danville, Pennsylvania; Intermountain Healthcare in Salt Lake City; and, Kaiser Permanente in Northern California. Finally, the other two Mayo facilities, in locations different in many ways from Rochester, achieve results very similar to it.
 
The anecdotal evidence about individual high-performing healthcare organizations is strongly supported by systematic research across thousands of such organizations. For example, the Dartmouth Atlas of Healthcare finds wide variations in per capita healthcare spending across the U.S. but concludes that “...just 30% of excess spending...could be attributable to (patients’) income and health.” What accounts for most of the rest? It is wasted spending: the Dartmouth group and others estimate that an astounding $600 - 700 billion of the Nation’s health bill is wasted on unnecessary tests, procedures, hospital stays, doctors’ visits, and the like, and there are large differences between healthcare institutions in this respect.
 
Many experts identify the fee-for-service reimbursement system as the major culprit when medical services are overused because it rewards healthcare providers for the amount, rather than the quality, of the care they provide. George Bernard Shaw put it well nearly a century ago: “That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair...”
 
Contrary to accepted wisdom about the relationship between quality and costs, the Dartmouth researchers find a tendency for areas of the country with the highest quality to have lower costs. There are many reasons for this. As Shaw reminds us, unnecessary procedures can be unhealthy as well as costly. Excessive hospital stays can be dangerous as well as expensive because of errors and negligence there. And, poor quality often requires “rework,” thus inflating costs. From the perspective of U.S. health care as a whole, therefore, quality pays! But, from the perspective of the healthcare provider, quality can depress earnings.
 
And so, the key question is: How is it that in the face of such perverse incentives, some institutions have managed to swim against the tide and provide such high levels of quality and do so efficiently? The same question can be asked about many industries. Automobile manufacturers, for example, are for-profit entities whose revenues come from the volume of cars they sell, a parallel to the fee-for-service system. Why did some companies, such as those from Japan, perform so much better than others over decades in the quality of the products they produced?
 
When accounting for an organization’s success, observers tend to emphasize highly visible, distinguishing practices, such as formal quality programs in Japanese companies. In healthcare, there is much written about how doctors in many high-quality, low-cost healthcare institutions -- such as Mayo -- are full-time, salaried employees. There are therefore no financial rewards for them for excessive tests, procedures, or visits.
 
Employee compensation is important, but focus on it distracts attention from the cultures of these institutions -- their “invisible architecture” -- of which the salary system is but a part and from which it, indeed, derives. After all, when pay is unrelated to performance, the effect might be a reduction not just in unnecessary treatment but also a general decline in the care and effort physicians devote to their jobs. Further, while the doctors are paid salaries, their employers’ revenues depend largely on fees for services. Why would they not pressure the doctors to increase volume and suffer the usual deleterious quality and cost consequences?
 
The answer lies indisputably in an institution’s culture, defined here as what the institution’s leadership genuinely values and, therefore, what it expects from its employees. In every industry we have studied, differences between organizations in their quality and efficiency can be explained largely by differences in their values and the skill with which the values are executed. Let’s see how this plays out at Mayo Clinic.
 
Mayo’s culture, remarkably pervasive throughout the organization, has its source in its simple, seven-word mission: “The needs of the patient come first.” While this sounds like innumerable other well-worn and hollow slogans, it is absolutely clear from our studies that in Mayo the mission is genuine and drives the day-to-day behavior of employees at all levels. In a recent employee survey, 90% of the Clinic’s employees agreed that, “At Mayo, the needs of the patient come first.”
 
In discussions with physicians, they repeatedly mention the mission and its genuineness as a primary reason they came to and remain with Mayo. Surveys of patients show just how impressively the mission is realized in practice. Mayo employees are frequently reported in these surveys to go to extraordinary lengths in their attention to patients’ needs. “Two nurses gave up their day off to be with us for my peace of mind,” comments a former patient. “They brought me smoothies. They hemmed the pajamas my mother sent. They were so wonderful.” “The phone rang,” says another. “It was a Mayo heart surgeon. I couldn’t believe it. He personally called to say come see him.” A third commented: “My oncologist is... the kindest man I ever met. He related some of his personal life to me. I was more than my problem to him. He related to me as a person.” These representative experiences may seem trivial at first glance but they have a tremendous impact on patients and their confidence in their care.
 
The mission impels daily behavior and is the basis as well of Mayo’s formal policies and practices. These range from an obsession with compliance with legal and ethical standards to an investment in unusually attractive and comfortable physical facilities for the physical and emotional well-being of patients. The straight salary system flows directly from the mission: the institution wants its physicians focused entirely on the needs of the patient and not on what might increase their own compensation.
 
A hallmark of the Clinic’s practices has been its collaborative approach to the delivery of care. Physicians and other health professionals work in multispecialty teams whose composition is dictated by the medical problems in a case. Working in teams helps to assure quality care and decreased repetitive testing, procedures and appointments and is fostered by a broadly egalitarian environment where mutual respect is an explicit standard of behavior.
 
In support of its team methods, Mayo studiously avoids the “star” system in the recruitment of physicians. It seeks those who are top-notch in their abilities but it wants their primary attention to be on patient care rather than building their individual external reputations. Straight salaries reinforce teamwork in that there is no incentive for doctors to hoard patients for the sake of financial gain. The most important criteria in the evaluation of physicians’ performance are the quality with which clinical care is delivered and the ability to work cooperatively with colleagues in delivering that care.
 
Collaboration in Mayo involves not just the doctors. It is expected of all employees and this requires an environment of mutual trust across levels as well as across specialties. In addition to technical competence, the major source of mutual trust in the work situation at Mayo is egalitarianism, where status and other needless barriers are at a minimum. Egalitarianism is characteristic of the Mayo culture to a degree rarely realized in healthcare institutions. As one example, status distinctions between doctors and others, while not entirely absent in the institution, are greatly diminished. On the Mayo employee survey, 76% agreed with the statement, “Based on my personal experience over the last year, there is mutual respect between physicians/scientists and allied health staff.” We have no normative data on that question, but we do know that disrespectful treatment of the non-physician staff by physicians is a well-known and serious issue in many healthcare organizations. Verbal reiteration of the need for mutual respect is reinforced in Mayo by required formal training for all in human relations.
 
Teamwork among employees is paralleled by a strong bond between employees and the institution as a whole. People want to work for an organization of which they can be proud and for an organization that has a genuine concern for them. 94% of Mayo employees say in their survey that they are proud to work for Mayo and 75% agree that “Mayo takes a genuine interest in the well-being of employees.” (The Sirota norm on the former question is 81% and on the latter 65%). One way the Clinic exemplifies its interest in employee well-being is a policy that layoffs will be a last resort in times of financial difficulty -- and this played out in 2009, as the Great Recession took hold, when physicians and senior administrators in Rochester forwent salary increases in order to prevent layoffs and provide salary increases for the rest of the staff. There is a large investment in employee education and development that prepares employees to transfer many times across different functions in the course of their careers at the Clinic and undergirds their job security.
 
The result of all of this is a dedicated workforce allied with Mayo and with each other in the service of patients. It is a culture of partners in which people go above and beyond in the performance of their jobs and in which most want to -- and do -- spend their careers. Mayo’s attrition rate was 4.1% in 2012. The attrition rate nationally in healthcare institutions was 13.5%.
 
Mayo values may appear anachronistic, a throwback to an era when loyalty -- to customers, employees, and employees to each other -- was considered vital for business success. But this mode -- we call it “partnership” -- has worked for Mayo since its founding more than a century ago, a period in which the practice of medicine has changed enormously in just about every other respect. In 1910, co-founder William Mayo wrote, “The best interest of the patient is the only interest to be considered, and in order that the sick may have the benefit of advancing knowledge, union of forces is necessary... It has become necessary to develop medicine as a cooperative science...” Little needs to be added to describe Mayo’s core mission and values a century later.
 
How has the Mayo partnership culture been sustained for so long? For one, the Clinic works at it. Considerable effort is required if a culture is to survive periodic and sometimes severe financial pressures, varying personalities of executives, and the allure of management fads. The mission is kept front and center by continual reiteration, celebrations of the Mayo brothers’ legacy and values, employee recognition for their achievements in line with the values, and conscious vetting of relevant policy and practice changes against the values.
 
Further, Mayo is a physician-led institution and, with rare exceptions, these physician-executives are promoted into their jobs from within Mayo, helping to assure cultural continuity. It is truly an institutional culture, not dependent on the outlooks or whims of one or a few individuals.
 
All of this effort at continuity would, of course, be for naught if the result was insolvency! While the institution has faced significant financial challenges over the years, its ability to survive and thrive is, ironically, due in no small part to a core mission devoid of financial goals. The focus on patients has resulted in a reputation for excellence -- one of the best-known and most-highly-respected healthcare brands -- that helps assure a continuing flow of patients from throughout the world. A large cadre of former patients contributes generously to Mayo in appreciation of the care they received there.
 
Sustaining a genuine institutional culture requires a lot more than slogans or borrowing the practices of admired organizations. American automobile manufacturers diligently copied Japanese quality techniques (after finally acknowledging that Japanese products were, indeed, superior) but had difficulty for decades closing the quality gap. Why the difficulty? Here is what an American automobile worker told me in the mid-1980s in a plant whose walls were emblazoned with quality slogans: “Let me tell you what really counts here -- it’s what my boss tells me: ‘Get the pieces out the door’.”
 
Skeptics seek coincidental reasons for an organization’s success, reasons other than skilled and farsighted management. We see this in the way the successes of Mayo Clinic and similar institutions have been attributed to the characteristics of their patient populations. When the Japanese automobile manufacturers began shipping high-quality cars to the U.S. and capturing a significant share of the market, the reason often given for their success was the discipline and dedication of Japanese workers. The Japanese then opened plants in the U.S. and continued to produce high-quality automobiles with American workers. Among the reasons then given for their success were the newness of their plants and the fact that the workers were non-union. These were excuses, not reasons. The primary reason for the achievements of these Japanese companies was their culture which, among other things, put quality first, treated workers as partners, and organized the work by teams. Sound familiar?
 
It is the values of an organization that count, values in healthcare institutions such as Mayo Clinic that dictate that patients’ needs come first and are satisfied in an environment of trust and collaboration among partners. Management seeking to transform their organizations need to focus initially not on practices, no matter has easily copied, but rather on core values and determine whether these can be enthusiastically embraced. The task then is to bring the values to life through practices that reinforce them, are best suited to an institution’s particular conditions (such as whether physicians are full-time employees), and can be adapted to changing conditions. Leaders at Mayo Clinic say that everything is up for change except their core values. The substance and constancy of those values paralleled by a willingness to adapt how they are realized in a changing world are what account for the institution’s amazing longevity and success.