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The Drucker Difference

Solving the Health-Care Conundrum

President Barack Obama began this week to push hard on health-care reform. Whether any legislation gets passed will depend, of course, on how well he navigates the treacherous politics of Washington in the months ahead. But whether the medical system actually improves will hinge on something else altogether: how effectively it is managed in the years ahead.

This is something that Peter Drucker understood very well. "Drucker championed the twin principles of management by objective and management by measurement—two driving forces behind the modern quality revolution in health care," the University of Toronto's Neil Seeman and Adalsteinn Brown declared a few years ago in the journal Health Quarterly.

But the revolution has yet to make it past the barricades, at least in the U.S. To begin with, quality is not what it should be. A government report issued earlier this month found that 40% of recommended care is not received by patients. Meanwhile, infections that people acquire during the course of their stay in a health-care facility, such as a nursing home or a hospital, stand among the nation's top 10 causes of death. It's little wonder that Health & Human Services Secretary Kathleen Sebelius has said "the status quo is unsustainable."

At the same time, costs are out of control. The U.S. spends far more per person on medical care than any other country. In 2007, we plunked down $2.2 trillion on medical expenditures, and government analysts predict the figure will climb by more than 6% annually through the next decade. That would boost the share of the gross domestic product going toward health care from 17.6% this year to 20.3% in 2018. All the while, some 45 million Americans remain without medical coverage.

A Complex Web

That the system is in such rotten shape is not totally surprising. The world of medicine has gotten more and more complicated over time. Drucker, for one, identified the hospital as "the most complex human organization ever devised," with its web of doctors and nurses and technicians. Insurance companies aren't inclined to simplify matters, either, having discovered that opacity and obfuscation can help bring in enormous profits.

So how do we make things better?

The White House believes there are several keys, including beefing up prevention and wellness programs so people don't get so sick in the first place. They're also hoping to spur the revamping of financial incentives for health providers so they're rewarded—rather than penalized—for delivering excellent care.

But much of the Administration's efforts are centered on something straight from the Drucker playbook: measuring results. Peter Orszag, the director of the Office of Management & Budget, is fond of citing a body of research from Dartmouth that shows how health-care spending varies widely between regions of the country, often with little correlation to outcomes.

By zeroing in on these discrepancies, as well as methodically determining which drugs and treatments work best, it should be possible to save oodles of money while enhancing quality. At least that's the theory.

What Drucker knew, however, is that measuring anything is far from a straightforward proposition. For starters, he wrote, "what we measure and how we measure determine what will be considered relevant and, thereby, determine not just what we see, but what we—and others—do." Beyond that, the more we measure, the more we risk flooding the system with data. What's needed, instead, is genuine information: what Drucker defined as "data endowed with relevance and purpose."

"A View of the Whole"

This is especially difficult to do, he added, in an organization filled with specialists—and no area has more specialists than medicine. "Each specialty," Drucker noted, "has its own knowledge, its own training, its own language."

A big challenge that management faces in such a situation, Drucker explained, is creating "a common vision, a view of the whole." Only when that's established can individuals begin asking the questions that Drucker deemed a matter of professional responsibility: "Who in this organization depends on me for what information? And on whom, in turn, do I depend?"

"Each person's list will always include superiors and subordinates," Drucker wrote in a 1988 piece in Harvard Business Review. "But the most important names on it will be those of colleagues, people with whom one's primary relationship is coordination.

"The relationship of the internist, the surgeon, and the anesthesiologist is one example," he continued. "But the relationship of a biochemist, a pharmacologist, the medical director in charge of clinical testing, and a marketing specialist in a pharmaceutical company is no different."

What is absent today is precisely the common vision and sense of coordination that Drucker called for. As Seeman and Brown pointed out, "health-care leaders have embraced measurement." That's not the problem. What "often goes missing," however, is Drucker's exhortation that "all collected data should be tied to a strategy that serves the patient."

In the end, Obama's team must remember that measuring is only half the battle. They must also make sure that the findings are diligently managed, just as Dr. Drucker ordered.

Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University.

Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University.

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