What Really Ails the Affordable Care Act: Proven Ways to Begin Curing America's Healthcare System

Jim Champy

Editor's Note: 

We’ll hear more and more these next few years about "reinventing healthcare practices," that is, about improving patient outcomes while simultaneously lowering healthcare institution costs.

Said Peter F. Drucker: "Let me say that the only thing that could've happened to the healthcare system is crisis… You cannot have the kind of growth we have had, in which you totally outgrow your foundations,"  and not have a crisis.

The Affordable Care Act now faces severe criticism for its alleged shortcomings: the rising price of healthcare, long waiting periods for service, and fewer doctors for patients to choose from.

In this article, Jim Champy illustrates how healthcare process innovations can dramatically improve patient outcomes and lower costs.

Further, he discusses the need for healthcare institutions to continuously benchmark (i.e., creatively imitate) the best processes and practices of competitors and non-competitors.

Put differently, every healthcare institution must become a "learning organization." They must organize for continuously identifying/adapting/enhancing best practices wherever found.


The Affordable Care Act is in trouble. Costs for insurance coverage under the ACA will rise an average of 26% in the coming year. 

And many insurance companies have pulled out of the program because of red ink. 

It is clear that Republicans, the party about to take control in Washington, does not favor the ACA in its current form.

Part of the problem is the number of younger, healthy people enrolling in the program fell short of expectations—driving up the average cost of coverage to insurance companies. 

The other major problem is the costs of providing healthcare have not fallen. 

I don’t know how to get more young people to join the program. But I have studied healthcare delivery for years and do know healthcare costs can be reduced, while improving quality of care.

Whether the Affordable Care Act survives the current political climate is, of course, an open question. But whatever happens, healthcare costs must be better managed.

The Challenge 

The business of providing healthcare is severely challenged. People who run hospitals tell me that their work is getting harder, not easier. 

Their profitability averages in the low single digits, and the complexity of payment systems is increasing. 

Community hospitals are disappearing, and doctors find it difficult to get a return on the cost of their education.

In spite of these mounting challenges, the healthcare system keeps going. After all, it is a business about life and death, with growing demand and dedicated workers who won’t quit.

It’s Getting Worse 

Cost pressures on providers—principally hospitals and doctors—increased with the launch of the Affordable Care Act. 

The government’s approach to constraining growth in costs is to pay providers for outcomes rather than the quantity of treatment.

Therefore, providers are getting paid less for much of the work they do. And collecting that money requires more paperwork. 

Many providers have been slow to adapt, putting them in jeopardy.

Certain diseases and disorders are also on the rise. Obesity and diabetes create a continued health challenge in the U.S., while some scientists predict the increase in Alzheimer's cases as our population ages will bankrupt our healthcare system, if left unchecked. 

Personalized Medicine Gets Real and More Costly

Science is coming to our aid. Real medical advances are being made in several areas. But medical advances cost money.

For example, physicians are now able to target treatment of certain cancers as a function of the cancer type, the patient’s genetic profile, and the mutation of the patient’s gene that’s causing the cancer. 

These procedures are only available at a few major medical centers. Eventually, anyone with cancer should have access to this kind of care. 

But as these targeted treatments are broadly introduced, the cost of healthcare will significantly increase. The testing and informatics required to determine these targeted treatments are very sophisticated.

What Should We Do?

The ultimate challenge is to make the best medicine available to all, while stabilizing the healthcare system. 

Everyone has an interest in accomplishing this—the insured and uninsured, providers and payers, and the government and companies providing healthcare coverage. 

The solution is not some angel of government dictating more policies and procedures. 

Providers must get costs down while comprising the quality of care. 

We need to find the money to pay for the future. Reducing the number of unnecessary tests and procedures will help, but that won’t be enough. The work of healthcare providers must change. 

(I would normally call this “reengineering,” but doctors don’t like to think of themselves as being reengineered. So let’s just call this “process change.”)

The good news is that many examples of effective healthcare process change already abound. 

The less good news: Introducing change at healthcare organizations isn’t easy. Organizations and highly trained workers don’t change easily.

Learning from Novant

The hospital emergency room (ER) is one of the most expensive places to seek and provide treatment. 

Novant, a North Carolina based hospital system, noticed patients over 65 were twice as likely to be treated in the ER for adverse drug effects (ADE) and seven times as likely to be readmitted to its hospitals. 

The ER visits and readmits often happened because older patients, anxious to leave a hospital, did not listen closely to instructions when being discharged. And when they got home, they continued to take medicines that created an adverse reaction with the newly prescribed drugs. 

This is not surprising. Half of senior citizens in the U.S. take at least five prescribed pills a day, plus dietary supplements. There are lots of pills in our medicine cabinets.

To solve the problem, Novant created a program called The Pharmacy Home Project. 

Originally, the program called for a hospital pharmacist telephoning an elderly patient a few days after being discharged and asking the patient to list the drugs he or she was taking. 

The pharmacist, together the patient’s physician, would “rationalize” the patient’s prescriptions and drug intake. 

Prior to the launch of the project, almost 18% of the visits to Novant’s ER’s were related to ADE. 

Shortly after the program’s launch, ADE’s were reduced to 4%. Keeping patients out of hospitals, while improving their health, is one of the best ways to reduce healthcare costs.

People, Process, and Technology

Programs like Novant’s Pharmacy Home Project require the design of new work processes, technology that enables the process change, and changes in the skills and behaviors of people. 

The Pharmacy Home Project relies on the existing electronic healthcare record technology. The big challenge was changing the skills and behavior of healthcare professionals.

The first hospital pharmacists assigned to the project had never dealt directly with a patient—they’re not like the ones you see at CVS. 

So Novant had to train a new cadre of pharmacists. Today, the project is now staffed by a specially trained group of nurses, who also make home visits.

Doctors also presented a challenge. They had never experienced someone, like a pharmacist, getting between them and their patients. 

The care teams had to get accustomed to working with and trusting each other. And of course, the patients, even at 65, had to become more accountable for their own care.

A Prescription for Continuously Improving Healthcare Process and Outcomes

If you step back and look at Novant’s program, you can see that it’s really simple in design. That’s typical of process changes that deliver big results. 

They are not just focused on cost reduction. Their focus is on improved outcomes that, in return, reduce costs.

All the players in the healthcare system have to learn from successful examples that are now becoming prevalent. Broad change is required to avoid even bigger crises in the future.

Summary and Conclusions

Every healthcare institution must routinely benchmark themselves against the best in the world to improve their performance.

In multi-hospital healthcare organizations, internal benchmarking is gaining ground. Knowledge gained in one hospital can be used to obtain better, cost-effective outcomes at other hospitals within the same organization.

In the business world, internal and external benchmarking have been rigorously practiced for more than a quarter of a century. 

Now it’s time for healthcare institutions to do the same. That means these organizations need to identify people who will be responsible for ensuring the identification and implementation of best healthcare practices.

Simply put, to turn a benchmarking program into performance requires effective management of this mission-critical activity.