Is there a business case for quality in health care? Eliel Arrey, M.D., Tracy Kenney, BA., Cameron Knox, BS., Diane Pham, BS., and Aurelio Vargas, BS. Texas A&M Corpus Christ - College

The answer to there being a business case for quality in healthcare is a long, complex, and somewhat controversial one. Quality in health care as it pertains to optimal patient outcomes, safety, and efficient service are pivotal to patient centered care and one any human will agree to its improvement. On the same token, improving quality in health care is the fiduciary responsibility of all medical providers. So yes, we contend that there is a business case for quality in health care. The inability to truly quantify a positive financial return for quality improvement (QI) initiatives and the variety of reimbursement systems in healthcare are a couple of strong reasons why the business case for quality in healthcare is not as widespread as one would expect.1, 2  This short narrative will discuss how several issues in the healthcare business sector affect the business case for quality, and review a few suggestions of our own on why quality improvement programs in healthcare are more than just another expense but are programs that have a good return on investment that benefit all interested parties, with patients being at the forefront.  

Quality seen as an expense:
The current situation in the healthcare business sector is that QI projects are hard to quantify and define. In a 2007 survey administered to chief medical officers (CMO) at four urban nonprofit, acute care teaching hospitals, there was great variability in how each of these hospitals allocated their funds for QI projects.  Inpatient QI projects ranged from $2 million to as high as $21 million.3 Thus, QI projects are widely seen as an expense or in some cases, a necessary cost to maintain accreditation or respond to regulations.3, 4  With an increasing number of quality metrics, and regulatory and accreditation agencies, there is growing support for the business case of quality in healthcare.

The return on investment (ROI):
No matter how well-intended QI projects may be, the difficulty in sustaining many of these projects as mentioned above lies in the time for the QI to result in an economic benefit to the investor and the beneficiary.9  Naturally, the earlier the ROI occurs, the greater the value of the QI and the stronger the business case for said QI program.10  In regards to the relationship between investor and beneficiary, Dr. Gross elaborates in his article, “when the ROI goes to the same party, the business case is self-evident.”9 The dilemma in the past was that hospital institutions spending money on new QI projects in order to be in accordance with departments such as Joint Commission (JCO) never were able to quantify any economic return. The beneficiary, according to some, was “the patient and society.”9  Nevertheless, in 2013, Swensen et al. made the case that beneficiaries to QI programs were the patients, insurers, employees, and providers.4  The institution of payment services like pay-for-performance helps reward hospital institutions that invest in QI programs that lead to better safety outcomes. We will discuss this in more detail under reimbursements.

Measuring Quality in healthcare:
Quality in healthcare is generally patient focused. It's a never ending process where quality criteria is set, data is gathered, data is reviewed using statistical tools, and then used to develop quality improvement efforts or identify issues. New criteria may evolve and the process starts over again. While quality concerns does not prevent all poor outcomes, it does increase more positive outcomes on desired care.12

Avedis Donabedian,5 the “father of quality assurance”, described the aspects of quality as: 

1. Resources used in care
2. Activities involved in providing care
3. Outcomes as consequences of care
He further identified attributes of quality which are efficacy, effectiveness, efficiency, optimality, acceptability, legitimacy, and equity.5 Many models have been developed to measure quality based on Donabedian’s work;6, 7 however, it's also important to consider case variety, patient illness, and conditions when evaluating quality measures.

Quality and its potential effects on provider liability:
We agree with Swensen et al. that clinical QI can deliver “net operating income if managed appropriately.”4  In their four year administrative date examination of the relationship between safety outcomes in hospitals and malpractice claims against providers in California, Greenberg et al. were able to demonstrate that a decrease in adverse safety outcomes from QI programs was associated with a decrease in the volume of malpractice claims.8 Their report supports the business case for quality in health care to not just improve patient safety outcomes, but to lower liability costs to providers.

What role do reimbursements play in the business case for quality?
​Reimbursements affecting the business case for quality: Fee-for-service reimbursement encourages overuse waste (provider related).  Reimbursements received from length hospital stays due to preventable complications have been captured in fee-for-service payment systems.  Value-based purchasing and pay-for-performance reimbursement models have become significant in supporting the business case for healthcare.  Providers need to be concerned with quality as it is directly related to receiving payments. The government implemented a Pay-for-Performance program and Hospital Value-Based Purchasing Program.12  Pay-for-performance (P4P) requires providers to submit data on an initial set of 10 quality indicators. If hospitals fail to submit, they will receive reduced payment. In return, the Hospital Value-Based Purchasing Program offers incentives with higher payments to providers for higher performance and/or improvements. While research to date does not suggest the effects of P4P, it obviously affects the bottom line of most organizations.12

What makes a strong business case for quality in healthcare?
In 2002, Michael D. Pugh stated that the business case for quality “varies by the type of improvement.”  He went on to describe a very strong case for QI: projects that readily decrease unit cost or projects that lead to higher productivity.  He described moderate cases for quality as those that only add value to products or services (an example will be employee bonuses for improved quality) or increased customer and patient satisfaction.9    

Reducing Waste:
​In their very elaborative review of “The Revolution in Health Care Delivery,” Swensen et al. declared emphatically that as much as “40% of healthcare dollars” spent is waste, specifically provider-related.11   We have previously mentioned one form of this waste, which is overuse. Other forms of provider-related waste include inefficiency and preventable harm.4  Swensen et al. do caution on the difference between waste and cost, and make the point that simply removing workers in an area to reduce cost will always erode quality.4  Reducing waste through effective QI programs results in direct benefit to patients, insurers, providers, and hospitals.

In conclusion, the business case for quality is a very broad and complex topic. Mainly because quality is complex and in some cases, depends on perspective. From a business perspective, resources are limited and the difficulty to quantify quality in healthcare or define how much of an institution’s revenue should be allocated to QI programs hurt the business case for quality.  Nevertheless, the business case for quality has more pros than cons as we have elaborated on, from patient safety, decrease in provider liability, ROI, pay-for-performance systems, and maintenance of accreditation.  Continual improvement of quality in healthcare will benefit all parties, the hospital institution, healthcare providers, employees, and above all, the patients, to whom we owe a fiduciary responsibility.




References:
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2)Leatherman S, Berwick DM, Iles D, et al. The business case for quality: case studies and an analysis. Health Affairs (Millwood). 2003;22:17Y30.

3)Chen LM, Rein MS, Bates DW. Title costs of quality improvement: a survey of four acute care hospitals. Jt Comm J Qual Patient Saf. 2009;35:544Y550

4)Swensen SJ, Dilling JA, McCarty PM, et al. The Business Case for Health-Care Quality Improvement. J Patient Saf 2013;9: 44Y52

5)Donabedian A. Evaluating the quality of medical care. Milbank Memorial Fund Q. 1966;44(3)(suppl):166‐206. Reprinted in Milbank Q. 2005;83(4):691‐729

6)Berwick D, Fox DM. “Evaluating the Quality of Medical Care”: Donabedian’s Classic Article 50 Years Later. The Milbank Quarterly. 2016;94(2):237-241. doi:10.1111/1468-0009.12189

7)Ayanian JZ, Markel H. Donabedian's Lasting Framework for Health Care Quality. N Engl J Med. 2016 Jul 21;375(3):205-7. doi: 10.1056/NEJMp1605101.

​8)Greenberg MD, Haviland AM, Ashwood JS, Main R. Is better patient safety associated with less malpractice activity? Evidence from California. Santa Monica, CA; Rand Corp, TR-824-ICJ. As of January
16, 2011: http://www.rand.org/pubs/technical_reports/TR824 2010.

9)Gross PA, Ferguson JP, DeMauro P, et al. The business case for quality at a university teaching hospital. Jt Comm J Qual Patient Saf.2007;33:163Y170.

10)Weeks, W.B., Bajian, J.P. Making the business case for patient safety. Jt Comm J Qual Patient Saf. Jan. 2003;29:51–54.

11)Swensen SJ, Meyer GS, Clancy CM, et al. Cottage industry to postindustrial care - the revolution in health care delivery. N Engl J Med. 2010;362:e12, February 4, 2010.

​12)Finkler, Steven A., Jones, Cheryl B. & Kovner Christine T. (2013). Financial management for nurse managers and executives FOURTH edition. St. Louis, MO: Saunders Elsevier.