“Pharmaceutical industry” sounds like an almost contradictory word. A great career, a glorious mission, giving up oneself for the sake of others.Now the profession has been reduced to that point
or widget maker. We operate on a system called “RVU” or Relative Value Unit. This is an ancient system based on diagnosis and quantity. Despite all our efforts, America has failed in delivering health care and its outcomes.
If medicine is to be run like a business, let it be a truly patient-first business. Of course, this is the primary one. From a business and human nature perspective, we must not forget this. Having said that, let’s learn business discipline from success and failure.
A good model comes from Dr. W. Edwards Deming in his paper on “The Five Deadly Diseases of 1984”. Deming was the post-World War II American statistician who lifted Japan from the ravages of war and helped create the economic powerhouse it is today.
In this article, I will take each of his claims and compare them to the business practice of medicine today. This comparison is not about any particular hospital, insurance company, or healthcare system, but about medicine as a whole.
1. Lack of constancy: Deming refers to planning production and services so that they have the ability to continue, always look forward, and push decisions to those who know best about the problem at hand. Innovation, research and education, as well as improvement in design, are the focus here. What does this have to do with medicine in particular. We are still shortsighted. For example, insurance companies may pay for certain expensive treatments but still pay little attention to prevention. While this has improved somewhat, we’re certainly still light-years away. As one of many examples, we still have difficulty accessing smoking cessation drugs. Other areas where this Deming principle applies is allowing those with the most education to contribute to decisions that affect them and their patients. Providers need to work at the highest level of education and not spend most of their time on desktop and computer tasks. In the medical economics article cited below, it is estimated that providers spend 49% of their time on EHR and desk work, and only 27% on in-person patient care. Another issue worth mentioning is education. In the RVU system, education is usually not valued. Promoting production with the aim of raising the level of production. This comes at the expense of time with patients, college interactions with peers, and, frankly, education in general. This culture fosters the creation of silos, leading to low morale, depression, and, as many statistics show, even suicide.
2. Emphasize short-term profits and short-term thinking. Fear of being “overtaken” or an unfriendly takeover. Too often, health systems base revenue or success on quarterly data, which can actually sacrifice the future of providers, the communities they serve, and the institution as a whole. They may overextend, overspend, and overemphasize the wrong short-term goals, ignoring how these decisions will affect the future of all of us. In the field of medicine, health systems acquire other practices or other health-related businesses that further expand their reach. Seems to be afraid of working with other entities. “We have to look good”. Squash game. Conquer the best and brightest to protect our own position. Take advantage of draconian non-compete contracts that could force healthcare providers to leave the communities they serve. There is an overwhelming sense of control, essentially ownership over the provider. This affects morale and leads to brain drain in the community, often affecting patients and practitioners the most. The skills and connections that individuals provide to the community will be lost. These may be used not only by those who need these services, but also by the system itself, and represent a significant loss to every stakeholder.
3. Merit rating or annual review. Sounds reasonable, doesn’t it? But as Deming said, “Pay for what you get; get what you pay for; inspire people to do their best for their own good. The effect is quite the opposite of what the text promises.” Part of the argument is that in professional medical care In a healthcare setting, perhaps more than 90% of performance is based on interactions with colleagues, the people around them, and the systems they work with. Deming’s suggestion here is that real improvement should focus on systems, processes, and methods, not individuals. In his view, focusing on individuals is a low-yield strategy. Instead of asking “why”, we focus on “who”. “Who” didn’t clean up and recover spills outside, not “why” didn’t clean up and make it safe. The concept is certainly a bit hard to swallow, but stepping back from our ingrained culture and way of doing things, I think many of us can really see value in this angle.
4. Managed liquidity. This theory argues against rapid management turnover. Managers may often jump from one position to another in an organization without ever really understanding the system as a whole. Metrics are created to demonstrate manager success, not to develop metrics that benefit the organization. An interesting observation is that in Japan, an industrial powerhouse for such a small country, after finishing school, one would go to a factory floor, work on an assembly line, deliver products, for years, and finally transfer to higher management positions. This builds complex working knowledge, a sense of identity and a sense of belonging to the company. This person is able to fully understand the culture, observe and learn from past failures and successes, and earn the respect of colleagues. The average CEO of many large companies only stays there for 4 years. They may engage in “empire building” or undertake projects that end up being negative present value, artificially successful, enabling them to take a higher position at another company. While these projects look good at first, increasing the number of these entities under the company’s control, they can eventually lead to failure. “It worked fine when I left”. Unfortunately, these scenarios play out regularly in the healthcare system.
5. Manage only with visible numbers, with little or no consideration for unknown or unknowable numbers. It sounds confusing, so what is the real meaning here?
Measuring data alone is not enough to successfully run medicine as a business. There are many things that affect the system that we simply can’t put numbers on, but still have to be considered. How do unhappy patients affect the health system? What about disgruntled suppliers?
These are very important aspects of the business of medicine, and we must consider them, even though they may be difficult or nearly impossible to measure.
These issues certainly paint a rather bleak picture, but all is not lost. We have to first agree that there is a problem, and I’m sure most of us can agree on that. Then we must work to correct our “deadly disease”. For the good of the business, we call it medicine, for our communities, and most importantly, for our patients. The lessons that Dr. Deming offers (and the points I mention represent only a small fraction of what he has to offer) can certainly serve as a springboard for change.
Vincent A. Cantone, MD, FAAP, FACP, is a physician and pediatrician, currently pursuing an MBA at the Johns Hopkins Carey School of Business.
1. Anderson, P. (May 8, 2018) Physicians have the highest suicide rate of any profession. https://www.webmd.com/mental-health/news/20180508/doctors-suicide-rate-highest-of-any-profession
2. Bendix, J. (April 2022) Destroying busy work. Medical Economics, 99(4), 22-25
3. W. Edwards Deming Institute. (nd) Seven deadly diseases managed. https://deming.org/explore/seven-deadly-diseases/
4. W. Edwards Deming Institute. (September 21, 2015). Create goal constancy.
5. W. Edwards Deming Institute. (January 9, 2017). Management of deadly diseases: Emphasis on short-term profits.
Deadly Disease of Management: Emphasis on Short-term Profits
6. W. Edwards Deming Institute. (29 October 2012). PhD.Deming calls for abolition of annual performance reviews
7. W. Edwards Deming Institute. (July 15, 2013).Manage liquidity
8. W. Edwards Deming Institute. (13 Aug 2015). Myth: If you can’t measure it, you can’t manage it.
9. (Guest star by Dr. W. Edwards Deming). (Chuck Olin Associates, Inc, Chicago Producer). (1984) Dr. Deming – Five Deadly Diseases.Encyclopedia Britannica Movies