Measuring Value

“As you know, hospitals across the country are under extreme financial pressure,” Judy Weimer, the hospital’s CEO began her presentation to the medical practice directors.  “We will begin to measure the contributions of our medical staff using Relative Value Units (RVU).”  Essentially, these measure the work we do in treating patients.  Each medical procedure we deliver will be recorded for each medical staff member.  We will weight these by the time spent on the procedure according to a standard.  For example, if the procedure takes longer than the standard, the RVU will be decreased by a percentage based upon the standard.”

As expected, there was a lot of grumbling about the RVU system, but the medical staff had little choice in going along with the system.

RVU’s became what counted.  But what mattered to patients was not counted.  Patient satisfaction plummeted.  Directors no longer were able to spend time with patients providing information about their treatment and comfort in their future health.

Medical outcomes also declined.  Doctors were hesitant to consult with each other because these consultations were not in the RVU’s.  Doctors had less time to learn from each other’s experiences because this cross training was not in the RVU’s.

Financial results which looked promising at first also deteriorated.  The hospital counted upon referrals from smaller hospitals.  These began to decrease as referring doctors were reluctant to send their patients to the hospital.  In addition, legal costs increased as a result of some high-profile medical malpractice lawsuits.

Some of the more senior medical staff retired when they became frustrated with the quality of care they were able to provide to their patients.  The hospital was challenged to hire replacements due in part to having to work under an RVU system.

If an organization undertakes the measurement of value, it needs to ensure that the measurement system reflects what matters in addition to what can be counted.  Patient satisfaction, medical outcomes, contributions to the development of others are examples of things that matter that should be incorporated into a measurement of value.  While these may make value measurement more subjective, they will lead to an organizational culture that is more reflective of what matters.

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“In business, the idea of measuring what you are doing, picking the measurements that count like customer satisfaction and performance…you thrive on that.”
– Bill Gates (founder of Microsoft)

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