Category Archives: Public Policy & News

Baldrige-Based Health Care Reform?

Today’s Washington Post has an article by Minnesota senator Tim Pawlenty on the effective design of national health care reform, entitled “To Fix Health Care, Follow the States”. He argues that the federal government should model its initiatives after successful state-based systems that link outcomes to value:

In Minnesota, our state employee health-care plan has demonstrated incredible results by linking outcomes to value. State employees in Minnesota can choose any clinic available to them in the health-care network they’ve selected. However, individuals who use more costly and less-efficient clinics are required to pay more out-of-pocket.

Not surprisingly, informed health-care consumers vote wisely with their feet and their wallets. Employees overwhelmingly selected providers who deliver higher quality and lower costs as a result of getting things right the first time. The payoff is straightforward: For two of the past five years, we’ve had zero percent premium increases in the state employee insurance plan.

Minnesota has also implemented an innovative program called QCARE, for Quality Care and Rewarding Excellence. QCARE identifies quality measures, sets aggressive outcome targets for providers, makes comparable measures transparent to the public and changes the payment system to reward quality rather than quantity. We must stop paying based on the number of procedures and start paying based on results.

Pawlenty also notes that healthcare reform should not focus solely on access to health care, but also the cost and quality of the service – that is, the value that is delivered. The Malcolm Baldrige National Quality Award (MBNQA) Criteria for Performance Excellence provides a framework that has been tailored over 20 years by a huge collaboration of experts to help business, industry and the government better solve this kind of “wicked problem”. The Minnesota solution sounds like it has applied concepts very similar – if not identical – to those presented by the Baldrige Criteria.

When will the government employ the successful problem-solving frameworks it has developed itself (e.g. MBNQA) to solve its most pressing problems?

Lean Thinking and Health Care Reform

Today’s Op-Ed section in the Washington Post has a piece by Philip K. Howard called “Health Reform’s Taboo Topic”. The problem?

Health-care reform is bogged down because none of the bills before Congress deals with the staggering waste of the current system, estimated to be $700 billion to $1 trillion annually. The waste flows from a culture of health care in which every incentive is to do more — that’s how doctors make money and that’s how they protect themselves from lawsuits.

The article goes on to talk about “defensive medicine,” the practice of ordering tons of diagnostic tests to refine a diagnosis or a treatment plan for the purpose of avoiding malpractice suits. Howard suggests that physicians are cultured into this way of doing business as a defense against potential risks and potential malpractice cases – he even mentions one case where a doctor reacted to a lawsuit by changing his behavior in favor of defensive medicine. A solution, however, is possible:

Containing costs, as Rep. Jim Cooper (D-Tenn.) noted on “Face the Nation” recently, requires overhauling the culture of health-care delivery. Incentives need to be realigned. That requires a legal framework that, instead of encouraging waste, encourages doctors to focus on what’s really needed. One pillar in a new legal framework is a system of justice that is trusted to reliably distinguish between good care and bad care. Reliable justice would protect doctors against unreasonable claims and would expeditiously compensate injured patients. The key is reliability.

The culture of a system – in this case the U.S. health care system – influences the behavior of individuals within the system. This behavior can be waste-producing. When it is, we need to look towards the cultural influences or the structure of the incentives that drive that behavior, and examine ways to address the root cause(s).

It reminds me of the requirements gathering phase of a software development project. Stakeholders spend hours trying to hash out what functions and behavior they expect from their software, and how reliable they want it to be. It is always a challenge to avoid designing the system (that is, how it will look or act) when the essence of what you need to know is what the system needs to do.

I see evidence in the growing national healthcare debate that many people have opinions on the design of the system (e.g. who gets coverage, how pre-existing conditions are handled, how much it costs, who pays), whereas most citizens and Congressmen aren’t even touching the requirements for a successful system (e.g. what scenarios it should support, what behaviors it should provide incentives for, or its reliability/requirements for how much waste the system can and should generate).

In my opinion, one requirement for a successful health care system is that it provides incentives for you to remain healthy and stay out of doctors’ offices and hospitals. A tax credit for a health Body Mass Index (BMI), or maybe lower interest rates? I’d go for that… it would even stimulate me to boost the economy a little more by buying rollerblades or something.

New Quality Manager for Obama: Zients replaces Killefer

obama-headIn his weekly radio address, President Obama announced today a renewed intent to cut wasteful spending, and the upcoming announcement of even more decisive cuts. He also noted the appointment of Jeffrey Zients, a former executive and Director of Sirius XM, as the Obama Administration’s Chief Performance Officer. His official title will be deputy director for management of the Office of Management and Budget. Zients replaces Nancy Killefer, who rescinded her nomination in March.

There have been criticisms of Obama’s handling of the budget so far. For example, critics bristle at the thought that Obama approved the fiscal year 2009 budget with earmarks (this is covered in an article by George Stephanopoulos on March 1, “Obama Will Sign Omnibus Despite Earmark Pledge”). But the fiscal year 2009 budget – executed in March 2009 – is retroactive. It is intended to cover operations of the government and all government-funded agencies (including research facilities, and university-driven research and development) from October 1, 2008 through September 30, 2009. Failure to pass that budget would have meant a swift and immediate crisis, catalyzing a domino effect of layoffs in the highly specialized industries. This could have a nontrivial and long-reaching impact on national competitiveness by depressing not only technological innovation, but also by cutting off practical opportunities for university students and researchers to contribute to innovation as they receive mentorship and training.

More about Zients from the White House Blog:

Zients has twenty years of business experience as a CEO, management consultant and entrepreneur with a deep understanding of business strategy, process reengineering and financial management. He served as CEO and Chairman of the Advisory Board Company and Chairman of the Corporate Executive Board. These firms are leading providers of performance benchmarks and best practices across a wide range of industries.  Currently, he is the Founder and Managing Partner of Portfolio Logic, an investment firm focused primarily on business and healthcare service companies.

Solving the Bird Strike Problem

goosePublic awareness of the danger of bird strikes to aircraft has greatly increased since the January 15 incident in which Chesley “Sully” Sullenberger expertly guided the crippled US Airways Airbus to safety in the Hudson River. On Friday, April 3rd, USA Today published a debate on airline passenger safety due to bird strikes. The newspaper presented the case that even though large bird populations are rising, and thus the risk of catastrophic collisions is also increasing, the federal government is responding by trying to hide the data. In late March, the FAA proposed blocking access to its bird strike database managed by Embry-Riddle Aeronautical University on the basis that public access to the terribly complex records would “stifle reporting”. The opposing view, published by USA Today as excerpts from the FAA’s proposed rules, basically established the position that “voluntary reporting is good enough”.
But according to the National Transportation Safety Board (NTSB, 1999), less than 20% of bird strikes are reported annually. How do we raise the profile of reporting, and encourage pilots and aviation workers to comply?

This question was answered by Dekker & Buurma (2005) in a paper to the International Bird Strike Committee in Athens. After all, the catastrophic failure of aircraft due to bird strikes is an international problem that readily crosses international boundaries and cultures, so it should not be a surprise that this issue has been taken up by aviation analysts worldwide. They recommend that we need to do the following to reduce the risks to human populations from bird strikes to aircraft:

  • We need to establish effective standards for defining what a bird strike is,
  • We need to decouple the reporting procedure from the international governance structures (FAA-like agencies as well as insurance providers), so that pilots and airline employees do not have to fear recrimination for their reports, and
  • We need to promote behaviors that encourage awareness and reporting, such as targeted inspections, clear guidelines, ensuring that the reports actually reach the databases, acceptance of the paperwork required by reporting, relieving time pressure so that there is available opportunity for reporting, and remove the reasons why people are fearful to report.

More details are provided in Dekker & Buurma’s paper at

Quality assurance. Ultimately, bird strikes are the currency with which the effectiveness of preventive measures is settled. This applies to all aspects of the bird strike problem: improved impact resistance of aircraft, wildlife policy of airfields (and their surrounding) and operational procedures of airliners…

For the simple reason that the civil aviation authorities do play a double role (condensation point for information and authority that supervises all other parties) the relations are contaminated and dominated by juridical arguments. This means that there is a tendency for national databases to be biased in such a way that liability is excluded. This in turn means that the existing databases do contribute only in a limited way to the scientific, educational and quality assurance goals. If mandatory reporting is to be successful it has to be organised in a different, non punitive way.

Enhanced reporting “could be realised by unlinking the national bird strike databases from the supervising authority… [and then] the emphasis will change from juridical to scientific and educational.

The solution seems simple – remove the punitive penalties for reporting, and possibly institute incentives for accurate reporting. This could create jobs and open opportunities for researchers to investigate the problems more openly. What do we have to lose?

NTSB (1999). National Transportation Safety Board. Safety Recommendations A-99-86 through –94.

Systems Thinking Predicts Economic Collapse in 21st Century

According to some researchers, it’s the end of the world as we know it – sometime this century, in fact. Economists and policy researchers have actually envisioned it coming for about three centuries, though.

The most recent tap on this subject came on March 7, 2009, when journalist and Hot, Flat, and Crowded author Thomas L. Friedman published an Op-Ed in the Washington Post, entitled “Is the Inflection Near?” He describes how the economic, financial and political systems that we have established in the world – particularly in the west – are inherently unsustainable, and that in order to achieve a truly green world, our fundamental systems for living life must shift:

Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese …

We can’t do this anymore.


What would you think if I told you that this was actually not a new idea, and that the notions Friedman presents were determined by a simulation done over thirty-five years ago? Furthermore, what if I let you in on the fact that people have been thinking about this conundrum since the late 1700’s? It may sound outlandish, but in this case, truth is stranger than fiction.

The simulation that I refer to was done in 1972, with a model called World3 which was coded in the object-oriented Modelica environment. It’s the subject of the Club of Rome commissioned study called “The Limits to Growth” (full text is here). Although the model has received criticism for some of its assumptions, a redaction in 2002 upheld many of the outcomes of the model. In 2009, Dr. Dennis L. Meadows (who directed this research) was awarded the 25th Japan Prize from The Science and Technology Foundation of Japan. Recall that the Japanese were the ones who initially recognized Dr. W. Edwards Deming for his contributions to revitalizing the economy – decades before the Americans embraced Deming’s teachings – and spawned the quality revolution in U.S. business in the late 1970’s and 1980’s that has embossed the landscape of how we do business today. From the Japan Prize announcement:

Dr. Dennis L. Meadows served as Research Director for the project on “The Limits to Growth,” for the Club of Rome in 1972. Employing a system simulation model called “World3,” his report demonstrated that if certain limiting factors of the earth’s physical capacity – such as resources, the environment, and land – are not recognized, mankind will soon find itself in a dangerous situation. The conflict between the limited capacity of the earth and the expansion of the population accompanied by economic growth could lead to general societal collapse. The report said that to avert this outcome, it is necessary that the goals of zero population growth and zero expansion in use of materials be attained as soon as possible. The report had an enormous impact on a world that had continued to grow both economically and in population since World War II.

We also have a rich literature dating back centuries that has studied the relationships between population, environment and technology. In the 1700’s, English economist Thomas Robert Malthus studied these relationships in terms of the projected effects of uncontrolled population growth. “Before Malthus, populations were considered to be an asset. After Malthus, the concept of land acquisition to support “future large populations” became a motivating factor for war.” (citation) The 20th century Boserupian Theory of Ester Boserup, in contrast, suggests that advances in technology will drive the capacity of the world to support population. Researchers like Steinmann & Komlos (1988) have simulated the interplay between both paradigms over time and suggest that there is a cyclical dominance. (I note that references to Malthus and Boserup, let alone Meadows’ World3 model, are rarely on the lips of policymakers.)

In my opinion, it is not climate change we should be worried about per se, but the social, economic and global political system that drives human interactions with each other and with the environment. Climate change may be a symptom, but it is just a tracer for the attitudes of unbounded material growth that are contributing to the effects (if you want to learn about climate change and policy, Prometheus is a good place to start – my point is not to argue the merits of “is it” or “isn’t it” happening because others including Pielke, Jr. do that very well). Regarding climate change, we need to decode what the data is trying to tell us about how we’ve structured our large-scale systems of interaction with one another – rather than merely trying to control our personal “carbon footprints” or recycle more (though these may be important ingredients in the solution).

There is nothing new under the sun. Only today, the forces of production, consumption and population have metamorphosed into a crisis of sustainability – a “perfect storm” to test our ability to live and work in the limit case.

Steinmann, Gunter & Komlos, John (1988). Population growth and economic development in the very long run: a simulation model of three revolutions. Mathematical Social Sciences, Vol. 16, No. 1, Aug 1988. 49-63 pp. Amsterdam, Netherlands.

Warren Buffett on Simulation & Modeling

John Hunter shared some excerpts from Warren Buffett’s 2009 Letter to Shareholders. I particularly liked this one part where he reflects on the outcomes of economic modeling and forecasting:

Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas.

I’d like to amend this: Beware of geeks bearing formulas who a) can’t tell you what every part of the derivation means, b) don’t know the model’s underlying assumptions, and c) don’t know what “threats to validity” are. (And if you’re the geek in question, be able to explain how your models and forecasts work!!)

Models can be a great way to capture the dynamics of social and technical systems, and simulations can help us explore how these systems will evolve over time – but how those models are initialized, and the simplifying assumptions they use to generate results, are just as important as the answers they propose.

The Quality and Innovation Attitude

ryan-headRyan Adams (@RyanSAdams; Blog) tweeted about another blog post this morning entitled “Looking for Yes” by Seth Godin. Ryan suggested that perhaps this is the reason, as described by Godin, that Obama got elected:

I don’t think it should matter whether or not you’re trying to make a profit. If you’re out to provide a service, or organized to deliver a product, then look for a yes. At every interaction.

Salesmen know to look for a small yes, and then pursue it aggressively to get a big yes. Kids know that to get a yes from a parent, a good strategy can be to find a similar situation that will get a yes, and then to make the comparison. Kids and salesmen want that yes to happen, so they’re willing to work on it – and think about what they want from as many different angles as it will take to win over the other party! This is the ultimate mode of “thinking out of the box” because it is so genuinely motivated by a person’s desire to accomplish something. So why is it so easy to revert to an objectionist attitude, particularly in the workplace?

I hear these kinds of phrases daily: “That will never work.” “It’s too complicated.” “People don’t want that.” “It can’t be done.” “It works the way we do it now, so why change it?” How will you know it doesn’t work unless you try? The naysayers may be right – that something can’t be done – but they’re missing the underlying dynamic. It can’t be done under the same assumptions that we’re using today. You have to change your assumptions to see new ways of doing things. You have to explore your rationale for doing those things in the first place.

Prahalad’s Fortune at the Bottom of the Pyramid presents some striking stories of finding innovation by applying this attitude. I strongly encourage everyone to read his Strategy+Business article from 2002. The intro the the article is revealing, and hopefully enough to get you interested in how this “looking for yes” attitude can help you in your work:

Low-income markets present a prodigious opportunity for the world’s wealthiest companies – to seek their fortunes and bring prosperity to the aspiring poor.

This vision requires challenging deeply rooted assumptions in culture and in business, and aggressively seeking ways to make impossible product development cases work. “Looking for yes” is a productive attitude in general, and particularly if you are working on quality improvement or increasing innovation. Who finds opportunities? The people who have open minds, and either actively look for the opportunities, or are open to those opportunities coming their way. Who doesn’t find opportunities? Anyone who doesn’t look.

(Side note: now that my senses have been “turned on” to discrete event simulation, I’m seeing it all over the place – even in books on my own bookshelf. Why didn’t I ever notice that before?)

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