February 2002
An updated version of this essay appears in the Nothing but the Truth about Quality manualJames O. Westgard, PhD, FACB
Enron - a verb meaning to hide liabilities, cover-up problems, and keep debt and delinquency off the books.
The Enron case shows that truth can be more unbelievable than fiction. Enron is another very public example of big business going astray because of the lack of professional responsibility and inadequate government regulation. Enron is even more interesting than the Firestone tire example because Enron made a lot of its money by providing services, not products. In that sense, the Enron experience should open some eyes in healthcare organizations because we are also service oriented. We tend to think we're different from businesses that produce products (like Firestone) and, therefore, those examples don't apply to us. Maybe we can learn something from Enron.
Many people suffered financial losses from the Enron bankruptcy, most noticeably the small investors and company employees, not the managers, officers, directors, bankers, lawyers, or accountants! Enron certainly gave credence to the "greed is good" philosophy espoused by Michael Douglas in the popular 90s movie Wall Street.
Even the politicians who took money from Enron realize something major went wrong with our free market system. As they conduct their hearings, congressmen are expressing their outrage at Enron's top managers, their supposed lack of knowledge of what was happening within the company, and the lack of leadership and values that allowed the business to go out-of-control.
Enron memorabilia is now being widely sold over E-Bay. One of the hottest items is the Enron Code of Ethics Manual, which is a very rare item, as you might imagine. One copy of this rather short book went for over $50 last week. The Enron "values photo cube" is more readily available, just $9.99 last week. One now occupies a special place on my desk to remind me of the importance of integrity, communication, respect, values, and excellence.
Quality has a lot to do with these values. Quality is about doing what's right! Doing the right things right is one of the simplest and most effective definitions of quality. Doing something wrong, deliberately wrong, is the highest affront to quality and the values needed to achieve quality. That's why this Enron debacle is relevant to our interests in quality management. Any culture that makes Enron possible makes quality difficult. If that culture is widespread and represents corporate America, not just Enron, then it becomes more and more difficult to achieve quality in healthcare.
The importance of the Enron financial implosion is evident by a new word that has already crept into our language - "enron," a verb meaning to hide liabilities, cover-up problems, and keep debt and delinquency off the books. A more proper definition that may be found in Business Schools and MBA programs is "to aggressively enhance profits and reduce losses, remaining in compliance with the laws, while influencing the government to change the rules and regulations as necessary to maximize financial opportunities and minimize liabilities."
Enron's trademark, now known as the "crooked E," has come to symbolize the art of hiding problems, adhering to the letter of the law, keeping the public from knowing what's really happening, making all the money you can now, regardless of the long term consequences. It is short-term thinking at its finest and fits well with the business practices in healthcare and healthcare laboratories. We've finally got a business model that fits these practices, unfortunately it's Enron's crooked E, fallen flat on its back!
In the last decade, healthcare has been transformed into a competitive business by adopting modern business principles and practices, and also adopting the modern business manager - the MBA - who has no professional background or understanding of healthcare. Popular novels, even murder mysteries such as Lescaroat's The Oath, often adopt the healthcare setting, particularly the HMO, as the place of intrigue where financial interests conflict with patients needs. Healthcare operates with its own special kind of "greed is good" philosophy where scientific advances, new medical technology, and new pharmaceuticals are quickly exploited to make money.
What has happened to quality during this period? According to studies conducted by the Institute of Medicine, the quality of healthcare is now so bad that the healthcare system must be considered as totally broken [1]! We've had too much business leadership without principles and values. We have a healthcare debacle that is even larger and more serious than Enron.
I've always been puzzled why laboratory tests have taken such a hit in healthcare budgets and regulations. Lab tests are the cheapest source of quantitative information, sometimes claimed to provide 80% of the information used in medical decision making while only consuming approximately 6% of medical costs. From a business point of view, it would seem that laboratory testing would be considered the best strategy for maximizing return on investment.
However, the government has targeted laboratory testing because the charges for laboratory tests are out-of-line with their real costs. Everyone who works in a laboratory knows that the charges reflect cost shifting to cover other services, e.g., laboratory tests are priced high to offset room rates, nursing costs, etc. The laboratory has become a cost center in the minds of hospital managers, even though it generates a lot of profit that is used to cover other costs. Enron's books are probably no more devious and complicated than those of healthcare organizations.
The business problems in healthcare are further complicated by the strategies of healthcare suppliers, such as the manufacturers of medical devices. They are also feeling the effects of government regulations/reimbursement practices and are looking for new, less restricted markets, such as patient testing, POLs, and POCT sites.
Consider "waived" tests - those tests that can be performed by anyone, anywhere, anytime, because they are simple, fool-proof, and can do no damage. An FDA draft guidance document in the year 2000 proposed that accuracy meant "the test performs the same in the hands of untrained users as it does in the hands of professionals when using the device under realistic conditions." [2] Getting the correct answer isn't necessary! As long as the user can get the same wrong answer with the device as a professional using the same device, then performance is okay! That would certainly make it a lot easier for manufacturers to gain approval for waived tests that can be marketed to unsuspecting consumers. Fortunately, professional opposition seems to have slowed this document down and it appears that the responsibility for defining waived test may be transferred from FDA to CMS.
Consider electronic QC! There's no technical or scientific rationale that can defend this practice. The only explanation is that business interests have influenced the regulatory agencies to approve electronic QC as a substitute for real QC. If you want to understand how this happened, the trail includes a series of letters between I-Stat and HCFA (now CMS). The key letter that allowed electronic QC to get its foot in the door actually was a temporary allowance, probably a tactic to put off the decision, that stipulated "all QC requirements are being re-evaluated as part of the process of preparing the final CLIA regulations. All determinations as to the use of internal electronic controls in meeting CLIA requirements will be reviewed at that time." [3] Of course, 6 years later, the final CLIA regulations have yet to be published!
What's been holding up the final CLIA regulations? One major issue is part of the original provisions that have yet to be implemented - validation of the manufacturer's QC instructions. The original CLIA-88 rules, published on February 28, 1992, called for FDA to implement a process for QC clearance, but that provision has never been implemented! There was a 2 year phase-in period for the QC requirements for moderately and highly complex tests, which were to become effective September 1, 1994. After that time, laboratories were to meet all applicable quality control requirements or follow the manufacturer's instructions if cleared by the FDA as meeting the CLIA requirements for quality control.
This phase in period was first extended on December 6, 1994, again on May 12, 1997, again on October 14, 1998, and again on December 29, 2000. This 4th postponement provides a total of 10 years for the phase-in of the quality control requirements, or a total delay of 10 years in implementing the QC clearance provision of CLIA. Meanwhile, quality control has been coasting along, reduced to the minimal requirement of analyzing two levels of control each day.
From the beginning, industry opposed the validation of QC instructions. In 1993, the Health Industry Manufacturers Association mounted an aggressive opposition to the FDA draft guidelines for documentation and validation of QC instructions. FDA gave up, ostensibly due to the lack of resources needed to perform additional reviews. It would probably be more truthful to say that government agencies can no longer oppose business interests as politicians have become more and more dependent on financial support from business and industry.
In the absence of an effective regulatory mechanism, customers and users depend more and more on practice standards that define acceptable performance and conduct. Standards of practice may be defined by professional organizations, but these days they're more likely to be defined by standards organizations such NCCLS (National Committee for Clinical Laboratory Standards, www.nccls.org) and ISO (International Organization for Standardization - www.iso.ch).
NCCLS imposes some guidelines on the composition of standards committees in order to maintain a balance between industry, professional users, and manufacturers. However, manufacturers can fast-track projects through NCCLS by providing direct funding for high priority projects. An example is the recently approved guideline for quality management for unit use devices [4]. Those who pay the piper also get to decide the tune that will be played!
ISO's committee appointments have less representation from experts in the field and an even stronger business membership. Many companies have full time people who serve on standards committees and have their expenses paid by the company. Professional scientists who may be experts in the field must be paid by the standards organization. Who do you think is best represented on ISO committees?
An example of this problem is the ISO/TC 212 working group that developed practice guidelines for defining desirable analytical performance goals. The leading subject experts in this area, Callum Fraser and Per Hyltoft Petersen, were not part of the ISO process, in spite of diligent efforts to comment on the draft documents and recommend revisions to the guidelines. For subject experts to have a voice and opportunity to discuss the ISO guidelines, Anders Kallner, President of the IUPAC Clinical Chemistry Section, organized the 1999 Stockholm Consensus Conference on Quality Specifications in Laboratory Medicine [5]. In spite of that effort to provide professional guidance, ISO has gone in its own direction!
The audit, or inspection, is supposed to be the check that assures rules and regulations are actually being followed. For manufacturers, one form of inspection is the ISO certification process. What typically happens is the manufacturer hires some consultants to guide the implementation of the ISO standards, then pays those same consultants to certify that they meet the ISO standards. The Arthur Andersen approach to consulting and auditing has nothing on the ISO practice for manufacturers! Now laboratories are getting also getting interested in being ISO certified. Laboratories also want to buy a stamp of approval!
And it's not so different in laboratory inspection and accreditation by professional organizations. Even the esteemed College of American Pathologists (CAP) has to be "deemed" as having requirements equivalent to the CLIA requirements to be approved for inspection and accreditation of laboratories. One of the results is that CAP too has accepted electronic QC! The audit business seems to have prevailed over the professional interests in quality. These business interests are also reflected in a variety of quality products, such as proficiency testing, Q-Probes, etc., that are often represented as necessary to pass inspection. Try arguing with a CAP inspector about the validity of any proficiency testing program other than CAP's own.
The Joint Commission for Accreditation of Healthcare Organizations (JCAHO) is an even more compromised position. There is no place where the enron practice is more prevalent than quality management in healthcare organizations. And JCAHO sets the standards! For example, any incident report in a hospital is automatically stamped as "privileged" information to prevent the customers from knowing about it. That's an accepted practice by JCAHO. Even the people who work in the healthcare organization have difficulty in gaining access to information about the problems that have been identified with their own processes and procedures.
JCAHO is as conflicted as Arthur Andersen, selling its own products on how to pass inspection, providing consultation services, and then also selling the inspection service. And outsiders wonder why so few healthcare organizations fail the accreditation process when everyone knows the healthcare system has broken down [1].
These are just a few illustrations - the list goes on and on. I'll stop here for now, but am sure it will be necessary to comment further as the Enron scandal unfolds.
It might be difficult to remain positive in the midst of such disappointment, but with age one has many experiences that demonstrate the power of the "little people" - the workers - to overcome the limitations of the organization. Even under very these trying conditions, individuals still make a difference. When each of us advocates for better quality in our own workplace, when each of us demands quality from our vendors and healthcare givers, we are the drop of water that begins the flood. For over six years on this website, I've written more than a few essays (see below and in the archives) about how to do better quality control, and I hope that these help you in our collective quest to bring true Quality back to healthcare.
When we have a pleasant experiences in healthcare, it's almost always attributable to one individual worker (tech, nurse, doctor, etc.) who does what's right to make quality happen. Think of the Quality that might abound if an organization provided the culture and values that rewarded quality rather than profits.
- Institute of Medicine. To Err is Human: Building a Safer Health System. LT Kohn, JM Corrigan, MS Donaldson, eds. Washington DC: National Academy Press, 2000.
- Guidance for Clinical Laboratory Improvement Amendments of 1988 (CLIA) Criteria for Waiver; Draft Guidance for Industry and FDA (Draft Guidance - Not for implementation). www.fda.gov/cdrh/ode/guidance/1147.pdf
- Letter of February 28, 1996 from Anthony J. Tirone, Deputy Director for Survey and Certification, Health Standards and Quality Bureau, Health Care Financing Administration, Department of Health & Human Services, to William P. Moffitt, President and CEO of I-STAT Corporation.
- NCCLS. Quality Management for Unit-Use Testing - Approved Guideline. NCCLS document EP18-A, NCCLS, 940 West Valley Road, Suite 1400, Wayne, PA 19087-1898, 2002.
- Hyltoft Petersen P, Frasser CG, Kallner A, Kenny D. Strategies to set global analytical quality specifications in laboratory medicine. Scand J Clin Lab Invest 1999;59(#7):475-585.
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