An examination of Total Quality Management in Health Care Organizations and

the application of TQM principles by the Joint Commission on the Accreditation

of Healthcare Organizations

I. Introduction

During the summer of 1999, CBS’s 60 Minutes dedicated a full hour installment of their

widely watched TV newsmagazine to a startling expose of several hospitals in the Charter

Psychiatric Hospital chain. This documentary cited Charter for numerous abuses

involving the inappropriate application of patient restraint and seclusion in its treatment

of disturbed adolescents, specifically naming three Charter hospitals in the northeastern

region of the U.S.

In many ways, this was “nothing new.” A number of private psychiatric hospital chains

have been prior targets of documentary exposes throughout the 80’s and 90’s. In one

very different aspect, however, the 60 Minutes documentary on Charter sent shock waves

throughout the healthcare industry. The President of the Joint Commission on the

Accreditation of Healthcare Organizations (JCAHO), Dennis O’Leary, M.D., was

repeatedly confronted by CBS’s Ed Bradley for continuing the extend JCAHO

accreditation to these hospitals, each of which had been previously reported for serious

abuses of patient rights, and in several cases, unnecessary patient deaths. The

implication of guilt by association, or in this case, guilt by accreditation, was subtly

extended to the JCAHO. How this serious gap in the practice of accrediting (insuring

quality) America’s healthcare institutions is one of the core themes of this paper.

I have managed healthcare facilities (substance abuse hospitals) since 1983, in both

Florida and Alabama. During that time, I have experienced six JCAHO reviews as CEO

of a healthcare organization. This 16 year span of experience has given me the ability to

observe (and in some ways, participate in) the evolution of JCAHO’s adoption and

application of the principles of Total Quality Management (TQM). In this paper, I will

review the application of the principles of TQM in the American healthcare setting,

compare and contrast JCAHO’s accreditation standards with the principles of the

Malcolm Baldridge National Quality Award Program (the Baldridge criteria), discuss

aspects of the healthcare industry that pose barriers to the further implementation of the

principles of TQM, and make several recommendations for change.

II. The application of TQM practices in American healthcare

Total Quality Management is a system promulgated by a number of key thinkers

(Deming, Juran, Crosby, Imai) to constantly improve product/service quality, while

providing commensurate control to costs. On both measures (quality improvement and

cost control), TQM has played to mixed reviews in the healthcare sector. As an industry,

healthcare has had an inflation index ahead of the CPI for 25 consecutive years (Brannon,

97). To a large extent, this out of control inflationary spiral is attributable to health care

payment mechanisms. Indeed, until the advent of managed health care in the late 1980’s,
one could make a defensible case that health care executives were incentivized to inflate

costs, i.e., reimbursement was largely designed around “cost plus” billing to insurance

companies. Although the widespread acceptance of managed health care (or more

accurately, managed health care reimbursement) has significantly slowed this inflationary

growth in costs, managers continue to lag behind their counterparts in other industries in

the core competencies necessary to control costs.

On the quality improvement side of the equation, the healthcare industry has suffered as

well. Unlike other industries’ acceptance of TQM as a potential distinct competitive

advantage, the principles of TQM have largely been “legislated” into the healthcare arena

by the JCAHO. Although the JCAHO promotes its accreditation process as a voluntary

process, and does not technically license healthcare organizations, accreditation is

necessary for 3rd party reimbursement by virtually every existing payer group. Thus,

accreditation becomes a de facto business license for healthcare organizations.

As the introduction of this paper illustrates, JCAHO’s focus on TQM principles has been

largely one-dimensional: that of assessing and accrediting the processes necessary to

provide quality. It has largely ignored the other key element of TQM, that of insuring the

quality outcomes of those processes.

The reasons for this one-dimensionality are complex. Multiple forces drive the

traditional healthcare employer in America. First, the largest power base, physicians, are

not employees of the organization. As essentially independent contractors to the

organization, their participation in any TQM efforts is not only voluntary, but in many

cases, doubtful. Unlike other industries, quality failures in healthcare settings often

create the most serious of consequences, death or serious illness. Compounding this,

healthcare organizations, and the physicians that contract with them, have a higher threat

of litigation than most sectors of the economy. For these two reasons alone, there has

been significant resistance to TQM efforts to tie quality processes to insured quality

outcomes in healthcare organizations. Specifically, initiatives sponsored by the JCAHO

to create a national data bank of mortality rates tied to specific healthcare organizations,

and more precisely, to specific procedures within those organizations, have been met with

tremendous resistance from both hospital and physician groups, and have largely failed.

In spite of these challenges, the JCAHO has continued to champion the principles of

TQM, especially those espoused by W. Edward Deming. JCAHO surveys began to

emphasize TQM principles in the mid-80’s, and in 1992, the Joint Commission required

hospital CEO’s to be familiar with the principles of TQM (Messner, 1998). Indeed, in a

wide ranging survey conducted of over 300 responding CEO’s of American and Canadian

hospitals, over 90% describe their organizations as having implemented a CQI (TQM)

program. The majority of these CEO’s expect their TQM involvement to increase over

the coming five years, but only 5.4% of these CEO’s indicated that their organizations

had a TQM track record of over 5 years (Yee-Ching, Shih-Jan, 1997). This study

indicates a growing acceptance of TQM principles in healthcare organizations, but also,

the relatively embryonic stage that many of those efforts represent.

III. JCAHO Standards and the Malcolm Baldridge Quality Award Criteria:

While the quality improvement standards espoused by the JCAHO are, in essence,

required for a healthcare organization to operate (required for 3rd party reimbursement),

the organizational assessment and improvement process of the Malcolm Baldridge

Quality Award is strictly voluntary. While many non-healthcare organizations are

required to adopt the similar but less stringent ISO 9000 quality criteria in order to win

certain contracts or conduct business operations in Europe, no such operating requirement

exists involving adherence to the Baldridge criteria (Melnyk, Denzler, 1996). A

comparison of the mission statements of the two organizations is instructive in

contrasting their operating realities. The mission statement of the Baldridge award

program is:

To promote awareness of the importance of quality improvement of the national

economy; to recognize organizations which have made substantial improvements

in products, services, and overall competitive performance; and to foster the

sharing of best practices information among U.S. organizations (Carr, Jackson,

1997).

The JCAHO’s mission is to:

 Improve the quality of care provided to the public through the provision of

healthcare accreditation and related services that support performance

improvement in healthcare organizations (Carr, Jackson, 1997).

Many of the differences in focus and emphasis found in these two assessment and review

processes can be extracted from these mission statements. In the case of the Baldridge

criteria, the award is clearly designed for the for-profit business organization. The

mission statement expressly covers profitability criteria (competitive performance).

Outcome improvement, as well as process improvement, is clearly addressed in the

mission statement. Finally, a key mission of the Baldridge award program is to share best

practices among organizations. Baldridge award winners know from the point of

application that if they win the award, their findings will likely become a fishbowl

experience, to be shared with competitors and across industries.

The JCAHO’s mission, on the other hand, limits itself to the improvement of the quality

of care. Profitability criteria, cost control measures, and competitive benchmarking of

financial/fiscal performance are not addressed by these criteria. Indeed, a large

percentage of the organizations reviewed by the JCAHO are not for profit organizations.

There is no specific mention of the sharing of best practices information among the

recipients of JCAHO accreditation. In practice, although JCAHO surveyors often say

that best practices are shared by incorporating them into standards revisions, there is

virtually no specific sharing of best practices as a result of JCAHO accreditation other

than standards revisions. The proprietary lid placed over the entire accreditation process
has created a very tight seal on the sharing of best practices information among other

healthcare organizations. Finally, although not specifically excluded in the JCAHO’s

mission statement, there has historically been little emphasis on measuring outcome in

the actual review process. The difference in emphasis in this area between the two

mission statements is clear.

Recently, the JCAHO has commissioned a pilot study to combine the review criteria used

by JCAHO and the Baldridge Award (Cesarone, 1997). This study has resulted in the

development of a crosswalk combining and contrasting the criteria, largely developed by

Francis Jackson, a former Baldridge Award examiner, and an instrumental party to the

Eastman Chemical Corporations Baldridge Award in 1993 (Carr, Jackson, 1997). The

pilot study criteria largely repeats the similar language in the two criteria, but the

differences noted in the crosswalk may forecast coming changes in the JCAHO criteria

and review process. The Baldridge criteria are used to measure three categories of data:

1. Approach, 2. Deployment, and 3. Results. As stated earlier, the pressure is increasing

for the JCAHO to increase its emphasis on the measurement of results. The pilot study

promises to increase this possibility. The Baldridge criteria further focuses emphasis on

external organizations and stakeholders related to the organization. JCAHO’s criteria

largely fail to address this increasingly important set of relationships in the delivery of

healthcare services. The crosswalk, and its use in this pilot study, may well increase this

emphasis. With the tremendous increase in power among 3rd party payers in the delivery

of healthcare, this emphasis may well be inevitable.

Finally, the explicit message of both sets of criteria is that they are to be used as tools in

the achievement of the organization’s already stated goals and objectives. The implicit

message in the JCAHO review process, however, becomes confused in practice in this

regard. As previously stated, although the JCAHO review process is a voluntary one, a

healthcare organization trying to operate without JCAHO accreditation faces an almost

impossible task: that of funding almost its entire operation with patient private pay.

Because of the de facto mandatory nature of JCAHO accreditation, in practice, the

standards of the JCAHO often literally become the goals of the organization. In essence,

then, the review process sets height of the quality “bar,” and what process the

organization should follow in jumping over the bar. Many would state that the review

process sets the bar very high. The recent failure, however, of the JCAHO to pull

accreditation from Charter Hospitals clearly involved in repeated (and reported to the

JCAHO) practices that led to unnecessary patient deaths, and the resulting negative press

coverage that accrued to the JCAHO, promises to further advance the accreditation

process toward both the measurement of outcome, and the reviewed organization’s

adherence to its own standards, goals, and procedures.

I. Further Obstacles that must be Overcome to Advance TQM in healthcare,

and Recommendations for Change:

The advance of managed health care reimbursement during the late 80’s and 90’s has

revolutionized healthcare in the U.S. Although the process continues to evolve, the

increase of managed health care to date has contributed to the creation of a tremendous
amount of excess capacity in U.S. hospitals. The increasing pressure to deliver care in

the least restrictive and least intensive environment has increased the amount of

healthcare delivery in outpatient settings, and concurrently decreased the real demand for

inpatient services. In practice, however, the continued emphasis of the JCAHO is the

hospital, or inpatient, setting. For TQM efforts to flourish in these settings, they must

have the full and sustained support of top management that is often beset by census and

capacity problems. A wavering of commitment by top management to TQM efforts is

often the consequence of serious capacity problems in today’s healthcare organizations.

For TQM to have sustained growth in healthcare, this support cannot waver, in spite of

operational challenges.

The increase in the real authority of 3rd party payers in the key decisions effecting

healthcare organizations, and the delivery of healthcare services, often complicate the

application of TQM principles in healthcare organizations. Often, the quality processes

of the treating organization are in serious conflict with the payment decisions made by

the payer. A patient discharged after one day because of the decision of an insurance

review organization, when the hospital recommended a stay of 3 days, seriously

compromises the integrity of the TQM process. For this problem to diminish, the

JCAHO will have to increase its emphasis on reviewing managed health care groups as

well as traditional healthcare providers. To date, the pressure on these organizations to

undergo accreditation by JCAHO has been minimal. Further, as de facto participants in

the process of healthcare delivery, managed care organizations must become involved in

the TQM process itself at these organizations. Both healthcare provider organizations as
well as payer groups should seriously consider the development of cross-functional

teams, buyer group/provider panels, and other measures designed to increase the

involvement of buyer/payer groups.

The large percentage of not-for-profit providers in the healthcare sector provides a real

challenge in the further advancement of TQM principles. Often, this category of provider

receives a large percentage of its revenue from Medicare and Medicaid (or other state

payment mechanisms). To a large degree, although TQM is widely practiced in this

category of healthcare organization, it is often less tempered by the realities of the for-

profit marketplace than those of for-profit organizations. These organizations often have

heavy layers of middle management, whose very jobs could be threatened by the

flattened organizations often resulting from a sustained commitment to TQM. The

JCAHO faces a difficult task in applying the same set of quality improvement criteria to

an industry that is distributed among non-profits and for-profits.

Departmental and discipline-specific territoriality are often crippling weaknesses in the

management of hospitals. Physicians are typically independent contractors in the hospital

organization, and nurses often move freely between hospitals. Indeed, most healthcare

organizations are organized around principles similar to the separation of church and

state: the medical or clinical staff organization exists within the overall administrative

structure of the organization, often involving very few or weak connecting mechanisms

between the two structures. This “organization within the organization” often

complicates the advancement of TQM practices, particularly if one of the two

organizations is resistant to the efforts of the other. For TQM to continue to flourish in

U.S. healthcare, more bridges between the clinical and administrative organizations must

be built. Specifically, more mechanisms and incentives must be developed to require

physicians to be instrumental participants in TQM efforts.

Finally, both the internal and external (as applied by JCAHO) processes of organizational

assessment and performance improvement must radically increase their emphasis on

outcome as well as process measurement. Healthcare organizations must be required to

do this, either through legislation, or a firm position taken by the JCAHO. The threat of

litigation by patients is too great to foster this increased emphasis without external

mandates. The recent publicity received by the JCAHO, and the flaws in the

accreditation process that it brought public attention to, bodes well for this developing

new emphasis on outcome measurement. Central to a solid TQM program is the ability

and willingness of an organization to admit mistakes, and to grow because of them. The

difficult challenge in increasing the emphasis on outcome measures in performance

improvement in healthcare is that mistakes often involve life or death issues.

Overcoming this serious obstacle to the further advancement of TQM in U.S. healthcare

is a central challenge to the healthcare industry of the 21st century.

 References

1. Assess for Success: achieving excellence with the Joint Commission Standards and

Baldridge Criteria, Diane Cesarone, 1997.

2. The Crosswalk: Joint Commssion Standards and the Baldridge Criteria, Maureen P.

Carr, Francis W. Jackson, 1997

3. Continuous Quality Improvement: A Survey of American and Canadian Healthcare

Executives, Lilian Chan Yee-Ching, Kathy Ho Shih-Jen, Hospital and Health Services

Administration, Winter, 1997.

4. Total Quality in Healthcare, Kenneth M. Brannan, Production and Inventory

Management Journal, Second Quarter, 1997.

5. Barriers to Implementing a Quality Improvement Program, Keith Messner, Nursing

Management, Jan. 1998.

6. Operations Management: A Value-Driven Approach, Steven A. Melnyck, David R.

Denzler, 1996