News outlets across the country, including Federal Times, carried stories about how top Veterans Affairs Department officials received bonuses of tens of thousands of dollars even though mismanagement and mistakes at their facilities led to preventable deaths of veterans. Perhaps the most high-profile report was by The Daily Show’s Jon Stewart in a segment he titled “Ignoring Private Ryan,” on Sept. 5. Stewart’s 2 million viewers were shown photos and facts that spared no one.
For government critics, this is the story that keeps on giving. The VA bonus controversy is a case study on how not to manage incentives. The backlash threatens to trigger a moratorium on bonus payments at a time when improved VA performance should be a priority.
Outside of government, incentive systems are virtually universal in health care. Incentives are prevalent in hospitals as well as claims processing. The Centers for Medicare & Medicaid Services (CMS) introduced incentives to promote quality care a decade ago. Similar initiatives exist in a number of countries.
For-profit hospital management companies maintain compensation programs based on the same model found in other large companies. I managed the pay program at one company that operates the George Washington University Hospital and other hospitals. Incentives are integral to the management of those facilities as they are at other for-profit hospitals.
The point is that health care providers have extensive experience with the design and administration of incentives. Their experience extends to the measurement of hospital performance. The CMS incentives are based on quality measures.
My experience highlights one distinct difference in the management of non-government hospitals — the role of outsiders serving on boards of trustees and committees that oversee specific hospital functions. The Mayo Clinic, for example, has a board of 32 trustees that includes only 11 physicians. The Cleveland Clinic has a board of 23 trustees. Massachusetts General has a similar board along with virtually every community hospital.
The trustees are in many cases volunteers from the local business community. In the elite systems, it is not uncommon to find celebrities (e.g., Tom Brokaw is a Mayo trustee) as well as foreign public figures. Every trustee may not spend a lot of time, but as a group they are deeply involved.
Hospitals also have smaller committees that focus on specific issues. Mayo, for example, has a standing committee, the Committee on Officer Succession, Compensation, and Governance, and a separate Salary and Benefits Committee. Outside trustees are always prominent on the committees. All executive and other large bonus awards would be reviewed by the committees.
Similar committees and governance policies exist in publicly traded companies as well as universities, foundations and other tax-exempt charitable, religious and scientific organizations.
The VA should consider adopting a similar approach to managing compensation. There are undoubtedly well qualified individuals, including highly regarded physicians, who would be willing to volunteer at every VA facility.
Hospital success is a team effort
In the current environment, with projected shortages in key healthcare occupations, every provider needs to get the best performance from its workforce. That means effective recruiting of qualified candidates, supporting the development of employee capabilities and maintaining a positive work environment.
On the “Best Places to Work in the Federal Government” listings, the VA is last or close to last on all but a couple of categories. That’s evidence of serious problems. This is not a time to take draconian actions to supposedly save a few dollars.
The best performing non-government hospitals consistently score high in employee engagement studies. To quote from one of the best, the Cleveland Clinic, “There are no minor tasks in health care. Every action contributes to patient outcomes, which is why we’re working toward total engagement. Studies have shown that workforce engagement is linked to patient safety, quality, outcomes and patient satisfaction.”
One strategy to improve performance is the adoption of a group incentive plan that rewards all employees when the hospital performs well. Payouts are frequently based on scorecard results. The VA and its more than 1,700 facilities could also incorporate comparative measures to reward the best performers.
Central to any incentives should be measures of veterans’ satisfaction. Hospitals routinely survey patient satisfaction.
Incentives can and should play a role in processing the huge backlog of benefit claims as well. But the system has to be well-planned to avoid having the more complex claims laid aside to focus on the easier ones.
I suggest an employee evaluation system that has three levels of performance: role model, full performance and unacceptable. Defining clearly what constitutes outstanding “role model” performance strengthens that process and becomes aspirational for many employees.
Ultimately, employees want to know what’s expected, how their performance will be evaluated and how their efforts contribute to their employer’s success. They want their contribution to be recognized and to be treated fairly.
The media reports suggest award bonus decisions at VA until now have been largely subjective and that is at best problematic. It is time that VA develop a performance and bonus system that is effective and defensible, and VA leaders should view such an effort as a needed investment to produce better outcomes down the road.
The Federal Employee Viewpoint Surveys confirms that VA has had problems managing rewards for several years. The next step should be a series of employee focus groups in VA facilities. Employees know what problems exist and they want management to address the problems. For incentives to be effective, employees need to believe exemplar performance will be rewarded.
Howard Risher is a consultant and writer on federal pay and performance issues. He was the managing consultant for the studies leading to the 1990 Federal Employees Pay Comparability Act and is author of “Planning Wage and Salary Programs.”