Why Healthcare Needs to Play Moneyball

I love Moneyball. It’s a great book, a gripping movie, and a powerful concept about how to ask the right questions about value, when everyone else is asking the wrong ones. Though I’m in healthcare and I never played baseball growing up, I’m passionate about data and the kind of analysis that Moneyball illustrates.

I want to use the Moneyball story to help explain a new way of thinking about healthcare performance and value that I call Valuenomics. I believe it will help healthcare organizations overcome their financial pressures and discover significant drivers of value in places where they would have never thought to look.

In 2001, the Oakland Athletics lost to the New York Yankees in the playoffs. This was a David and Goliath story, except Goliath won. The A’s had a payroll of $41 million and the Yankees $125 million. Before the next season started, the A’s lost their three best players to the Yankees, Red Sox, and Cardinals for salaries that exceeded the A’s entire player budget.

To win at a ridiculously unfair game, Oakland’s GM, Billy Beane, played by Brad Pitt in the movie, knew he needed to think differently about player selection and recruitment. He hired a young analytics expert to help him overcome baseball’s “epidemic failure” to understand what really drives performance and wins.

With data to guide their decision-making, they rejected the old-school approach to evaluating talent and found a mix of players who were under-valued in the market because they didn’t “look” like real ballplayers. One player they recruited was overweight, another was too old, and a pitcher had a bizarre throwing motion. Collectively, they generated the statistics (walks, runs) that actually led to wins. This new approach helped the A’s go on another epic playoff run.

While the Oakland As didn't make it to the World Series with Moneyball, they did get the same number of wins as the Yankees, and went head-to-head against them in the 2001 American League Division Series. The Yankees, who won that series in Game 5, spent $1.4 million per win that season. Oakland spent $260K per win.

And therein is what makes Moneyball a success.

What does this have to do with healthcare? Like baseball, healthcare is a human endeavor steeped in traditional ways of thinking and working that are rarely questioned. Like baseball, healthcare also has an epidemic failure to understand the true drivers of performance and value.

In this series of stories on Valuenomics, I want to explain how to look at healthcare in a fundamentally different way. Over the next four posts, I’ll describe the principles of Valuenomics, and how that changes the healthcare game. Then I’d like to dig in on many examples of practical ways a data-driven approach to analysis and decision making can lead to transformational improvements in healthcare performance, financials, and experience.

Evaluating Healthcare Performance with Runs Not Players

Here’s a taste of how Valuenomics works.

Billy Beane’s basic goal was to buy runs not players, so he broke down how runs are generated (mostly by walks and singles, not home runs), then found underpriced players who can produce those mundane numbers. In other words, Beane taught himself to ignore the stars with fancy PR and similar stats that other teams would outbid him for and found value in places no one else was looking because they lacked his deeper understanding of performance.

In healthcare, there are countless parallel examples. Healthcare executives regularly overpay in some areas—star surgeons, new technology, acute care facilities—because they believe such operating expenses or investments generate outsized returns. Quite often, the data doesn’t back that up.

As I’ll explain in later posts, Valuenomics gives decision-makers a way of analyzing every aspect of a healthcare organization’s performance and discovering where the drivers of truly differentiating value can be found.

For example, in the case of health systems participating in value-based care contracts, readmissions are a key driver of negative financial performance and draw a lot of attention, investment, and technology.But, fundamentally, health systems must do three things really well when a patient is discharged to avoid readmissions. Specifically, they must:

• Reach out to the patient within 24 hours of discharge
• Enroll the patient in a transition of care protocol to ensure plan adherence
• See that the patient visits their primary care provider within 7 days of discharge

Working with one health system to develop stronger value-based care capabilities, we knew they needed to reduce their readmission rate from 17.5% to 14.8% to achieve their financial goals. So we measured performance variations across seven benchmarks to determine ways to optimize value.

In the traditional mindset, transition care planning teams look at how many patients were enrolled in transition of care management programs, and how many patients each nurse enrolled. It’s not a win. It’s just swinging the bat every ball that comes their way.

It turned out that a key driver of differentiating performance were the care coordinators—those who are calling the patients post-discharge. So we ranked those nurses to examine their success at actually reducing readmissions, versus just successfully engaging with them. One nurse stood out from the group. Let’s call her Mary (not her real name). Her readmission rate was only 5% compared to 11% among the other nurses, even after adjusting for risk profiles.

What did Mary do better than the others to generate such results? She started every call with a promise and an offer: “I’m here with you for the next 90 days. Call me for whatever you need.” That invitation gave patients encouragement to seek help from Mary before complications or crises arise that might lead to costly readmission.

The Courage to Question Everything

Valuenomics is about finding ways to win. Like Moneyball, it helps healthcare organizations level the playing field and succeed at an unfair game.

For most organizations, especially health systems, these are exceptionally difficult times. Financial pressures are enormous. Margins are razor thin. Change is exhausting. Administrative or business priorities can seem at odds with the needs of providers and patients. Even profitable systems (like rich baseball teams) often underachieve. Valuenomics helps improve the efficiency of every dollar spent.

The basis of Valuenomics is data. Without data, it’s not easy to see problems and opportunities. The story about Mary might seem simple, but other pieces of the readmission puzzle drew more attention, dollars, and concern. Mary, who would have been easy to overlook, was actually an elite run producer. Identifying her was the hard part—replicating her approach across the care coordination team to multiply that value was easy.

The fun of watching Moneyball is seeing Beane at odds with everyone around him. His old-school scouts through their instincts and eyes were better judges of talent. His manager wanted certain types of players to win. Even the players were hung up on appearances and traditional stats. The sports reporters thought Beane lost his mind. The fans see only impending doom.

But the biggest challenge to Beane was himself. He knew he needed to fight his own hard-wired beliefs and biases to make decisions that are counter to the logic and traditions of a sport he played all his life. It takes courage to question fundamental assumptions and go against the crowd. You’d think such a perspective would be celebrated in sports, business or leadership where advantages accrue to those who see opportunities or hazards that others don’t. But many of us, in baseball or otherwise, would rather be wrong than risk the awkwardness of standing alone.

Valuenomics provides the courage to question everything, and the insights to make decisions that can help your organization and your patients win in remarkably new ways.

In my next article, we’ll dive into Healthcare Valuenomics 101: General Principles of Managing Risk.