Waste

flying cadeuciiHealthcare costs far too much. We can do it better for half the cost. But if we did cut the cost in half, we would cut the jobs in half, wipe out 9% of the economy and plunge the country into a depression.

Really? It’s that simple? Half the cost equals half the jobs? So we’re doomed either way?

Actually, no. It’s not that simple. We cannot of course forecast with any precision the economic consequences of doing healthcare for less. But a close examination of exactly how we get to a leaner, more effective healthcare system reveals a far more intricate and interrelated economic landscape.

In a leaner healthcare, some types of tasks will disappear, diminish, or become less profitable. That’s what “leaner” means. But other tasks will have to expand. Those most likely to wane or go “poof” are different from those that will grow. At the same time, a sizable percentage of the money that we waste in healthcare is not money that funds healthcare jobs, it is simply profit being sucked into the Schwab accounts and ski boats of high income individuals and the shareholders of profitable corporations.

Let’s take a moment to walk through this: how we get to half, what disappears, what grows and what that might mean for jobs in healthcare.

Getting to half

How would this leaner Next Healthcare be different from today’s?

Waste disappears: Studies agree that some one third of all healthcare is simple waste. We do these unnecessary procedures and tests largely because in a fee-for-service system we can get paid to do them. If we pay for healthcare differently, this waste will tend to disappear.

Prices rationalize: As healthcare becomes something more like an actual market with real buyers and real prices, prices will rationalize close to today’s 25th percentile. The lowest prices in any given market are likely to rise somewhat, while the high-side outliers will drop like iron kites.

Internal costs drop: Under these pressures, healthcare providers will engage in serious, continual cost accounting and “lean manufacturing” protocols to get their internal costs down.

The gold mine in chronic: There is a gold mine at the center of healthcare in the prevention and control of chronic disease, getting acute costs down through close, trusted relationships between patients, caregivers, and clinicians.

Tech: Using “big data” internally to drive performance and cost control; externally to segment the market and target “super users;” as well as using widgets, dongles, and apps to maintain that key trusted relationship between the clinician and the patient/consumer/caregiver.

Consolidation: Real competition on price and quality, plus the difficulty of managing hybrid risk/fee-for-service systems, means that we will see wide variations in the market success of providers. Many will stumble or fail. This will drive continued consolidation in the industry, creating large regional and national networks of healthcare providers capable of driving cost efficiency and risk efficiency through the whole organization.

Continue reading “Half the Cost. Half the Jobs?”

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Healthcare reform was a frontline topic during the recent presidential elections. The political warfare and misleading information around the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare, has prevented the public from understanding its intended purpose, and has left many skeptical about its benefits. It is safe to say the general public has little to no idea about the quality of healthcare delivery in their respective regions.

In fact, it is not a far cry to claim that even healthcare professionals might not truly understand the issues facing American healthcare. Thus, most of the public is generally uninformed or misinformed about the population level problems facing the healthcare system. Therefore, it is quite simple for political parties to misguide the public and capitalize on their uninformed perceptions. If the public knew more about the flaws present in the healthcare system, perhaps they would better realize the PPACA is a reasonable start at addressing the failings of our system.

The Dartmouth Atlas Project is an online database which collects Medicare spending and utilization data from around the country. Information gathered from the database has shown immense variation in the way medical resources are utilized by even similar regions, communities, and health care organization. Evidence has repeatedly shown that, from a population perspective, areas that spend more on medical care do not consistently benefit from increased quality of care or patient wellbeing. Variation in the type of care delivered can be attributed to diverse incidence and prevalence of disease severity or the type of care a well- informed patient chooses. Variation in health care delivery is thus omnipresent and expected, because every patient is unique and medical innovation presents a growing number of care options to choose from.

Continue reading “What Does the Dartmouth Atlas Have to Say About the Politics of the ACA?”

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Currently, India spends about $20 per person per year on healthcare and spending more once seemed like a peripheral concern, taking a back seat to basics like food and sanitation.  However, in the past decade, as the Indian economy has grown and wealth followed, Indians are increasingly demanding access to “high quality” healthcare.  But what does “high quality” mean for a country where a large proportion of the population still goes hungry?  Where access to sanitation is so spotty that the Supreme Court recently had to decree that every school should have a toilet?  What is “high quality” in a setting where so many basics have not been met?

It turns out that “high quality” may mean quite a lot, especially for the poor.  A few weeks ago I spent time in Delhi, meeting with the leadership of the Indian health ministry.  I talked to directors of new public medical schools and hospitals opening up around the country and I met with clinicians and healthcare administrators at both private and public hospitals.  An agenda focused on quality rang true with them in a way that surprised me.

The broad consensus among global health policy experts is that countries like India should focus on improving “access” to healthcare while high income countries can afford to focus on the “quality” of that care.  The argument goes that when the population doesn’t have access to basic healthcare, you don’t have the luxury to focus on quality.  This distinction between access and quality never made sense to me.  When I was a kid in Madhubani, a small town in in the poor state of Bihar, I remember the widespread impressions of our community hospital.  It was a state-run institution that my uncle, a physician, once described as a place where “you dare not go, because no one comes out alive”.

Continue reading “Can Quality Be on India’s Health Care Agenda? Should it Be?”

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At our first meeting years ago, Tom Emerick, Walmart’s then VP of Global Benefits, told me,

“No industry can grow indefinitely at a multiple of general inflation. It will eventually become so expensive that purchasers will simply abandon it.”

He said it casually, as though it was obvious and indisputable.

Health care is playing out this way. From 1999 to 2011, health care premium inflation grew steadily at 4 times the general inflation rate. During that same period, the percentage of non-elderly Americans with employer-sponsored health coverage fell from 69.2 to 58.6 percent, a 15.3 percent erosion rate.

Health care’s boosters like to argue that it has buttressed the economy, and that it means more jobs and economic prosperity within a community. A February 2011 Altarum Institute report estimated that private sector health care jobs now account for nearly 11 percent of total employment. Since the recession began in December 2007, health care employment has risen by 6.3 percent while employment in other industry sectors fell by 6.8 percent.

But there’s a darker side. Health care’s ever-increasing revenue growth has come at the expense of individuals and firms that pay its bills, directly through health plan premiums, and through taxes, often instead of buying other goods and services. It transfers wealth to health care from everyone else. Like the finance services industry, health care has become a disproportionate “taker” industry, sapping economic vitality from America’s communities.

Continue reading “Irresistible Forces”

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In Healthcare Beyond Reform: Doing it Right For Half The Cost I lay out the five strategies that healthcare must adopt, and is adopting in various ways and places, to make healthcare better and cheaper at the same time.

Strategy Five is “Rebuild Every Process.” It’s about “lean manufacturing,” smart standardization, measurement, “big data,” evidence-based design, teaching the innovation, all the detailed, rigorous, hard attention to intelligent process re-design that healthcare is so obviously lacking — and that is absolutely necessary if healthcare is to improve its abysmal cost/benefit ratio.

Now in The New Yorker writer/surgeon Atul Gawande has done a brilliant turn on this theme, by diving into, of all things, the processes of a restaurant chain, comparing them to the duplicative, chaotic, mistake-prone processes of traditional healthcare, and finally to some examples of smart, rebuilt healthcare processes that drive down costs while killing fewer people.

Gawande shows how The Cheesecake Factory manages to deliver 308 dinner menu items and 124 beverage choices to exacting standards, on time, from fresh ingredients, with only 2.5% wastage, in a linen-napkin and silverware environment, at lower cost, then compares that with the disconnected, uncoordinated, messy environment that is most of US healthcare. He details several examples of how new drives toward standardization and control of processes in the operating room and the emergency department, for instance, are making a difference, lowering costs and improving not only outcomes but the patient experience, all at the same time.

Continue reading “What Healthcare Must Learn — from a Chain Restaurant”

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