Healthcare Efficiency

One of the key concepts in the book and movie mentioned last time is that waste is not always obvious.  Sometimes what we see as part of our job is not necessary and therefore qualifies as waste.  I recently sent in a reimbursement request without some required info.  BC/BS had to write me and answer two phone calls.  That’s waste for everyone, even tho it was somebody’s job to handle those problems.  Perhaps if their instructions were more explicit . . . or they kept info on providers . . . or they only insured compulsive patients.

Some waste is more wasteful than other waste.  Red-bag trash is hazardous material and costs dollars per pound to dispose of.  Special handling, tracking, etc.  Expensive.  State health departments have rules about what goes into red-bags--generally, stuff that has a potential to cause disease.  I’ll spare you the descriptions, but not everything.  If I cut my finger in the kitchen, I don’t have to search for a red bag.  Blood on a paper towel or a 4 x 4 doesn’t count.  Into the normal trash, and off to the landfill.  

But not everyone reads the rules.  The last hospital I was in, had ONLY red bags in their intake area, so EVERYTHING went into the expensive waste system.  (From my limited observation, NOTHING there required red-bag disposal) Why do they do that?  The simple answer is that no one cares.  People who work in that area are not trained or motivated to look for waste.  No one is looking at what it costs to get a patient ready for surgery and where we could save money.  If you made the room a little warmer, you wouldn’t need so many blankets--less money for laundry.  And if you kept the patient warm in the OR, you wouldn’t need the individual warmers ($$) in recovery.  

These are trivia in the big picture of potential cost savings in hospitals.  Estimates mentioned last time from hospital administrators were 40 to 50%.  Actually, they were thinking mostly about overuse savings--tests done that were not necessary.  So, my examples would go on top of that.  The nice thing about such savings is that they go on forever, and most of them don’t cost any money to implement.

Posted by Dr. Robert Burney at 09:41 PM | Permalink | Comments (2)

Today, I showed a movie to our employees that everyone in healthcare should watch.  It’s a rerun from a PBS documentary about “The Nun and the Bureaucrat.”  Sister Mary Jean Ryan of SSM Healthcare and Paul O’Neil of the Pittsburgh Regional Healthcare Initiative describe the application of the Toyota Production System to their healthcare worlds.  Both know what excellence means and how to achieve it.  SSM Healthcare was the first healthcare organization to win a Baldrige award, and PRHI has demonstrated impressive results, particularly in minimizing central line infections.  

There is, of course no magic bullet.  Use of the TPS is one potent tool for process improvement, but not the only one.  The focus of TPS is identification and elimination of waste, and that plays well to our efficiency goal.  Estimates of waste in the hospitals shown varied from 40 to 50%.  And these were from senior people about the hospitals where they worked.  Remember that we have previously said that a 25% saving would pay for healthcare for all the uninsured in the country.  

Waste is not easy to see--at least not easy to recognize.  In the movie, employees regarded waste as part of their job until someone pointed out that it didn’t have to be that way.  We have a process in my office where one office receives physical exams done by outside physicians.  In roughly 30% of the cases, they must go back to the physician or patient to request additional information.  This has been going on for at least 30 years, and no one has ever thought of changing it.

Concepts of “Lean” and “Value stream Mapping” are part of the TPS--another example of an industry technique that’s migrating to healthcare.  

It’s curious that more hospitals haven’t endorsed these concepts--until you think about the consequences:  Success would mean reduced costs and (probably) fewer employees.  That sells well to Toyota, but the average healthcare bureaucrat is judged by the size of his budget and the number of people who work for him.  TPS would not enhance his esteem.  Better to lobby for insurance for the uninsured.  That would increase both revenue and payroll.

Posted by Dr. Robert Burney at 09:28 PM | Permalink | Comments (0)

The speech is over, and it was less painful to read it in the paper.  His sole sentence about healthcare quality invoked technology as a magic bullet.  Sorry, George.  Technology is a tool, but you have to have a plan.  Technology is underutilized in healthcare relative to other industries, and the potential for improvement is huge.  But it won’t happen by accident.

He joined many others in looking to provide health insurance for the uninsured.  That’s a motherhood issue that few could oppose, but we need the details.  Throwing money into the healthcare industry will NOT improve anything except executive salaries.  Not to say that healthcare for the uninsured isn’t a worthy cause.  We just need a way to do that without fanning the fires of healthcare inflation.  

We are already paying a tax for the uninsured.  At least those of us with health insurance are doing so.  Providers charge paying customers more to compensate for non-paying customers.  It’s not clear that those extra charges would go away as the non-paying pool diminishes.  

So how do we include the uninsured and remain budget neutral?  The only reasonable suggestion I’ve heard is price competition at the individual healthcare service level.  This is what “transparency” and “consumerism” aim for, but we could do much of it now.  Medicare (CMS) is the largest purchaser of healthcare in the US.  Probably 40% of every provider’s revenue.  Their payment scheme is Byzantine and bizarre, not to mention totally irrational.  The reason is politics, so the solution is not easy.  CMS has the power to leverage huge cost reductions, but not the will.  If only they could thumb their nose at Congress.

What about the Automotive Industry Action Group, or the Leapfrog group, or the National Business Group on Health?  Mostly gutless.  Interesting that industry seeks bids for materials and services but only contracts with HMOs, etc. for healthcare.  If they bid out the five major operations their employees have, prices would plummet.  “If you want a total hip, here’s our list of suppliers.”

What does it take to get our leaders to think about value and efficiency in healthcare?  Another election?

Posted by Dr. Robert Burney at 08:21 PM | Permalink | Comments (0)

Attention is turning again to “healthcare reform,” whatever that means.  One note of caution in thinking about systems of care and payment:  declare your goals up front, then develop a strategy to achieve those goals.  If your goal to reduce the total amount of money spent on healthcare in the US, buying insurance for the 46 million currently uninsured is NOT the answer.  More insurance leads to higher utilization, thus raising the total expenses.  

Here’s an article that has been on my desk for awhile: Calvin Pierson wrote a piece in the Washington Post titled, “How to Trim Health Costs in Maryland.”  Virtually all of the article was devoted to providing health insurance to the uninsured in MD, and this would, of course, increase Health Costs.  The bill would be paid by MD taxpayers, US taxpayers, business owners, and smokers.  Mr. Peirson is the president of the MD Hospital Assn., and I’ll let you guess who would benefit from his suggestions.

Providing healthcare to the uninsured is a different goal.  Any strategy here ought to be budget neutral.  Buying more health insurance policies is counter-productive, regardless of who you tax to pay for it.  Yes, raising cigarette taxes is a good idea.  Same for gas tax.  But not to throw more money into the  healthcare system.   This is too complex a problem to be solved in a sound bite, but there are ideas that might work:   Demand management works. (In healthcare, it’s called “disease management,” and Mr. Pierson did mention this.)  Prevention works, but the lead time is long.  Bribes and coercion work.  In France, women are paid to make prenatal visits.  MA has a law that everyone must buy health insurance.

In most cases, the uninsured are already getting healthcare, and those with insurance are paying for it thru cost shifting--charge more for those with money to pay for those without.  The rest of the money is already in the system, just waiting for us to apply it to the uninsured.  It’s there in the form of waste, and the way to recoup those funds is thru improved efficiency.   

Let’s make efficiency a goal, and develop strategies for success.  Stay tuned.

Posted by Dr. Robert Burney at 08:57 PM | Permalink | Comments (0)

Clare Mason writes (here and in her book) about the application of lean principles to healthcare.  Yes, that would, by definition, improve efficiency, provided the lean target is appropriate.  Missing is the incentive for change.  Why should a hospital adopt lean procedures when third parties pay them for being fat?  That would require change, which most organizations resist without a compelling crisis.  “Not first to adopt the new nor last to cast aside the old.”  Lean and other process management techniques are foreign to healthcare, so expertise and culture are missing.  The profit motive is missing, so there is no driving force to “Beat Coke.”  

When I checked in for my surgery (see 8 June posting here, “My Operation”), the first clerk told me to wait to see the second clerk who did things she could have done without me.  Instead of “What’s your name again?”, it should have been, “I have your papers right here.”  And fire the other clerk.

What does it mean?  Obvious things like inventory reduction and trimming non value-added steps from processes.  But there’s more.  I once proposed a video study of the OR to count the minutes that nothing was happening to the patient.  That’s waste.  Whenever work stops in your system, the waste stopwatch starts.  Our ORs cost $20 per minute--probably more now.  The sole raison d’etre for the OR is the patient, and if nothing’s happening to her, something’s wrong.  

Some of this is intuitive and easy.   Much is not, but there are books and consultants.  As with most things in life, the biggest step toward improvement is deciding to do it.  

Posted by Dr. Robert Burney at 10:08 PM | Permalink | Comments (1)

California is the latest state to propose health insurance for all residents.  (See editorial in Monday’s Washington Post.) At least Arnold has a plan to pay for it.  Providers there have engaged in an ancient form of cost-shifting by charging paying patients extra to compensate for non-paying patients.  One effect of this is to increase health insurance premiums for everyone.  To pay for his plan, Arnold would tax providers to shift the cost-shifting revenue to payment of premiums.  He also plans to make health insurance compulsory.  No more picking a large screen TV in lieu of premiums.  Finally, there would be financial incentives to “encourage” all businesses to provide health insurance for all employees.  

Overall, a reasonable, rational, and comprehensive plan that may achieve its goal of ensuring insurance for all CA residents.  Not exactly clear where illegal immigrants  fit.  

However, like the plan in MA,  this would do nothing to reduce the cost of healthcare, promote efficiency, or ensure quality of care.  Yeah, you can’t do everything, but proposals like this will increase the cost of healthcare in the state--more people with insurance will get more care.  And the costs of care will probably increase faster than the amount of care provided, tho this depends on how you do the accounting.  At any rate, it represents more of the same system.  There is nothing here that will promote price competition or otherwise reduce the costs of individual healthcare services.

Waste in healthcare has been estimated between 25% and 40%, tho not all of this is inefficiency.  And the uninsured population in CA is estimated at 19%.  So, if you can recoup 20% of healthcare expenditures by improving efficiency, you could pay for the whole program without any new taxes.  

Posted by Dr. Robert Burney at 10:02 AM | Permalink | Comments (1)

It can be done.  At one time, preoperative testing prior to outpatient surgery was a major expense.  As formal studies began showing that most of this was without value, we decided that, with few exceptions, we would not require any tests.  We weren’t so much concerned with cost to the insurance company as with the time and trouble for us on the day of surgery.  The second most common cause for starting surgery late is looking for a lab test.  If you order a test, you have to look at the result, and those aren’t always easy to find.  Some surgeons persisted in ordering some tests, and then, an interesting thing happened:  BC/BS decided that if we didn’t require the tests, they wouldn’t pay for them.  Next time a test was ordered, the patient got the bill.  And the patient complained to the surgeon.  And the surgeon stopped ordering the test.  And they lived happily ever after.

One area where price competition currently exists in healthcare is cosmetic surgery.  Want a tummy tuck?  You can shop for price, and it’s a package deal--one price includes everything.  A new plastic surgeon came to our town, and we wanted him to use our facility.  He was in price competition with other surgeons, and we had to negotiate with him for the costs of our operating room and anesthesia services.

Patient centered healthcare would extend this principle to all of healthcare.  However, this would require a lot more price transparency than currently exists.  You can find out the cost for a tummy tuck, but not for a cholecystectomy.  (At least not in a hospital.)

There is, of course, the quality thing, and that requires transparency also--and diligence by the patient.  Story in Saturday’s Washington Post about women in Hollywood having injections by a guy who never went to medical school.  Incredible what the right personality will do.  Someday, he may be president.

Posted by Dr. Robert Burney at 09:35 PM | Permalink | Comments (0)

In testimony for a hearing on “Healthcare Coverage and Access,” Karen Davis talks about the need to “extend health insurance coverage ... and contain costs.”  If you think about it, that’s an oxymoron.  If you suddenly add say, a million people with health insurance to our system, expenditures would skyrocket.  People who don’t have health insurance tend not to get healthcare.  If you give them a health credit card, guess what!  They’ll use it, and the total costs of healthcare in this country will increase dramatically.  We must think more broadly about how to provide healthcare to those who need it without increasing overall costs.  Now, there’s a challenge.

Under “efficiency,” the testimony focuses on the use of technology.   In some ways, this is a false God.  True enough, there are productivity increases to be obtained from technology, but the entry cost is high.  Most U.S. physicians practice is small offices where the purchase of an electronic record system would be hard to justify.  Furthermore, if you computerize a poor system, you end up with an electronic poor system.  The system of care could be dramatically improved without even plugging in the computer.  

I watched an old movie tonite where the CEO dictated a letter to his secretary.  I laughed at how archaic and inefficient that was and then recalled that most U.S. surgeons still dictate their operative notes.  

Ah, Denmark, where everyone loves the healthcare system.  (It’s free.)  Primary care docs work 9 to 5, and government clinics handle nite and week end calls.  (And by the way, they’re paid extra not to actually see the patient.)  Guess what DK would do if times got tough or they wanted to start a war in Iraq?  That’s right, they’d cut back on healthcare.  

True, there are lessons to learn from other countries, but most of the knowledge transfer goes the other way.  I don’t see many (any) consultants coming from Europe to help U.S. hospitals do a better job.  

Two basic truths:
    1. Central planning doesn’t work.  The Russians learned this, but the concept just won’t die.
    2. Large systems tend to be inefficient.  There are economies of scale, but there are limits.  There should not be more than one step between the person making the decision and the healthcare provider.  

Posted by Dr. Robert Burney at 08:52 PM | Permalink | Comments (0)

Speaking of Goals and Strategies, Germany wanted to reduce the amount of gasoline they used, so they added a tax of 11+ cents a gallon each year for five years.  It’s coming, folks, adjust.  The result is lower CO2 emissions, less gasoline used, increased use of public transportation, and new cars average >50 mpg.  In  other words, it worked.  The government said, “Here’s what gasoline will cost in five years, you decide what car you want to drive and how much.”

So how does this apply to healthcare?  Well, let’s pick  laparoscopic cholecystectomy, a common outpatient surgical procedure.   And suppose there’s a surgery center in Peoria, IL, that does these for $1,200.  (Just a guess.)  Now, Medicare, surveys the country and determines that’s a good price--maybe not the absolute lowest, but a good price.  So, they announce that starting tomorrow, that’s what they’re paying for a lap chole.  Doesn’t matter if you’re Harvard Hospital or Community General, that’s what you get for a lap chole.  If it costs you more than that, here’s the phone number of the place in Peoria.  Find out how they do it.  In other words, “Here’s what you’ll get paid, find a way to make money at that price or get out of the business.”  What would happen?  

First, there would be intense lobbying.  Millions spent on consultants to convince Congress to reverse the decision.  But we’ve got a smarter crew on the Hill today, and these guys may see a way to save money here.  It’s lap-chole’s today, hernias tomorrow, and arthroscopies on Friday.  Medicare’s going to march through the list of CPT codes and peg their reimbursement to the 15th percentile.  Sorry fellas.

Then, most hospitals would find that they could, indeed, make money at $1,200.  Instead of lobbyists, they’ll hire process management experts and apply principles of Lean manufacturing.  CEOs will be reading about the Theory of Constraints and Value Stream Mapping.  And little lights will go on everywhere.  Costs will come done.  We’ll be able to pay for healthcare for the uninsured with the savings, because health insurance costs will come down also.

Sorry.  I’ve been reading Dickens.  It’s all a dream.

Posted by Dr. Robert Burney at 09:41 PM | Permalink | Comments (0)

Tom Miller reviewed a book, “Redefining Health Care” by M. Porter and E. Teisberg in the Sep/Oct issue of Health Affairs.  The original paper that spawned this book was mentioned here previously, and their basic premise is that healthcare is expensive, because it lacks effective competition.  In the second paragraph of his review, Miller makes a slip that is probably the root cause of failure of most reform initiatives: he states that “Value represents the desired combination of health outcome per dollar of cost expended.”  Buzzer! Patients don’t buy health outcomes.  They purchase episodes of care, and this is an important distinction.  Let’s say I want to have fun in the sun in Jamaica. I really can’t buy that.  I can reserve a hotel room and buy a plane ticket, but the fun part depends on other things.  And the sun may not shine.  Same with healthcare.  Patients don’t purchase “good health.”  They do buy office visits, appendectomies, cholecystectomies, etc.  Episodes of care.  

This distinction is important, because you often hear criticisms of the US healthcare system because our life expectancy or infant mortality are not the best in the world in spite of all the money we spend on healthcare.  These outcomes have little or nothing to do with healthcare.  For proof, visit www.RealAge.com.  Almost nothing in their survey relates to healthcare.  For a long life, start with good genes and personal habits, and mix in clean air and clean water.  And stay out of hospitals.

Miller wisely notes that health insurance companies are “in business to stay in business,” and that they will “deliver what their customers want.”  Of course, their customers don’t want healthcare to get cheaper and care not about what the country as whole spends on healthcare.  It is thus unrealistic to expect health insurance companies to fix those problems. 

Posted by Dr. Robert Burney at 04:39 PM | Permalink | Comments (0)

The year.  Day one, full of hope and expectations of something new for healthcare.  The looming ‘08 elections will probably stifle anything dramatic or creative from Congress, but maybe there will be something.  Lots of pressure to provide coverage for the uninsured, but little agreement on just how to do that.  Hard to argue against motherhood and helping the uninsured.  (As James Whitcomb Riley wrote, “help the poor an’ needy ones ‘at clusters all about, er the Goblins’l getcha, if you don’t watch out.”  However, both motherhood and insurance for the uninsured will increase healthcare spending and raise costs for individual services.  (See writings here previously suggesting that insurance is partly to blame for high healthcare costs.)

Employers want more flexibility to design health insurance plans that are less expensive.  That doesn’t set well with advocates who want the same benefits for everyone--well, everyone except Congress.  (They have their own plan that mere mortals could never afford.)  Any expanded coverage will cost money, and Congress will work hard to see that the money doesn’t come out of the federal budget--that is, if they ever get around to passing one.  (That’s right.  No budget yet, and not likely to be one.  Ever.)

In the end, there will probably be some expansion of benefits under Medicaid and more pressure on more employers to provide more health insurance to more workers.  All that means more money coming into the healthcare system but no incentives to lower prices.  Efficiency will not improve--no reason to expect that.  

What would it take?  A goal and a strategy.  (No, not Iraq.  We’re talking about healthcare!)  Everyone complains about the high cost of healthcare, so let’s set a goal of reducing costs.  That means total expenditures for the country and the cost of individual healthcare services.  OK, we’ll throw in drugs too.  Strategy?  Quote in the Washington Post today, “If it (strategy) is wrong, it does not matter how well you execute, you will fail.”  So, make a plan that has some chance of reducing costs in individual healthcare products and services.  How about competition?  It did wonders for the computer industry.  Right now, it’s hard/impossible for the patient to know what healthcare costs, much less make purchase decisions based on price.  And Congress seems unlikely to fix that.

Posted by Dr. Robert Burney at 11:06 AM | Permalink | Comments (1)