A Glimmer
James Robinson, Health Affairs editor, interviewed Gary Kaplan, Virginia Mason Medical Center (VM) CEO about his “efforts to redesign care” and the related article, available briefly in Health Affairs. Kaplan came to VM to restore profitability and was shortly greeted by demands from Aetna to reduce costs for services. He had already embarked on a “lean” focused system to reduce waste and looked to this as the answer to Aetna. This looks like a purchaser demanding lower prices of a supplier and should have resulted in greater efficiency.
Aetna is not a key player in the Seattle scene, and VM could have just blown them off. What VM actually did was to reduce the volume of healthcare services they provided in response to a limited set of diagnoses. For example, patients with low back pain no longer get MRIs as part of their work up. VM also reduced the number of “unnecessary” studies for patients with cardiac diagnoses and switched to cheaper generic drugs for some conditions.
And the result was . . . well, it’s not clear. Everyone walked away happy, but the article doesn’t present any data or details on results. It seems as if VM agreed to provide fewer services related to 3 or 4 diagnoses, and Aetna agreed to keep VM on their list of preferred providers. Other than that, it’s not clear that anything changed. Certainly, the cost for an MRI scan did not change. They’re just not doing as many for low back pain in Aetna patients. In a broad or macro sense, that’s efficiency--lower cost for treating a given diagnosis. However, neither the cost (to VM) nor the charge (to Aetna) for an MRI changed. No efficiency there.
The article’s authors wring their hands over the lost revenue to VM because of fewer MRI studies. What???? That’s an opportunity to do more MRIs on other patients. Remember, in the last episode, we established that the demand for healthcare is essentially infinite. “A hospital bed built is a bed occupied.” In confirmation, radiologists reported no “decline in volume, because demand remained high.” And with fewer resources required per case, VM was able to see more back pain patients per week.
What’s interesting about all this is that no one asked the patients what they thought. Not VM, not Aetna, and not the authors of the HA article. Why? Well, patients don’t really count. They don’t pay the bill, so no one cares. The telling remark in the article is that this plan has produced “little effect on overall market dynamics.” In other words, the changes did not provide VM with any competitive advantage, probably because their prices did not change.
For its part, Aetna will be a candidate for the cowardly lion award. They had an opportunity to press for lower prices and they blew it in favor of reducing their annual cost--a very different concept. VM may have improved their efficiency and thus increased their margin on these diagnoses, but that’s not clear from the article.
The authors seized the opportunity to throw a gratuitous jab at the fee-for-service concept, as if that had any relevance here.
All in all, and interesting foray into normal market play that didn’t accomplish anything. But they thought about it. Maybe next time.
Aetna is not a key player in the Seattle scene, and VM could have just blown them off. What VM actually did was to reduce the volume of healthcare services they provided in response to a limited set of diagnoses. For example, patients with low back pain no longer get MRIs as part of their work up. VM also reduced the number of “unnecessary” studies for patients with cardiac diagnoses and switched to cheaper generic drugs for some conditions.
And the result was . . . well, it’s not clear. Everyone walked away happy, but the article doesn’t present any data or details on results. It seems as if VM agreed to provide fewer services related to 3 or 4 diagnoses, and Aetna agreed to keep VM on their list of preferred providers. Other than that, it’s not clear that anything changed. Certainly, the cost for an MRI scan did not change. They’re just not doing as many for low back pain in Aetna patients. In a broad or macro sense, that’s efficiency--lower cost for treating a given diagnosis. However, neither the cost (to VM) nor the charge (to Aetna) for an MRI changed. No efficiency there.
The article’s authors wring their hands over the lost revenue to VM because of fewer MRI studies. What???? That’s an opportunity to do more MRIs on other patients. Remember, in the last episode, we established that the demand for healthcare is essentially infinite. “A hospital bed built is a bed occupied.” In confirmation, radiologists reported no “decline in volume, because demand remained high.” And with fewer resources required per case, VM was able to see more back pain patients per week.
What’s interesting about all this is that no one asked the patients what they thought. Not VM, not Aetna, and not the authors of the HA article. Why? Well, patients don’t really count. They don’t pay the bill, so no one cares. The telling remark in the article is that this plan has produced “little effect on overall market dynamics.” In other words, the changes did not provide VM with any competitive advantage, probably because their prices did not change.
For its part, Aetna will be a candidate for the cowardly lion award. They had an opportunity to press for lower prices and they blew it in favor of reducing their annual cost--a very different concept. VM may have improved their efficiency and thus increased their margin on these diagnoses, but that’s not clear from the article.
The authors seized the opportunity to throw a gratuitous jab at the fee-for-service concept, as if that had any relevance here.
All in all, and interesting foray into normal market play that didn’t accomplish anything. But they thought about it. Maybe next time.
