Healthcare Efficiency

Here is a terse summation of previously discussed concepts: 

1. It is important to distinguish between Macro-efficiency (dealing with populations) and Micro-efficiency (dealing with the provision of individual services).  On a macro level, we might ask what is required to care for 1,000 diabetic patients over five years.  On the micro level, we would ask what resources are required to repair an inguinal hernia.
2.  “Efficiency” is mentioned in many articles/documents but rarely defined.  Added as an afterthought, as in, “Yes, we want quality and efficiency.”  Neither term is meaningful unless defined further. 
3. Many talk about over/under/mis-use of healthcare services.  These are macro level considerations and may be a matter of perspective.  What you define as overuse healthcare may be what I consider appropriate use.
4. The basic efficiency equation is Resources spent per unit Healthcare service provided.  In the numerator, one must include both time and money.  When making comparisons—either over time or between institutions—it is important to keep the denominator constant.  Reducing expenses by providing less healthcare is cheap, not efficient.
5. Improving access and quality of healthcare will actually be detrimental to efficiency on the macro level, because more patients will require more care for chronic conditions that were previously untreated or unrecognized.
6. Tools for improving macro-efficiency include prevention and disease management.
7. Tools for improving micro-efficiency include accessible scheduling, value stream mapping, and other operations management techniques.
8. Estimates of the financial impact of poor efficiency range between 30 and 50% of total healthcare costs.  At the individual patient service level, an improvement of 20% within a 12 month period is a realistic goal.
9. Our current bizarre payment system rewards inefficient providers by paying them more for a given service.  Reimbursement is structured by provider type (hospital, teaching hospital, surgery center, etc.) rather than offering a single reimbursement rate for the same service.  
10. The potential financial rewards for improving efficiency are enormous, but the savings in patient time are equally important.  Savings within individual institutions could provide additional capacity without new construction or new employees.
11. When evaluating costs, it is important to look at the entire patient care episode.  For example, if reducing drug expenses for anesthesia results in more nausea and vomiting post op, nothing has been gained.  Similarly, it may be important to look at patient healthcare needs over several years to evaluate costs for some interventions.   
12. Everyone should desire more efficient healthcare.  Patients will see reduced waiting time and fewer tests.  They will probably not see reduced out of pocket costs, unless they are in a high deductible/Flexible spending account situation.  Providers will be more productive, because they will spend less time providing the same service.  Institutions will see higher revenue, because reduced resource use creates opportunity to see more patients.
13. Governmental and institutional thinkers who traditionally write and talk about healthcare policy will have difficulty grasping these concepts, because they are not used to thinking this way.  Efficiency measures do not fit the traditional pattern for healthcare indicators.
14. Private, for-profit institutions will lead the way in improving efficiency, primarily because that is their business.  
15. Effective measurement of efficiency will require changes in accounting techniques.  It will become necessary to know exactly what it costs (time and money) to perform a given test or procedure, or to see a patient.  
    

Posted by Dr. Robert Burney at 08:02 PM | Permalink | Comments (0)

How could anyone be against efficiency!  I’d sooner be against motherhood (too many people in the world).  But Bill McKibben does that in a recent book, “Deep Economy.”  The book is about economics at the personal level, and his argument is that the quest for “MORE” has brought economies of scale (one form of efficiency) but not happiness.  We have more “stuff” but we are not better off.   He scores points about the trend for local farm markets as opposed to corporate chicken.  When everybody’s lettuce or hamburger comes from a single source that is thousands of miles from their table, there are risks.  A single bug in the central machine can poison a wide swath of the country.  Not true with local markets, although they are having their own battles with state health departments over inspections and pasteurized milk.  

Central processing has brought down the price of produce and pork, but some say the quality of the food has descended also.  And there is certainly an increased risk to a larger population.

So, what about healthcare?  We are a service industry, and you can’t mass produce service the way you do chickens.  And generally, no 800 line to India.  Healthcare service is up close and personal.  There are national health insurance companies, but we’re talking here about the provision of healthcare.  Most of this is done in small offices of fewer than three physicians.  In fact, this is one of the inhibiting factors for adoption of electronic records--no economy of scale.  Even hospital care is more commonly provided in small hospitals (<100 beds).  So we are still at the local level in healthcare, and most of us wouldn’t like to see corporate care when we are sick, even if it were cheaper.

But does this mean that local healthcare processes cannot be more efficient?  Eugene Litvak doesn’t think so.  His work in operations management in healthcare has improved throughput in emergency rooms and operating rooms.  It could also be applied in doctors’ offices, along with concepts of accessible scheduling.  A  locally applied service can be efficient.  But there has to be a motivation to do so. Someone’s job has to depend on doing it faster, better, and cheaper. 

Posted by Dr. Robert Burney at 09:26 PM | Permalink | Comments (0)

Most patients have limited choices in healthcare today.  And the choices they make are not based on data.  (So much for fact based decision making.)  Even non-urgent choices such as a primary care provider (PCP) are more likely based on personal recommendations of friends and neighbors.  And specialist choices stem from PCP recommendations.  And hospital choices are dictated by the specialist.  Not always, and not entirely, but usually.  There is little to no shopping and price doesn’t enter into the decision. 

Quality of care--as defined by NQF--is also not a factor, although there are efforts by AHRQ to make data on these indicators more readily available.   It is not clear, however, that patients will or can uses this information, and also not clear that the measures actually reflect “quality” from the patient’s perspective.

For the  most part, patients assume quality in the sense of expecting the practitioner to be qualified and to deliver care according to current guidelines.  They depend on hospitals, state agencies, and accrediting organizations to ensure the quality of practitioners.  And to some extent, this works--at least for what Donabedian calls the status aspect of quality.  Does the practitioner have the right initials after his name, and are they real?  Hospitals generally require physicians on staff to be board certified--and they check.  All of this, however, ignores the process and outcome aspects of care.  

It has been argued that patients don’t know enough to evaluate the quality of care issue.  This is true only for the technical aspects of performance and is both paternalistic and insulting to the intelligence of patients.  Besides, there are the service aspects of quality that are not addressed:  how long to the next appointment?  Is he on time seeing patients?  Is the hospital environment clean?  Can I find the place?  Parking?  Does he listen to me?  Spend enough time with me?

We all make decisions based on quality and cost.  For most things, we can find out the features and costs of competing products or services.  This is one reason cars and computers are cheap today.  Not true in healthcare.  And this is one reason healthcare is so expensive today.  

Who would shop for cost in healthcare?  Only those who pay for it.  Not patients, because we pay only the insurance premiums.  HMOs used to approach this, but in a perverse manner.  They would first control the patients, and then tell practitioners what they would pay for services.  Or tell patients what services they could or could not have.  This didn’t work well, and HMOs were forced to retreat to a more traditional insurance role.  And costs went up.  They were not really shopping for price but dictating price, and that’s an important distinction.  

Can you imagine Walmart complaining that they have to have low prices, that customers just won’t pay them a fair price for their goods and services?  That’s what healthcare providers said.  Walmart aggressively seeks to provide low prices, and they’re proud of it.  Have you ever seen a hospital do that?  “Have your appendectomy here.  Lowest prices in town.”  Effective price competition would do this, and healthcare costs would come down.  I remember a discussion with a patient in Boston over costs for her breast biopsy.  I calculated that she could have taken a taxi 40 miles to a surgery center in Worcester, leave the meter running while she had surgery, and still save almost $2,000.  But she didn’t know that and had no way of finding out.  

As noted previously, Medicare pays widely different fees for the same procedure within the same geographic area.  Suppose, instead, they shopped for price and sent all patients to the lowest cost provider who could provide the desired technical and service quality of care.  Do you think others would begin to compete for that business? Would they find ways to provide that care for a lower price?  

Posted by Dr. Robert Burney at 01:15 PM | Permalink | Comments (0)

Washington Post columnist David Broder discusses a report from the Committee for Economic Development that seeks to trash the employer-based health insurance system.  They want the federal government to purchase everyone’s health insurance.  He mentions legislation along these lines by Sen. Ron Wyden (D-OR), and Sen. Robert Bennett (R-UT).  There is also support for this approach from Sen. John McCain and Sen. G. Voinovitch.  
One problem with all of this is that CED titles their report (in part) “Affordable Health Care for All” but the report is all about health insurance, not health care.  Nothing in any of these proposals would reduce the cost of healthcare for anyone.  Primarily this is intended to shift the cost of health insurance from employers to the federal government and to individuals (thru increased costs and loss of tax advantages).  

It has been argued that employers are in the best position to affect the cost of healthcare--even if they haven’t done much to date.  One factor driving healthcare costs is that people get sick.  Who is more interested in the health of workers than their employers?  Certainly not the federal government.  (I work for them.  Trust me.)  One example cited is the Federal Employees Benefit program (FEHB), where I buy my health insurance.  Their huge purchasing power gives the fed a strong bargaining position with insurance companies, but they do nothing to reduce the cost of healthcare.  There is no effort by FEHB to improve the health of employees.  No effort to ensure that those over 50 have screening for colon CA.  No attack on obesity.  True, individual agencies have sporadic Health Fairs and episodic spasms at promoting diet or exercise. But there is no organized systematic effort.  More importantly, there is no effort to reduce the cost of individual healthcare services.  The FEHB does not promote price competition for hernia repairs--or any other healthcare service.  

On the other hand, employers do this.  At least some do.  Walmart pinches pennies pretty hard, but they have active programs to improve the health of individual employees.  When employees are healthy, they come to work.  When their families are healthy, employees are happier at work.  

In another publication, the CED espouses four “Common Sense Principles” for healthcare (paraphrased):
    1. Every person must have health insurance coverage.  This is a popular theme, but watch for details on how it will be financed.
    2. Individual have a responsibility to maintain and protect their health.  Yes, they must have information, preventive care, and chronic disease management.  But what do you do when they fail to act responsibly?  
    3. We must improve the value for every healthcare dollar.  Under this heading, they mention slowing the growth of health costs, but offer no plan to achieve this.
    4. Business, governments, and individuals should all contribute to managing and financing healthcare.  Yes, but we’re already doing that.  They advocate a stronger role for Government.  (Maybe after they finish in Iraq.)

Finally, the CED advocates “getting serious about healthcare reform” and moving “past traditional habits.”  Sounds like Disruptive Innovation.  Let’s hear more.

Posted by Dr. Robert Burney at 09:19 PM | Permalink | Comments (0)

Everyone’s definition of efficiency is “Resources expended per unit of service provided.”  
And every industry struggles with measuring the numerator and defining the denominator.  At last week’s DePauw Discourse  on “Sustainability and Global Citizenship,” speakers from professors to polluters struggled particularly with how to measure the numerator in the efficiency equation. For example, Kay Pashos (Duke Power) and Greg Watson (MA Technology Collaborative) agreed that electricity from coal was cheap.  Others argued that it’s cheap because there is no charge for dumping pollution into the atmosphere.  NOX, SOX, Hg, and particulates produce negative effects at the other end of the smokestack, but those costs are not measured and not included in the cost of power from coal.  Electricity from coal is only efficient if you can fairly allocate all the costs of burning coal.  How do you account for mercury pollution such that tuna is no longer safe to eat?  How much does it cost to treat the childhood asthma caused partly by coal fired power plants?  You cannot consider the process efficient if you pile up debt for future generations.  Should the costs of burning coal be allocated back to the power companies as the health consequences of smoking are charged to tobacco companies?

Solar energy is widely regarded as expensive, but there is no smokestack.  All of the costs are contained in the solar panel.  And how do you determine the cost per kilowatt hour when the costs are all up front.   There is no boiler to feed; no maintenance.  The power output depends on sunshine input.  How do we measure future sunshine?

Similarly, in healthcare, we have trouble measuring costs.  Most accounting systems are not set up to allocate costs to particular procedures.  The institution charges what it can, and Medicare pays what it will.  No one cares about the exact price, because there is no price competition--no comparison shopping.  No one vies to be the low cost provider for, say, inguinal hernia repair.  Patients don’t know and have little or no choice if they did know.  And what is the cost?  When my wife had ambulatory surgery, I took the week off to take care of her post op.  Where is that cost in the efficiency equation?

Just because we have a daunting task is no excuse not to try.  There are some efforts to induce hospitals to disclose costs for procedures.  But would this be charges for the uninsured? Or negotiated fees for BC/BS? Or Medicare payments?  Medicare, for it’s part, pays widely different fees to different providers in the same area for the same procedure.  Will the real fee please stand up.  How is the poor patient supposed to navigate this accounting nightmare?

Both healthcare and electric power need rewards for efficiency.  Both also need accurate measures of costs in order to measure efficiency effectively.  

Posted by Dr. Robert Burney at 09:24 PM | Permalink | Comments (0)