Healthcare Efficiency

Right behind the Iraq war, healthcare cost is the subject voters want to hear about most. But, like imigration, it’s a subject candidates don’t want to talk about in detail.  Important here to distinguish between healthcare costs and health insurance costs.  True, they are related, but if you want to minimize the money spent, the tactics are very different.  General principles still apply--if you want to decrease the amount spent, you can decrease the unit cost or the number of units.  For healthcare, that would mean decreasing the cost of a unit of healthcare (an appendectomy or an office visit) or reduce the number of appendectomies.  The latter approach is called “demand management” and there’s a lot of evidence that it works.  Providing protocol-based care for chronic conditions, such as asthma or diabetes reduces the need for healthcare services down the road.  This thinking is behind much of the effort at NQF, and it should work--but not tomorrow.  

But what about appendectomies?  Hard to reduce the incidence until we can design kids without an appendix.  That leaves us with reducing the cost of individual healthcare services, a.k.a. efficiency.  We could start with the diagnosis--does it really take an MRI?  A lot of complaints from those with gray hair that current kids rely too much on technology, in effect treating numbers or reports rather than patients.  As a medical student, I went with a surgeon to see a young woman with abdominal pain in the ER.  After seeing the patient, the surgeon asked the husband, “Has she had this problem before?”  The answer was, “Doc, I’ve never seen her look worse.”  And on the basis to that statement, we went to the OR and repaired her ruptured ectopic.  No tests, no xrays.
And next?  Let’s assume a Dx of appendicitis.  The OR nurse pulls a card for Surgeon Jones and assembles the  instruments and supplies that he typically uses for an appendectomy.  These are run thru the autoclave and laid out on a sterile table in the OR.  But, in this hospital, the surgeons got together 6 months ago and agreed they would all use the same instruments and supplies for appendectomies.  The Hospital sterile supply room has pre-assembled all the instruments, and a contractor furnishes all supplies in a sterile pack.  The OR nurse now has two sterile packages to open, and she’s ready.  Faster, better, and cheaper.  An appendectomy in this hospital costs 20% less now than a year ago.  

Cynics among readers will ask what happens to that 20%.  Today, it would go to the hospital bottom line.  In a perfect world, it would help them to compete in a price-sensative mark place where efficiency is an advantage.

Bottom line:  it is possible to reduce the cost of healthcare thru two strategies:
Macro-efficiency or demand management.  Doing the right things for chronic diseases, so patients won’t need as much healthcare in the future.
Micro-efficiency at the individual service level.  Virtually any service can be improved, but it takes powerful motivation.  There’s nothing like the knowledge that you’ll be out of business unless you beat your competitor’s prices.
Translating these efficiencies into lower costs for the consumer requires transparent price competition.  Making rules about how chronic conditions “must” be treated won’t do the job.  These rules become a cost of doing business and won’t accomplish the goal in and of themselves.  You just can’t make enough rules.

Health insurance costs?  These are different but related.  A lot of healthcare isn’t included in health insurance.  Americans pay more  out-of-pocket expenses for healthcare that anyone else in the world.  Bad or good, it’s reality.  When’s the last time your health insurance bought you a pair of glasses? A bottle of aspirin?  A  Band-Aid?  A face lift?  Well, you get the idea.  The 15% or so that we spend out of pocket isn’t included in health insurance, but it is in the cost of health care.  If health care costs were lower, our costs would be lower.  As individual service costs go down, so does the aggregate expense for healthcare for the country as a whole.

Adding health insurance for the uninsured will NOT reduce the cost of health insurance or the cost of health care.  In fact, the total amount paid for each of these will increase after the next election.  Regardless of who wins, everyone loses financially.  The unit cost for each will not change, because there is not reason for change.  The total cost will go up, because more people will be getting more healthcare.  This, of course, is one reason provider groups are pressing for this benefit to the uninsured--more revenue for them.   What’s missing is downward pressure on prices.

 

Posted by Dr. Robert Burney at 12:23 PM | Permalink | Comments (0)

Right behind the Iraq war, healthcare cost is the subject voters want to hear about most. But, like imigration, it’s a subject candidates don’t want to talk about in detail.  Important here to distinguish between healthcare costs and health insurance costs.  True, they are related, but if you want to minimize the money spent, the tactics are different.  General principles still apply--if you want to decrease the amount spent, you can decrease the unit cost or the number of units.  For healthcare, that would mean decreasing the cost of a unit of healthcare (an appendectomy or an office visit) or reduce the number of appendectomies.  The latter approach is called “demand management” and there’s a lot of evidence that it works.  Providing protocol-based care for chronic conditions, such as asthma or diabetes reduces the need for healthcare services down the road.  This thinking is behind much of the effort at NQF, and it should work--but not tomorrow.  

But what about appendectomies?  Hard to reduce the incidence until we can design kids without an appendix.  That leaves us with reducing the cost of individual healthcare services, a.k.a. efficiency.  We could start with the diagnosis--does it really take an MRI?  A lot of complaints from those with gray hair that current kids rely too much on technology, in effect treating numbers or reports rather than patients.  As a medical student, I went with a surgeon to see a young woman with abdominal pain in the ER.  After seeing the patient, the surgeon asked the husband, “Has she had this problem before?”  The answer was, “Doc, I’ve never seen her look worse.”  And on the basis to that statement, we went to the OR and repaired her ruptured ectopic.  No tests, no xrays.
And next?  Let’s assume a Dx of appendicitis.  The OR nurse pulls a card for Surgeon Jones and assembles the  instruments and supplies that he typically uses for an appendectomy.  These are run thru the autoclave and laid out on a sterile table in the OR.  But, in this hospital, the surgeons got together 6 months ago and agreed they would all use the same instruments and supplies for appendectomies.  The Hospital sterile supply room has pre-assembled all the instruments, and a contractor furnishes all supplies in a sterile pack.  The OR nurse now has two sterile packages to open, and she’s ready.  Faster, better, and cheaper.  An appendectomy in this hospital costs 20% less now than a year ago.  

Cynics among readers will ask what happens to that 20%.  Today, it would go to the hospital bottom line.  In a perfect world, it would help them to compete in a price-sensative mark place where efficiency is an advantage.

Bottom line:  it is possible to reduce the cost of healthcare thru two strategies:
Macro-efficiency or demand management.  Doing the right things for chronic diseases, so patients won’t need as much healthcare in the future.
Micro-efficiency at the individual service level.  Virtually any service can be improved, but it takes powerful motivation.  There’s nothing like the knowledge that you’ll be out of business unless you beat your competitor’s prices.
Translating these efficiencies into lower costs for the consumer requires transparent price competition.  Making rules about how chronic conditions “must” be treated won’t do the job.  These rules become a cost of doing business and won’t accomplish the goal in and of themselves.  You just can’t make enough rules.

Health insurance costs?  These are different but related.  A lot of healthcare isn’t included in health insurance.  Americans pay more  out-of-pocket expenses (see also CMWF reports) for healthcare that anyone else in the world.  Bad or good, it’s reality.  When’s the last time your health insurance bought you a pair of glasses? A bottle of aspirin?  A  Band-Aid?  A face lift?  Well, you get the idea.  The 15% or so that we spend out of pocket isn’t included in health insurance, but it is in the cost of health care.  If health care costs were lower, our costs would be lower.  As individual service costs go down, so does the aggregate expense for healthcare for the country as a whole.

Adding health insurance for the uninsured will NOT reduce the cost of health insurance or the cost of health care.  In fact, the total amount paid for each of these will increase after the next election.  Regardless of who wins, everyone loses financially.  The unit cost for each will not change, because there is not reason for change.  The total cost will go up, because more people will be getting more healthcare.  This, of course, is one reason provider groups are pressing for this benefit to the uninsured--more revenue for them.   What’s missing is downward pressure on prices.

Next time:  more on why it costs so much. 

Posted by Dr. Robert Burney at 12:23 PM | Permalink | Comments (2)

Two meanings for this word:  a line in the sand.  A performance level to be sought after.  A standard of the industry.  
OR, a way to improve what you do be emulating others who do similar things, not necessarily in the same industry.  For example, an airline and a hospital have both benchmarked with the Indianapolis 500 pit crews to turn over something faster--race cars and airplanes or operating rooms, it’s the same process.
I recently heard a Xmas concert by the Washington Chorus, directed by Eric Stark, and I thought, “This is what healthcare needs.”  In addition to the many and varied voices of the Washington Chorus, he had the following resources at his disposal:
An organ.  A BIG organ.
The National Capital Brass and Percussion.  
The Woodlawn (high school) Chamber Singers.
And Mr. Stark was in charge and in control of everything.  The singers sang when he wanted, and the instruments played when he wanted.  He had an effect--a sound--that he wanted to create for the benefit of the audience.  He was providing a service.  You could take the same talented musicians, and the performance would not be the same without a conductor.  

And that’s what we have in healthcare.  A group of talented individuals without a conductor.  No one in charge.  No one in control.  No one making eye  contact with each performer to ensure a coordinated performance.  Ostensibly, there is someone “in charge” tho you’ll get arguments over who that is.  Want to test this?  Go into the ER or the OR of your local hospital and ask several people, “Who’s in charge of this operation?”  Is it the hospital administrator?  The Director of nursing? The Medical Director?  The anesthesiologist?  The surgeon?  And generally, there is no one in control, which is another question.  Who is monitoring the process of care to make minute by minute adjustments or summon needed resources at exactly the right moment?  Who monitors outcomes and redesigns the care process to constantly improve the outcome?  

For the Chorus, Mr. Stark was in charge and in control.  The outcome was wonderful, but I bet it wasn’t so at the first rehearsal.  It just kept getting better and better.  Maybe he gives lessons.

Posted by Dr. Robert Burney at 03:45 PM | Permalink | Comments (2)

http://www.minuteclinic.com/en/USA/
The definition of efficiency includes saving time as well as money, and that precludes sitting in a waiting room.  It may come as news to some that saving patient time also counts in this equation.  Mothers complained about bringing their little darlings to the surgery center 60 minutes prior to surgery.  So, we cut the time to 30 minutes, and, despite dire predictions, nothing bad happened.  Oakwood hospital in Dearborn, MI pioneered the 30 min door-to-doc time in their ER.  (The guarantee is now down to zero min.)  It can be done, but first you have to care.

Apparently, patients do care about saving time.   MinuteClinics and other “retail healthcare” establishments are gaining traction.  Open 7 days a week.  No appointment necessary.  Prices posted on the door.  Try that with your family doctor.  The concept has not been endorsed by the medical establishment, and has been largely ignored.  (I remember when General Motors took this attitude with Japanese cars.)  But look who’s coming to dinner!  The Mayo Clinic.  They have opened an Express Care Clinic on the same model, inspired by the competition.  They offer a limited menu at low cost with walk in access.  

Obviously, this is not the answer to all primary care needs.  But for some conditions for some patients, it is a convenient and inexpensive alternative to the waiting room.  The puzzling thing to me is why primary care offices don’t incorporate this concept into their offices.  Why are some planning to open entirely separate facilities?  

This is analogous to the surgery center movement that started because of poor service by hospitals and has grown to perform over 50% of all operations.  The instinctive reaction to a new concept is to resist--pass laws and put up barriers to limit the competition.  This has happened with specialty hospitals, and many states still have certificate of need laws for any healthcare service.

OK.  It’s a bit more complex.  But you’d think when someone comes in and does a task better, faster, and cheaper than you do, you’d want to steal some of his ideas.

As health insurance moves to shift more of the cost to patients, less expensive alternatives will become popular.  A survey by Regence showed that patients will shop for elective healthcare, and that cost and quality were both important.  Not surprisingly, those without insurance were more interested in cost.  Now translate that into a world where no one has insurance--at least not for the first $5,000 of their healthcare.  I would guess that a lot more people will be a lot more interested in how much things cost.  That should mean that providers will focus more on how much they charge, and we’re on the way to reducing healthcare costs.  Whoopie!!

Posted by Dr. Robert Burney at 06:43 PM | Permalink | Comments (0)

It’s fun to give advice, particularly when you will never have to implement any of your suggestions.  The Commonwealth Fund recently assembled the usual suspects and wrote their “Advice to the Candidates.”  A lot of the paper is apple pie and motherhood or so vague that it means anything or nothing.  But some of the points are familiar soap boxes for academia.  Efficiency is mentioned occasionally, but the only meaningful reference is on the last page of the appendix.

Health insurance coverage for everyone is probably a done deal, at least politically.  All candidates have more or less endorsed this, tho some are more tenuous about how to pay for it.  As noted here before, we’re already paying for healthcare for all, but not health insurance for all.  At least not entirely and not openly.  A complex issue.  The points in the CMWF document on this issue are generally good ideas, tho all would increase costs.  They mention efficiency here, but only in “reducing transaction and administrative costs.”  Admin costs are a small fraction of the cost of healthcare, so the returns would be tiny.  Besides, don’t you think all those HMOs that have been doing this for years have been looking for ways to reduce their costs?

Align Incentives and cost.  Many have lamented the link between volume and revenue, tho this seems a well established principle in every other industry--the more you do, the more you earn.  In healthcare, the more practitioners “do” the more the country spends on healthcare.  At times, we have sought to cut that link by reducing capability.  HMOs originally tried to reduce access to care.  At one time one state limited the number of MDs they would allow to practice there.  (Restraint of trade.  Didn’t work.)  Some states still have certificate of need laws, but these are circumvented by bribes and favors from large players.  About 1960, some wise men decided if we increased the number of doctors, the unit cost of healthcare would go down.  Supply and demand.  When the demand approaches infinity, the law of supply and demand just doesn’t work.  All those new doctors found things to do.  So now, we want incentives for them to do less and make less money.  Good luck.

Management of high-cost and chronic conditions.  Yes.  Chronic conditions are a big ticket item for Medicare, and proper management can reduce the need for healthcare.  For an individual practice, however, doing a good job means less need for your services and reduced revenue, unless you can fill the time with other patients.  Of course, this would mean agreement and endorsement of practice guidelines.  Maybe a role for incentives.

Prevention.  This is a motherhood issue.  It seems intuitive that primary prevention--reducing smoking, for example--would reduce healthcare costs.  And it does.  In some cases.  But it takes a long time to see any financial benefit.  And the most beneficial prevention measures fall into the realm of personal habits (smoking, drinking, exercise, etc.), rather than healthcare.  If we closed all the coal fired power plants in the US, we could probably reduce the incidence of respiratory diseases, at least along the East coast.   Prevention is a many splendored thing.  

Eliminate waste.  One sentence on page 28 of the last appendix.  And this has the potential to reduce costs by 20 to 30% all by itself.  Actually, they wrote, “Establishing incentives for elimination of waste” and this is key.  The tools are there.  Have been for years.  But there are no incentives to use them.  Price competition at the service level would do that, and the savings could pay for health insurance for all.

Posted by Dr. Robert Burney at 10:17 PM | Permalink | Comments (0)