(From Hospitals and Health Networks Online, 5/10/08)

Health care organizations need to buckle down and deliver care that is better, faster, cheaper.

Here’s what we know: Come next January, the United States will have a new president and a new Congress. We can bet that president and that Congress will take up the issue of health care reform. And it is a dollars-to-doughnuts bet that whatever they do will not come close to fixing health care. That’s our job.

We can entertain a reasonable, better-than-even expectation that the reform bill will result in draconian reimbursement cuts to providers. If we are lucky, if we are good kids and clean our plates, maybe the political powers that be will figure out how to pay for every American to have access to health care at some basic level.

But the system will still be broken. It will still not bring us what we want and desperately need, which is health care that is competent and convenient, and costs something less than every last nickel.

In the face of this, we must gear up for serious political action over the next several years. At the same time, we must recognize that we truly have no control, and only limited influence, over the system as a whole. Our focus has to be on fixing what we can control—our own sector, and our own institutions.

The slogan of these coming years has to be “People changing health care”—that is, those of us in the industry re-shaping our own institutions from the strategic plans to the protocols and formularies to the brand of floor wax.

Customer Priorities

How do you succeed in business by really trying? As Henry J. Kaiser put it, “Find a need and fill it.” It’s a the hot-dog-stand business model. What do our customers need and want? Health care that is “better faster cheaper.” Our customers (consumers, employers, health plans and government) often have different interests, but they are mostly united in what they want from providers: better (that is, higher quality, more tightly organized around results), faster (more immediate, more convenient, available in more ways) cheaper (less expensive) health care.

The major trends (including increased transparency, increased consumer direction, digitization, increased use of hospitalists, more expected budget cuts and increasing chaos in the insurance market) mean two things. The first is that our customers increasingly will be able to tell how good our services are and how much the whole package will cost. The second is that the traditional hospital business model (providing free work space for physicians, in return for their help in running the place, and then charging a la carte for everything from rooms to catheters) increasingly doesn’t work.

How do we get to “better faster cheaper?” Not by nibbling around the edges. It is only possible through profound change, through organizational re-shaping, through “lean manufacturing” management of processes. Change has to encompass all the processes, parking lot to thrombolytics. And the product has to be prix fixe: The customer is not buying a pile of bandages and catheters, and time in a hospital room. That’s what we are typically selling, but the customer is buying a re-plumbed heart, a healed wound, a delivered baby. You can’t improve the product if you don’t recognize what the product is, name it and price it.

Meeting the Challenge

The large-scale challenge is growing increasingly obvious: If institutions are going to offer whole packages, be transparent about their outcomes and improve all their processes, they need rational control of their processes. You can’t do this as a loose congeries of freelancers with “loading dock” relationships with other service providers. The Chicago Bulls don’t work that way, Home Depot doesn’t work that way and neither, it is becoming clear, can a medical center.

Across the country, a growing number of providers is recognizing this necessity, and acting on it in several ways:

Buying key physicians. You want to build an efficient, high-quality team that does knees or hearts or eyes? Bring the specialists in house, give them the resources they need, lift their administrative burden, surround them with the right teammates who work with them steadily over a long period of time, and put in place the right kind of “lean manufacturing” program that allows them steadily to improve what they are doing. Build a dedicated primary care network, standardize their software and work routines, pay for the ER and on-call coverage that you need by being their employer—and find the efficiencies in the processes and the protocols. Keeping in mind that, as noted in previous columns, the Dartmouth Group has shown that we waste at least 30 percent of all the health care that we deliver. It’s clear that the efficiencies are there to be found—but they will be found only if we deliver packages, not pieces. As long as we make a profit from every extra test or image, we will never find the efficiencies. When we deliver packages guided by consensus protocols, we will rapidly discover what works and what doesn’t, what is necessary and what is not.

Getting into insurance. Not to pay yourself more, but simply to get paid honestly, and to deliver your customers from the fear of “post-claim underwriting” (now being named by numerous district attorneys and attorneys general as fraudulently failing to deliver on contracts). In many markets, insurers effectively have a monopoly or duopoly. In the rapidly changing insurance environment, it should not be too hard to compete by simply following the Google dictum: “Don’t be evil.”

Competing in retail and urgent care markets. Organizations across the country are beefing up their money-losing EDs and adding not only creature comforts but rapid triage to attached clinics. At the same time, Wal-Mart and a number of other retailers are getting into the coughs-and-cuts business. Both ends of this “instant care” spectrum serve as entry points to the health care system—your system, potentially. They are, at the same time, organizational training grounds in delivering fast, efficient, customer-centered health care with standardized protocols and tight coordination. Furthermore, we can anticipate that the economics of such down-scale entry points will change dramatically if health care reform gets us any closer to truly universal coverage. You want to be there.

Competing in concierge and added-value niche markets. The same arguments apply to those who are willing and able to pay a yearly subscription fee for high-end hand-holding, instant access and a menu of preventive services such as annual physicals and flu shots. They apply as well to optional retail services such as sleep labs.

Owning the home health, ambulance, laboratory, imaging, long-term care and other services. This is not so much to give yourself any special deals as to ensure tight coordination. One hears just as frequently from long-term care administrators who can’t get anyone from the medical center on the phone to come out and give a round of flu shots, and from docs who keep a patient in a hospital bed for lack of somewhere to efficiently step them down to.

A New Approach

Have we been here before? Not really. In the 1990s, we went through a round of panicked consolidation under the lash of managed care (“The HMOs are coming! The HMOs are coming!”) in the belief that sheer size would help us negotiate with the health plans. Results? Not so much. It turned out that size doesn’t help negotiation all that much when there are only one or two health plans left to negotiate with. And buying power can be gained in other ways—through buying groups, for instance.

Too often health care centers bought docs just to rescue them from their own poor business practices, instantly turning them from not-so-good businessmen into even-worse employees.

And too often, health care centers expanded in all directions for a motive that looked, from the outside at least, like just an urge for greater empire. Not good.

We saw what came from that rush to buy, and it was not a pretty picture. This time, the urge for integration must come from an entirely different direction.

The only reason to own the docs, the insurance capacity, the retail centers, the ancillary services and a piece of the concierge market is tight coordination and control of processes,
using lean manufacturing techniques over months and years to repeatedly find what works to deliver your products better, faster, cheaper.

It’s not about building bigger empires. It’s about doing what works—nothing more or less. It calls for the heart of a warrior, a necessary ruthlessness, a keeping the eye on the prize, a prize that is not about the comfort of any of us in health care, but the comfort and cure and satisfaction of our customers. That’s what we are here for. That’s our real job.