Supporting Lean: Medicare Won’t Pay for Medical Mistakes

Medicare will no longer pay for treatment of certain preventable medical mistakes, it was widely reported this week. That’s a good thing for many reasons. One is that Medicare’s previous willingness to pay undermined efforts to apply lean principles to healthcare. More on that in a moment.

            Medicare’s new rule applies to eight conditions, and more are likely to be added to the list. The eight are: objects left in a patient during surgery; blood incompatibility; air embolism; falls; mediastinitis, which is an infection after heart surgery; urinary tract infections from using catheters; pressure ulcers, or bed sores; and vascular infections from using catheters. 
            One story notes that


            Last year, Mark McClellan, then director of the Medicare and Medicare programs, said the government could save hundreds of millions of dollars a year if the Medicare program stopped paying for medical errors such as operations on the wrong body part or mismatched blood transfusions.


            What does this have to do with lean? A lean strategy focuses on providing value to the customer, and a generally accepted definition of value is that which the customer is willing to pay for. So since Medicare was paying for fixing these errors – rework, you might say – hospitals had no incentive to reduce the number of errors (other than their desire to do the right thing).

            Look at it this way: If you are a manufacturer, and your customer pays for the products you produce, then is willing to pay you again to fix the products if they prove to be defective, would you have any reason to eliminate defects?

            Some of you may be thinking, wait a minute: Isn’t the patient, and not Medicare, the hospital’s customer? That depends on how you look at it. I would argue that, in at least some situations, the customer is the person or organization that provides payment – in this case, Medicare.

            This parallels a statement I heard last week at a conference on customer needs. A speaker from a consumer product manufacturer described a distinction that seems relevant here. The individual who goes into a retail store and buys the product (the end user), he said, is the CONSUMER. But the retail store, which actually pays the manufacturer for a supply of the product, is the manufacturer’s CUSTOMER.

            However you look at it, Medicare’s decision is a powerful additional incentive for hospitals to improve operations. I hope those who promote the concept of lean healthcare will use this new financial reality as a selling point for their efforts.



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