Healthcare Association Head Needs to Learn About Lean

The president of the Blue Cross Blue Shield Association seems to understand the need to eliminate waste from healthcare. Unfortunately, he doesn’t have a good handle on what needs to be done.

The New York Times just published an interview with Scott Serota, the association’s president and chief executive. One of the issues he discussed was the need to eliminate waste.

Our goal is that health care costs rise no faster than any other goods and services. The essential fundamental to getting there is improving the underlying system because 30 percent of care rendered today, according to some studies, is unnecessary, redundant and, in some cases, even harmful. We need to get waste out of the system. That means $700 billion in a $2.4 trillion system.

I’m talking about a whole battery of things like duplicative testing such as two M.R.I.s instead of one or hospital-acquired infections.

That certainly sounds like (and is) an opportunity to apply lean principles. Or six sigma. Or other improvement methodologies where it has been proven over many years that they work.

But Serota apparently is not aware of all that:

The cornerstone of how we get at this is creating a comparative effectiveness institute to study what treatments really work best for a given condition — and letting everyone know what works. There is legislation on this pending in Congress.

Just what we need – a new bureaucracy to conduct a study to tell us what we already know.

I also take issue with Serota when he talks about the decision by Medicare and some insurance companies (including some of the blues) to stop paying for treatment of avoidable medical mistakes, known as “never events.”

On the one hand Serota acknowledges the impact these decisions have:

If they are no longer getting reimbursed for those costs, institutions will be very aggressive in eliminating those events.

That’s the point, isn’t it? But then Serota questions the approach:

Not paying for them is the end point… We’re trying to figure out mechanisms to help them improve their performance. Then we’ll tie reimbursement to performance. These events are a huge problem where we haven’t made a lot of progress over the last 10 years. We have to fix it, then adjust the financing.

It sounds like he’s saying we should stop paying for mistakes after we stop making them, or at least after we know how to prevent them. I guess no one ever taught him the value of a “burning platform.”

With any luck, the drive for the “comparative effectiveness institute” Serota mentions will be abandoned amid growing awareness that some healthcare institutions have already found approaches that work, such as lean. However, I’m not too optimistic about that. Drives for new bureaucracies sometimes take on a life of their own, regardless of the facts.


Mark Graban said...

Only $700B is wasteful spending? I've heard others put the number at $1 Trillion.

The health insurers need to help figure this out. When hospitals like Virginia Mason or ThedaCare help reduce unnecessary diagnostics, they get slammed financially because "eliminating waste" also means eliminating revenue given the "piecework" approach to payment in our disease-care system.

So, instead of lecturing and pontificating, BCBS can start getting to work fixing that.

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