Transforming an Industry: Achieving Healthcare Reform

With discussion growing over how to improve healthcare in the United States, a recent article in The New York Times offers some worthwhile – but incomplete – ideas.

Two main causes of the system’s ills are century-old business models, for the general hospital and the physician’s practice, both of which are based on treating illness, not promoting wellness. Hospitals and doctors are paid by insurers and the government for the health care equivalent of piecework: Hospitals profit from full beds, and doctors profit from repeat visits. There is no financial incentive to keep patients healthy.

The reporter, Janet Rae-Dupree, then quotes author and Harvard business professor Clayton Christensen on what needs to be done.

Mr. Christensen and his co-authors argue that by putting the financial interests of hospitals and doctors at the center, the current system gives routine illnesses with proven therapies the same intensive and costly specialized care that more complicated cases require.

“Health care hasn’t become affordable,” he said in an interview, “because it hasn’t yet gone through disruptive decentralization.”

It’s coming, though. Some health care suppliers have set up fixed-fee integrated systems, and accept monthly payments from members in exchange for a promise of cradle-to-grave health care. Each usually also charges a small co-payment for treatment. Routine cases are handled through lower-cost facilities, leaving more complicated cases to higher-cost hospitals and specialists.

I have no argument with these ideas. Financial incentives are extremely powerful, and the points made in the article are undoubtedly true.

In addition, the idea of handling different types of cases in different types of facilities has a parallel in the lean manufacturing concept of making different families of products in different types of manufacturing cells. However, I take issue with calling the different facilities “lower-cost” and “higher-cost.” It should be about the type of care provided, not the level of cost.

And that reflects what is missing from this article: mention of the need to focus on improving healthcare processes. Yes, the financial incentives should be changed. But the system must also be changed to focus on how to best provide effective treatment (read: value) to the patient. We are publishing an increasing number of books focusing on how to do that.

Whether you agree with him or not, Christensen’s ideas are the kind of thinking that should be central to the debate over healthcare reform. But so should the concept of applying lean thinking to healthcare.