Healthcare Costs Can Be Cut

Healthcare cost can be cut. So says a Pittsburgh Tribune-Review article by the same title on September 14, 2006. The examples from Virginia Mason Medical Center do demonstrate that healthcare costs can be cut, but is this enough?
The article cites statistics from Robert Mecklinburg of Virginia Mason Medical Center, that half of all health care dollars spent is wasted. This is $1 trillion wasted on poor quality care, safety issues and an incentive plan that rewards mistakes. This is waste that can be cut out through kaizen.
The ideal condition of a society is not to have the degree of illness, trauma and poor health as we do in the U.S. Our healthcare institutions are focused on firefighting rather than on fire prevention (healing the ill rather than preventing illness). This is by nature a very expensive way to keep a society healthy, with or without the 50% waste.
If we think deeply about the goal of healthcare organizations, it is to keep people healthy. This is not a question of cost. It is not a question of the quality of patient care. It is to avoid the need for patient care. It is a question of prevention. Yet if healthcare organizations succeed in this mission, their revenues will decline. I have heard hospital executives talk about applying the savings from Lean toward providing more indigent care or community outreach programs to promote daily good health, yet none of them considered the latter as a revenue model.
A Shmula blog titled The Profit Tree raised the point that the combination of increasing revenue and cutting costs is ideal. Mark Graban at the Lean blog said about the situation at the Ford Motor Company:
Lesson for me — don’t EVER be part of a company that isn’t growing. Shrinking is painful. As management, don’t let it get to that. It all falls apart if you’re not growing, no matter what the business.
Healthcare should be more about prevention than about medication and surgery. Of course like the poor, the sick will always be with us. The lesson for me is that if I were a healthcare organization my long-term plan would be to shift a large part of my revenue towards services aimed at prevention. It’s something that by nature you can provide at a much lower cost, and what customer wouldn’t prefer preventive care to surgery?

---