Posted by: Ken Pilone, Sr. OD/Lean Consultant, TBD Consulting
With all the fuss about the ‘Obamacare’ legislation, it seems we have lost sight of the REAL problem here. All of the attention seems to be focused on how to pay for our nation’s healthcare needs. Rarely if ever do you hear anybody asking, "Why are health costs so high in the first place?"
The question needs first to be asked, why providers charge so much. While there are no easy answers, this much is clear: The entire end-to-end process of providing health services is riddled with waste!
There are at least two ways to look at the formula for making a profit. The first and most common is, cost + profit = price. You have only to look at the Post Office to see how this plays out. Their motto might be, “Inefficient, no problem. Just raise the price of a stamp.” This formula doesn’t allow for any scrutiny into what drives cost in the first place. The second formula, and the one most overlooked is, price – cost = profit. This works well in highly competitive markets where price is more or less dictated by the customer and thus is essentially fixed.
Think about it. For any consumer product to have a chance at being successful in the marketplace, it shouldn’t cause sticker-shock for the customer. For example, if I want to buy a toaster, I can expect to pay between $15 and $50 depending on features, brand, retailer, etc. But, if I see a toaster on the shelf with a price of $200, I might react like, Jeez, I just want toast for Pete’s sake! Does it also do my laundry? We’re not likely to be too sympathetic if the maker responds with, “Well, that’s just what it costs to make it plus a little profit.” That’s not our problem! If they can’t compete, well, then they have the right to go out of business!
Herein lies the rub. When healthcare providers THINK and subsequently ACT as if they have no real competition, where is the incentive to look for and eliminate waste? There is also a mindset working in this industry that cost doesn’t really matter to their customers (patients) because those big, greedy, money-grubbing insurance companies are going to foot the bill anyways. Right? We think it’s all their fault we’re in this mess. And the finger-pointing ensues.
If we zoom out far enough, we can find some hope from this dilemma. Ironically, there is a potential model right under our noses in the Emergency Rooms across the country. The routines in place when an ambulance pulls up are very tight, efficient and well-rehearsed. This is a completely customer-centered process. All non-essential tasks and activities are suspended until the crisis is over.
Unfortunately, we haven’t examined all other healthcare related ‘value streams’ with the same eye towards fast, efficient, waste free work. It’s as if by some invisible elastic band around us, we revert instantly back to the ‘norm’. But, what if we used the same critical lens to look at all the other processes in place in the system? Start with identifying who are REALLY the customers and track backwards to see how value is created for them. Along the way we will find waste of unimaginable proportions.
Doing this will help us solve the healthcare crisis its root cause, waste and inefficiency. This is the center point around which healthcare providers’ lean/PI staff SHOULD be revolving.