Trimming the fat off health care

Colin Hannifin

Columnist

Late last month, President Barack Obama signed one of the most important health-care reform bills into law. The news coverage of this act has been significant.  Whether you’re a supporter or detractor of the new law, there is no question that it makes some significant changes in how we pay for health care. It may make health care more affordable for many Americans, but a question remains: does it actually make health care cheaper?

The answer to this question is murky. The Congressional Budget Office (CBO) has reported that the law will lower the federal deficit by billions of dollars over the next ten years, largely by new fees (on pharmaceuticals), taxes (on income), and other related cost-saving measures (changes in Medicare). Much of their savings seems to come from taking more money from companies and taxpayers—and these numbers only hold true if all current legislation is implemented on time, and no legislation in the coming months changes law. It would seem that these decreases in the deficit have little to do with the actual cost of health care—in any event, while the CBO was reporting savings over $130 billion, according to the Centers for Medicare & Medicaid Services (under the U.S. Department of Health & Human Services), national health expenditures in 2008 totaled $2.3 trillion dollars—more than 16 times the projected savings.

Are there savings to be had? Evidence suggests that, yes, savings are to be had—and to get an idea of where, we have to look no further than Appleton, Wisconsin.

In Appleton, ThedaCare – a four hospital health care system – could be on the front of a revolution that could shake the entire health care industry. They have found a way to reduce costs while increasing quality by taking cues of one of the most successful companies in the world of manufacturing: Toyota (from Wall Street Journal Online, “To Fix Health Care, Hospitals Take Tips From Factory,” April 9, 2004).

After World War II ravaged Japan, Toyota rose from the ashes and quickly grew to be one of the best car companies in the world, known for their quality, low price, and fuel efficiency. They did this using what would come to be known as the Toyota Production System, also known as just-in-time or lean manufacturing. This process is marked by elimination of waste and inventory (which is viewed as waste). There is a constant push to improve processes, make them more efficient, and eliminate defects. These strategies have been adapted the world over by good manufacturers—and members of the service sector are starting to listen too.

To move from traditional health care practices to leaner, more efficient ones is not easy. There are many differences between the Toyota and the patient. But as ThedaCare CEO emeritus Dr. John Toussaint saw, there are many similarities. In both scenarios, the customer—be it a car buyer or a patient—wants the top quality for the least amount of money. Time wasted by the professional in either case—be they blue collar factory workers or white coat doctors—is money lost and efficiency out the door.

The most difficult process, according to Dr. Toussaint, is getting the staff on board. Health care professionals are skeptical to begin with, as similarities between the factory floor and the sterile hospital seem sparse. Doctors are especially difficult, as they do not appreciate being told what to do—especially by consultants from the manufacturing sector (Wall Street Journal Online; Harvard Business Review, “Getting Physicians to Buy in to Lean Health Care,” March 22, 2010).

After convincing the staff, the rest is relatively easy. It’s a matter of structuring the work area to work for the employee. It has taken years of small improvements, such as lowering the inventory on hand and placing it closer to where it will be used. Such as shifting where IVs are inserted to minimize infections. Such as training employees to be able to perform multiple processes, to avoid pigeonholing of employees (Wall Street Journal Online; “What is ThedaCare?” interview with Dr. Toussaint by FOX News). These steps seem small on their own, but added together, they spelt a dramatic change for ThedaCare.

Numbers suggest that the changes have worked for ThedaCare. According to JSOnline (the online branch of the Milwaukee Wisconsin Journal Sentinel), ThedaCare estimates that due to an increase in work efficiency in 2005 and 2006, they managed to cut costs by $22 million a year, while reducing errors. Because of this, costs for the patients are routinely significantly lower at ThedaCare than at competing hospitals (“Tending to improvements in health care,” March 31, 2008).

Toussaint has been to Washington, D.C. several times, and has hosted law makers as well as other health care professionals to his hospitals (“What is ThedaCare?”) Other health care systems have noticed, and have begun to follow suit. According to BusinessNorth.com, St. Luke’s in Duluth, Minnesota has also taken up lean health care practices—and they’re only one among several in Northern Minnesota to adopt the practice (“Health care is going lean,” March 25, 2009).

Health care is a $2.4 billion industry, but up to 40% of that cost may be waste, according to Dr. Berwick, President and CEO of the Institute for Health care Improvement (“Improvement Tip: Find ‘Muda’ and Root it Out,” ihi.org). Change has been slow in coming, but savings have been realized in small health care systems around the country by a shift towards lean service. If ThedaCare, such a small health care system, can see such savings, how could America benefit if the entire country adopted such practices?

Hope may be finally coming. The aforementioned Dr. Berwick, a supporter and believer of lean service practices, was nominated by President Obama to be administrator of the Centers for Medicare and Medicaid Services this past Monday, April 19 (New York Times, “President Nominates Professor to Health Job,” April 19, 2010).