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Understanding the True Cost of Care

by Jordan Harmon
February 24, 2015

Understanding the True Cost of Care

by Jordan Harmon
February 24, 2015 | Comments (3)

Reading through the hundreds of stories from healthcare professionals and patients that we receive each year at Costs of Care, it’s apparent there is still a ton of waste in healthcare. I read about physicians struggling to decide whether or not to order an MRI for fear of being sued by a patient if something in the diagnosis is overlooked. I read about patients who don’t have the funds to pay for life saving treatments because of how much they cost.

These stories can be disheartening, but we need to hear them so we can get a handle on the scope of the problem. At Costs of Care, we’re focused on reducing waste and costly treatment in healthcare, addressing the waste problem at the root. We aim to address the issue of costly care by integrating cost decision making at the point of care and provide clinical teams with educational tools to do it effectively. Addressing costs when the patient is in the exam room happens to be the most impactful place to apply lean principles; however, it is one of the least addressed by healthcare organizations today.

If you haven’t noticed, our health system is extremely complex. There are hundreds of surgical and non-surgical sub-specialties, thousands of hospital systems, and billions of medications prescribed each year. Physicians have more treatment options than even just a few years ago and patients today have an overwhelming amount of care information available; yet, we struggle to provide holistic, coordinated care. As a patient, you can now get various hospital quality data online, compare a hospital to those in other cities, and rate a physician on both quality as well as bedside manner. There are literally thousands of locations to get a hip replacement and just as many options on who you want to perform it. It is no wonder that patients are feeling confused and looking to find value in healthcare.

Today, front line clinicians are being asked to provide even more cost-efficient care to patients yet few understand how to do so. There is a new focus on efficiency in treatment options and today’s patients are more cost savvy than their predecessors. We must ensure value while reducing costs and improving quality outcomes. 

To assist organizations and individual clinicians with providing more cost-conscious care, we have developed a clear framework to address overtreatment and non-value added treatment. The “COST” framework outlines 4 key areas of focus:

  1. Culture - organizations must value cost-consciousness and resource stewardship
  2. Oversight - there must be clear accountability for cost-conscious decision making
  3. Systems Change - systems should guide cost-conscious decisions and be supported by policy
  4. Training - information sharing needs to exist to increase the skills and knowledge of clinicians

The main objective of the framework is to drive cost-conscious decision making, but the framework itself is not sufficient in reducing costs. Individual practitioners and organizations must instill the framework daily in order to see results. However, this framework, aligned with lean principles, also reminds us to identify value and focus on identifying areas of waste in the current system.

Applying the Framework

At my hospital, we have a dedicated department that works to improve organizational processes and partners with physicians to test theories on ways to reduce waste. We have interdisciplinary teams of clinicians and administrators from the front lines working together to change the way we provide care. This is something that has been ingrained in our culture. All levels of management and clinical staff are involved with transforming the organization and there is clear support/oversight from senior leadership to empower teams to create change and help us succeed.  

Our progress has been remarkable though not yet complete. We’re also currently working to install a new electronic medical record system and have designed future workflows to enable these changes. Finally, this past year, we have asked our teams to spend a lot of time on this initiative and it has pulled them away from their daily responsibilities. However, we’re currently engaging our teams to align a comprehensive training program that both encompass our newly designed workflows along with system changes. Only by applying all areas of the “COST” framework will we be truly successful in impacting value at the hospital. 

As the healthcare industry continues to transform and progress towards providing more value-based care while improving outcomes, patients should always be the focus. I encourage others to focus on value. And not only look to lean methodology for solving our industry's issues, but to experiment with the “COST” framework. Identifying waste will continue to improve and develop a strong organizational culture, develop stronger leadership oversight, and enable systems change. In our work, we’ve seen transformation finally come to healthcare. Through the “COST” framework, we are shaping the way value is defined with patients. 

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
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3 Comments | Post a Comment
Mark Graban February 24, 2015
1 Person AGREES with this comment

In my almost ten years of working with hospitals, I find this statement to be very true:

"Today, front-line clinicians are being asked to provide even more cost-efficient care to patients yet few understand how to do so."

The idea of reducing cost or improving efficiency is scary to healthcare providers and this is understandably so... in healthcare, "cost cutting" has meant that either people lose their jobs or that quality/safety suffers.

We need to teach hospitals how to improve quality, safety, and cost simultaneously and that's where Lean thinking and Lean methods are incredibly helpful. We can demonstrate to people that improving quality and safety is a great path that leads to lower cost - as an end result, not a primary goal. This is an important and necessary culture change for healthcare.

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Mighty Casey February 26, 2015

Another tip here is "let patients help" - those of us in the expert-patient cohort have lots of empirical info on actual cost, particularly those of us who either choose or are forced to self-pay for treatment.

There are open-data projects currently underway, like those led by ClearHealthCosts.com and their media partners (which include NPR affiliates), that can provide price/cost data that can be included in workflow process design.

Another dispatch from Captain Obvious - one that I've personally had Karen Ignani of AHIP say, directly to me, is a really good idea - is for payer data to be included in EHR workflows. IOW, since the EHR knows I'm Patient Jane Doe, and what my insurance coverage is, why can't the EHR dashboard serve up the cost figures on the treatment options being assessed/advised/entered at the point of care?

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Paul Nelson February 28, 2015
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A woman called our office, Primary Health Care, to make an appoitment as a new patient.  She stated she was concerned about her anemia.  The nurse, an R.N., who answered the phone later told me that she thought that she seemed frail.  After the initial process of learning a few details about her health, an  appointment was arranged for later in the morning "as soon as you get here."  There was no indication of a recent new health condition, e.g., bleeding.  But, the blood count in the office was 5, 11-14 being normal.  An outpatient transfusion was arranged at the hospital, and she was seen again in the office to begin the process of establishing an over-all care plan.  A fundamental issue for her was the lack of health insurance and how it affected her accessibility to healthcare.  Her providers were so preoccupied by the payment process that they allowed it to govern their responsiveness, their "caring about" her.  Admitting her to a hospital was never an object because there was no indication that she had acutely unstable health.  In addition, it was clear that she did not want "more hospitals."


Puting aside the issue of insurance as a factor for accessibility,  how do we sponsor Primary Health Care that is equitably available TO and culturally accessible BY each citizen?  This is THE issue.  We do not have any nationally sanctioned institution to promote the solutions to this issue. I would offer that having an experiennced and dedicated R.N. always aswering the phone for Primary Health Care is the most important avenue to managing the triage process for Primary Health Care.  Improving the efficiency of our nation's healthcare must begin with high quality healthcare for Basic Healthcare Needs.  


Without this level of healthcare for everyone, how else can we hope to reduce our nation's highly unacceptable maternal mortality ratio.  In 2013, there were almost 4 million births in our country.  This means that about 700 women would have died in association with a pregnancy.  If these women had lived in the 6 states with the best maternal mortality ratio, at least 350 would still be alive.


Ultimately, the cost of healthcare is a relationship issue.  How do we build the institutional governance necessary to promote this for every health care encounter?  As said many years ago, the care of the patient is in caring for the patient.     

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