Home > The Lean Post> 3 Therapies to Purge the Healthcare “Tapeworm”

3 Therapies to Purge the Healthcare “Tapeworm”

by Eric Buehrens
February 7, 2018

3 Therapies to Purge the Healthcare “Tapeworm”

by Eric Buehrens
February 7, 2018 | Comments (21)

When I first heard the news about the new healthcare venture to be formed by Amazon CEO Jeff Bezos, Berkshire Hathaway CEO Warren Buffet, and JPMorgan Chase CEO Jamie Dimon, my first reaction was: fasten your seatbelts, America. This will be really interesting and potentially really disruptive for the existing healthcare system.

Of course, we know hardly anything about this new venture, other than (1) these are really big, capable partners, (2) it will have something to do with using technology, and (3) they’ll start by using their own nearly one million employees as a testbed:

“The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”

What makes these three giants – not a healthcare provider among them – think that they can improve upon the vaunted American healthcare system, said by some to be the best in the world?

Well, much of the answer is: it isn’t the best, not by a long shot, so there is plenty of value to be captured and potentially returned to the consumers, employers, and government bodies that pay for healthcare in the US.

The sad fact is: medical outcomes for individual patients in the U.S. are no better in the aggregate than in other advanced countries; population health and wellness is much poorer, with higher incidence of chronic disease, substance abuse, and other health conditions than found in Europe or Japan, and the cost of American healthcare as a fraction of GDP is almost double what it is in these other countries. We are paying more, getting less, and costs continue to increase faster than inflation – that’s the “tapeworm” that Amazon and its partners say is eating the U.S. economy, depressing wages, and absorbing an ever-larger share of local, state, and Federal budgets. They’re right.

So, buried in the $3.5 trillion that we spend annually on healthcare in the U.S. is plenty of muda that, if reduced, could generate significant savings for patients, employers, and government, plus a nice return for Amazon and its partners.

Where I live in Boston, finding and eliminating that muda has the potential for real and painful disruption: Boston healthcare is dominated by academic teaching hospitals (one of which I used to run), associated with Harvard, Tufts and Boston University medical schools. They provide superb care but are among the most expensive hospitals in the United States.

If the U.S. healthcare system does a decent job of patient care (although a lousy job of population health), it is without a doubt the most effective healthcare system in the world in transferring wealth from customers – patients and those who pay their costs – to the stakeholders in the healthcare system, those that receive the $3.5 trillion in the form of wages, hospital charges, insurance premiums, fees for medical devices, pharmaceuticals, and the list goes on and on. “Somebody’s cost is someone else’s income”, so real transformation of the U.S. healthcare system will mean that those stakeholders (I used to be one of them …) will get a smaller share of the national wealth. This will hurt, and those stakeholders will not go quietly.

My advice for Amazon and their partners:

  1. There are three social groups that pay the $3.5 trillion annual healthcare bill: government (through Medicare and Medicaid), employers (through company-sponsored health insurance, and patients (which is all of us). Focus like a laser on creating dramatically better value for those groups, on returning some meaningful fraction of the 18% of GDP that we now spend on healthcare back to patients, government, and employers – and do so by structuring this new venture to get paid for outcomes, not quantity (think “lump sum”, not “time and materials”). The goal must be “healthier customers”, not “more tests performed” or “more hospital admissions.”
  2. Use technology to improve quality and the experience of care: wouldn’t you like to get routine health needs handled with the ease of booking an airline ticket or a hotel room? Keep, and strengthen, the personal connection between patient and caregiver; technology can both deepen the human relationship and streamline the merely transactional.
  3. And, although they are stakeholders and beneficiaries of the existing system, listen to the millions of Americans involved at the point of care for the patient, to those doing the work. Like frontline workers in all industries, they know the system and all of its flaws and have much to teach. But they were also drawn to a mission of care for the patient, and although they will be anxious about the coming disruption, they want to heal.
The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
Keywords:  healthcare,  taxpayer
Search Posts:
On the Mend
By John Toussaint, MD and Roger Gerard
Perfecting Patient Journeys
By Judy Worth, Tom Shuker, Beau Keyte, et al.
July 31, 2018 | 2 Comments
Was this post... Click all that apply
HELPFUL
23 people say YES
INTERESTING
50 people say YES
INSPIRING
21 people say YES
ACCURATE
19 people say YES
Related Posts
21 Comments | Post a Comment
Bob Emiliani February 07, 2018

"1. ...structuring this new venture to get paid for outcomes, not quantity..."

"Outcomes" is results, and "quantity" is process. Changing the focus from process to results is no good. It must be process and results. Right process produces the right results, right?

Reply »

Claire Everett February 07, 2018
1 Person AGREES with this reply

Outcomes are results, yes; quantity is process, um... no??

To me quantity is a number e.g. we treated 100 patents for X last week.

The process is the method or how the patients were treated; to me this is different to quantity.

You're right in saying that the right process gets the right results and therefore that process is important for achieving outcomes.  But I don't understand your link between process and quantity.  I'm not sure how you've made this connection, could you please elaborate?

Reply »

Bob Emiliani February 08, 2018

In the context in which Eric was writing, quantity meant number of procedures (processes) that payers must pay for. Accordingly, the view is that not all processses are contributative to good patient outcomes.

It is common for organizations to be process-focused. When that is perceived as ineffective, the pendulum swings to outcomes focused. The pendulum going from one extreme to another creates a lot of waste. Better to maintain a balance between process and results over time.  

Reply »

Eric February 08, 2018

Yes, Bob is correct about the context: our healthcare system is predominantly based on “fee-for-service” payment, in which every medical intervention - office visit, prescription, test, procedure, hospital admission, etc. - is a separately billable event. There are many alternative payment models in use and under development, but most of them have at the center the concept of “paying for outcomes”, which would be a healthy patient or a successful outcome to a complex surgery, for example. Most health policy observers believe that fee-for-service encourages overuse of resources since there are financial rewards for doing so, and very little disincentive. On the flip side, the “managed care” of the 1980’s was widely seen as an attempt by providers to profit by withholding care. Current payment plans contain provisions to prevent that sort of abuse.

Mark Graban February 09, 2018

It seems that it's easier said than done, the idea of paying for outcomes. The devil is in the details.

As to "provisions to prevent that sort of abuse," there's the Affordable Care Act rules that require insurers to pay out a certain percentage of premiums for care:

https://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-notice-2-group-markets-rebate-to-policyholder.pdf

The perverse incentive is created where insurers would rather keep 15 or 20% of a larger spend, right? That doesn't seem like an incentive to keep costs down or to reduce waste. 

An article on this:

https://www.huffingtonpost.com/john-weeks/the-8020-rule-why-insurer_b_11115430.html

Alec Williamson February 08, 2018
1 Person AGREES with this comment

I completely agree with this post and hope that Amazon et al embrace lean process improvement.  My feeling is that American doctors bias toward more testing, and especially more drug prescriptions is not tied to overall value (sum of all costs divided by sum of all positive outcomes).  This is driven by equipment and drug manufacturers, sales people and lobbyists. 

High costs are also driven by the lobbyists ensuring that congress doesn't get any funny ideas about negotiating drug prices in aggregate to drive down prescription prices. 

Another problem is the fact that much health care is delivered for free, and those costs need to be spread to paying customers.

None of this is efficient, and of course that is by design.  The Muda will not be removed without fixing these systemic issues on a national level. 

Reply »

Eric February 08, 2018
1 Person AGREES with this reply

Hi Alec, agree with many of your points. See my comment above; at the systemic level, I think we have created perverse incentives through payment methodologies that foster the growth of non-value-added interventions.

Reply »

Jason Yip February 08, 2018

What are you thoughts on this? https://stratechery.com/2018/amazon-health/

That is, this is essentially a path to privately run single-payer healthcare.

Reply »

Eric February 08, 2018

It’s an excellent analysis, Jason, and I’m a regular reader of that newsletter. Is it correct? Only time will tell. But certainly agree that Amazon has successfully disrupted numerous industries and is one of the most patient corporations in the world - they are playing the long game, and this team of partners seems capable of sustaining a big effort over a long period of time. I’d also note that it may not take a total transformation to force a tipping point: most hospitals are low-margin operations that rely on internal cross-subsidization, which is to say: they lose money on many services and make money on a few. If those relatively few profitable services were to be disrupted, it would force a reckoning across the national system.

Reply »

HowardL February 08, 2018

Hi Eric

You're the CEO of the Lean Enterprise Institute, so why does the disclaimer at the end of your message say what it says?

 

Reply »

Eric February 08, 2018

Hi Howard, 

Two reasons: the disclaimer is boilerplate on the posting template, because lots of people from a lot of different corners of our community offer their thoughts and opinions on the Lean Post. We’d be the poorer if we tried to restrict postings to only those we endorse organizationally.

And that applies to my thoughts as well: there are certainly times when I or any organizational leader speak on behalf of the institution - but this Post isn’t one of them. They’re my thoughts, not LEI policy or consensus.

Reply »

HowardL February 09, 2018

Thanks Eric

That makes sense 

Excellent article and some terrific comments. 

The way we look at modern medicine and health is unfortunately through the financial lens first. When seen this way, the focal point becomes financial results based on the use of the medicines and treatments within the system. Even discussions of the "new venture" have primarily focused on financial improvements through technology as opposed to actual health improvements desired. Early days I know, but when the word holistic enters the discussions I'll be more enthused.

Good quality food is healthcare; medicine is sick care. Eventually I think we will see a larger push to make unadulterated food a priority. Lean farming. Back to basics.

The way we see other national needs is also wrong. Education, mass transit, energy, are all set up to fail under similar financial models that incentivize the wrong things.

Lean them all, we should.

Reply »

Eric February 09, 2018

Howard, couldn't agree more. The phrase "population health" is widely used in healthcare circles these days to suggest just such a holistic approach as you are suggesting. We do quite well in fixing people when they are sick ("patient outcomes") but very poorly in prevention and our population health is quite poor compared to other countries.

That's why I am very, very interested and supportive of the work of our friend Ben Hartman, author of The Lean Farmer. He's doing important work to make the local production of healthy food cost effective for the consumer and financially viable for the farmer.

Check out what the government of Chile is trying to do in an effort to reverse their epidemic of childhood obesity: https://www.nytimes.com/2018/02/07/health/obesity-chile-sugar-regulations.html

Mike Harlowe February 09, 2018

The word “system” is mentioned in this most interesting article no less than 8 times. Just what is the “system?” I also find it striking that any article suggesting disruptive and significant change in the delivery of better health care must also address the indisputable link between poverty and health status. As a former Surgeon General C. Everett Koop summed it up, "When I look back on my years in office, the things I banged my head against were all poverty."

Reply »

Eric February 09, 2018
1 Person AGREES with this reply

Mike, these are both great points - I was unconscious about the overuse of the term "system" in the article - and of course to call it a "system" overstates the rationality and design involved. I think we might more correctly apply that term to healthcare in countries that have a national service, like Britain's NHS, but the US approach has always been to allow a wide variety of both public and private approaches to healthcare.

And I also agree with the comment about the links between poverty and health status. In general we are a country with a less robust social safety net than others - in fact there are some studies that argue that if you aggregate all social services expenditures + healthcare expense, the US and European countries look pretty similar. The difference, of course, is that they spend more on social services to mitigate the impact of poverty and less on healthcare, while we spend less on poverty alleviation and much more on fixing the health consequences. IMHO - not a lean approach to public policy,and of course, we have a much sicker population in consequence.

Reply »

Mark Graban February 09, 2018

I heard a health policy professor from MIT said to a class a few years back: "Healthcare system? What "system"???"  

He was making a joke, not that it's ha-ha funny.

Reply »

Mark Graban February 09, 2018

*say

I heard him say this when I was in the room, just before passage of the ACA. 

A Kris Widdison February 09, 2018

Eric, Thanks for the insightful analysis.  Certainly the U.S. has the resources, technology and infrastructure to provide the best healthcare in the world. If we view the delivery system from the viewpoint of capacity vs demand, it seems that some of the key problems result from certain lobbies not acknowledging portions of the capacity, specifically so-called alternative modalities such as chiropractic and acupuncture both of which have been of immense help to me - age 75 - and many of my family members. BTW, I am a Lean/6Sigma Blackbelt so I can objectively assess the value of the outcomes of these methods.  In addition, the entire reimbursement system, including subsidies which masquerade as insurance, is so convoluted tha the overhead and administrative costs along with political restrictions unnecessarily burden the costs and delivery mechanizms to create the muda that you point out. HMO's do not honor the maintenance elelemt contained in their names.

Reply »

Mark Graban February 09, 2018

Eric - Thanks for this piece...

One thing I'd be curious to see you explore in the future... "superb" is a pretty loose adjective for quality.

Is it REALLY measurably superior to care in other cities?? If so, where to patients find information?

How do consumers or this new healthcare initiative know what better quality is or means?

That's one of the real barriers to competition... a lack of transparency about not just cost, but quality.

Reply »

Eric February 10, 2018

It’s a great point, Mark - and on reflection, I’d say that I was being polite in calling the care here in Boston “superb” - which really doesn’t have any place in helping us grasp the current condition, does it?

Probably a fairer statement would be: most of the local hospitals rank well on the national quality indices, but those indices are not great, and there is so much variation day to day, clinic to clinic, procedure to procedure in what is a sort of “craft industry” that it’s pretty meaningless to make generalizations about quality. On average, they are good places - but your mileage as an individual patient may vary greatly.

Reply »

Mark Graban February 12, 2018

Here is another article on this theme:

'Amazon, please deliver Health Care Prime'

by Karen Wolk Feinstein

The system won't let me post a link. Google it... worth the read.

Reply »

Search Posts:
On the Mend
By John Toussaint, MD and Roger Gerard
Perfecting Patient Journeys
By Judy Worth, Tom Shuker, Beau Keyte, et al.
July 31, 2018 | 2 Comments
Learning to Lead, Leading to Learn
"Too Busy to Walk the Gemba"
A Total Shift in Mindset
An A3 Antidote to the Opiate Epidemic
Cost Reduction, Waste, and Purpose