In this month’s Harvard Business Review (November 2014) there’s an article by Robert Kaplan and Derek Haas entitled How Not to Cut Health Care Costs. The authors list 5 common mistakes that health care systems and teams make when trying to lower costs:
- Cutting back on support staff,
- Underinvesting in space and equipment,
- Focusing narrowly on procurement prices,
- Maximizing patient throughput,
- Failing to benchmark and standardize.
I can only imagine that some must have been scratching their head while reading this article.
Here is my summary:
#1 Cutting back on staff: It turns out that support staff aren’t the expense problem and cutting them creates bottlenecks and more work for clinical staff who could instead be directly helping patients instead of doing clerical work, managing schedules, and solving operational problems.
#2 Underinvesting in space and equipment: Space and equipment can drive up costs if not managed prudently, however, too often these items are cut to the point of creating bottlenecks and wasting more expensive resources (like doctors).
#3 Too much focus on small procurement prices: It turns out that saving $0.10 on every 100 gauze may be a victory for the supply chain manager, but it does very little for the bottom line. It would be better to reduce the waste of relatively expensive supplies that are common in health care. This is especially true in procedure oriented areas. And it turns out that the variability in use of these expensive supplies is considerable, suggesting room for improvement.
#4 Maximizing patient throughput: This is my favorite. The article asserts that pushing doctors to see more patients, or incentivizing them to see more patients (same thing), leads to increased health care costs , and not just because they will tend to do more than they really need to, but because they aren’t making long-term investments in their patients. An example is talking about advanced directives for people with terminal illnesses, or counseling patients with end stage renal disease who are likely to need dialysis.
#5 Failing to standardize: Need I say anything further – not taking the time to standardize the processes of care and of doing business (operations) sets a system up for unnecessary variability, confusion, reworks, poor communication, etc.
There is an interesting paragraph towards the end of the article that states: “High health care costs are the result of mismatched capacity, fragmented delivery, suboptimal outcomes and inefficient use of highly skilled clinical and technical staff. The current practice of managing and cutting costs does nothing to address those problems.”
Articles that make you go ummmm…