Planning the Patient-Centered Health Plan for America


Current Issue:

5. Lean HealthCare: Cost in Perspective Who’s To Blame For Our Rising Healthcare Costs? By Louis Goodman & Timothy Norbeck

  • Capital Flows Contributor
  • Guest commentary curated by Forbes Opinion.
  • Avik Roy, Opinion Editor.

For many years and in countless articles, physicians have been the scapegoat for rising healthcare costs in the U.S. In fact, they have been blamed by many critics for the U.S. leading the world in healthcare expenditures.

A close examination of the data indicates that this blame is misplaced. Something else is revealed by digging deeper into the key components in healthcare spending: Technology, administrative expenses, hospital costs, lifestyle choice and chronic disease conditions have all had greater impacts on rising overall healthcare costs than physicians.

Some critics have suggested that physicians’ incomes and the fact that physicians direct most healthcare spending (80 percent is a frequently used number) are the real culprits in soaring healthcare costs. Yet despite this, physicians are not necessarily the principal beneficiaries of healthcare spending. The bulk of medical procedure payments go to hospitals and device manufactures.  For example, in California, Medicare pays on average $18,000 for a total hip replacement – $16,336 to the hospital and $1,446 to the surgeon. This reimbursement disparity is certainly not limited to California and is representative of a broader trend on a national level.

Moreover, doctors’ net take-home pay amounts to only about 10 percent of overall healthcare spending. Which if cut by 10 percent would save about $24 billion – a considerably modest savings when compared to the $360 billion spent annually for administrative costs as estimated by the Centers for Medicare & Medicaid Services (CMS), and the fact that 85 percent of excess administrative overhead can be attributed to the insurance system. Administrative costs for physicians are in the range of 25-30 percent of practice revenues and insurance-related costs are 15 percent of revenues, according to a National Academy of Social Insurance report for The Robert Wood Johnson Foundation.

Once the physician impact on healthcare costs is placed in proper perspective, the true role of other key factors can be examined more clearly.

The first area is technology.  There is consensus among experts that technology is the most important driver of healthcare spending increases over time. Installing and implementing electronic health records is costly – often as much as $25,000 per doctor for a system and a monthly subscription fee on top of that – and requires significant resources.

A technical review panel convened to advise CMS on future healthcare costs trends concluded that about half of real health expenditure growth is attributable to medical technology. The Robert Wood Johnson Foundation goes on to say that advancing technology may have a particularly large impact on spending in the U.S. because of “few requirements that effectiveness be demonstrated before technologies are used broadly and concern that their application tends to go beyond those patients likely to benefit the most from them.”

Admin expenses and hospital costs represent two additional areas of significant concern.  Physicians are continually frustrated as they see increasing administrative regulations as significant burdens that take away from patient care, and they are deeply pessimistic as they struggle to sustain their practices. Seventy-seven percent of physicians feel negatively about the future of medicine, according to the Foundation’s survey of more than 13,500 physicians. Many independent practicing physicians are seeking employment at larger hospital systems to avoid administrative burdens.  Forty percent of primary care physicians today who see patients at hospitals are employed by the hospital, which has doubled since 2000.

But hospitals may not be the solution for lowering healthcare costs in the United States.

Hospital costs during 2010 in the U.S. constituted $814 billion or 31.4 percent of all healthcare expenditures. Furthermore, the cost of care will only continue to rise as we shift into a consolidated healthcare system and programs like Medicare allow higher payments for services performed in hospitals as opposed to independent private practices. One widely reported example found a Nevada patient whose echocardiogram bill came to $373 before the physicians’ practice had been purchased by a hospital system and then increased to $1,605 after the merger.

THAT IS A 430 PERCENT INCREASE IN WHAT MEDICARE
PAYS THE HOSPITAL FOR PHYSICIAN SERVICES
OVER WHAT MEDICARE PAYS PHYSICIANS FOR THE SAME SERVICE.

Read the entire article at Forbes; https://www.forbes.com/sites/realspin/2013/04/03/whos-to-blame-for-our-rising-healthcare-costs/#31a708f280c2

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Previous Issue:

Avoid the High Cost Centers with Catastrophic coverage

Health insurance plans are supposed to give us peace of mind in case something unimaginable happens. After all, that’s when we need these medical benefits the most. More people just want catastrophic coverage and don’t want to have to pay high premiums for basic, every day care. If that’s you, these options normally include the following:

  1. Hospitalization
  2. Surgery
  3. Emergency room expenses
  4. Sudden illnesses
  5. Traumas
  6. Accidents

This is what is essentially insurable. Office visits and routine care are not appropriate. If there’s an unexpected trip to the emergency room, the member is responsible for a $300 co-expense.

The average cost of an emergency room visit varies wildly on basic treatment. In our experience of a decade ago, this was in the neighborhood of $500 to $1250 rather than the $50 to $125 cost of a medical office visit. The National Institute of Health study put the median cost more recently at $1,233. According to Truven Health Analytics, 71 percent of ER visits are for non-emergencies which could more cost-effectively be managed in a physician’s office. Thus, ER visits are a huge increase in unnecessary costs.

There are a increasing number of insurers offering true emergency, surgery and hospital care. This will save you approximately one thousand dollars a month. Quoted rates are as low as $104.17 per month ($1250 per year). We have found other rates of $1,068 to $1992 with benefits not clearly defined. The plan comes with a $300 copay if you do go to the Emergency Room. The rate quoted in a recent issue of Sacramento Medicine stated that the average cost of first dollar coverage was $19,000 per year ($1583.33 a month).  However, with a yearly cost of $1250 or $1992, or even if we double that to $4000 instead for HDHP, that is a $15,000 savings from the $19,000 for full first dollar coverage. Then cost of office calls, lab, CXR, and ECG and rare ER visits are miniscule compared to the $15,000 per year savings.

Read more . . .
To evaluate these plans go to: https://www.healthforcalifornia.com/health-share-plans/aliera-health-care/catastrophic-coverage?gclid=eaiaiqobchmizcn0goct4qivih-tbh0j7alpeaayasabegklb_d_bwe

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The Future of Health Care Has to Be Lean, Efficient and Personal. * * * * *

Past Issue:

Lean is ubiquitous. Or is it?

How many private jets are going to Davos in 2019?

  • Based on official statistics for business jet use into and out of Zurich and St Gallen airports, we estimate 14% less private jet use in 2019 compared to 2018
  • Taking into account the average number of flights expected at both airports during the year, this equates to around 270 ‘movements’ or a maximum of 135 there-and-back flights
  • The Forum offsets all carbon emissions related to air travel to and from our Annual Meeting

It’s a question that always gets asked. And so it should. From an environmental perspective, taking a private jet is the worst way to travel to Davos, where the World Economic Forum’s Annual Meeting takes place.

It’s also a complicated question, as the data is not always easy to determine. For example, air traffic authorities use a metric called ATM, or Air Traffic Movements. A normal flight would be two ATMs, however during busy times, when parking is not available at the airport, planes are required to take off again and park at another airstrip nearby. This adds a further two legs to the journey, meaning that one trip to Davos could be divided into four separate trips.

Now this is clear, let’s look at what we know about this year’s movements.

In 2018, Zurich airport saw a total of 463 movements of fixed-wing aircraft (flachenflugzeuge in the table below) between Sunday 21 and Tuesday 23 January. In 2019, the figure for Sunday 20 and Tuesday 22 was 350 flights. This equates to a 32% reduction on traffic year on year. . .

Now let’s look at St. Gallen-Alltenrhein, where there were 93 ATMs. This year, the figure is slightly higher at 136, mainly because we have been encouraging participants to use this airport to reduce congestion on the roads. This is a 46% increase. However, if we calculate the numbers from Zurich, which still receives much more traffic, the overall difference year on year is -14% . . .

This gets us closer to determining how many private jets are being used for Davos participants. Considering that the average daily number of movements throughout the year in Zurich is 55, we could assume that there have been in the region of 185 extra flights over the three days of the conference. A conservative estimate – based on each flight requiring only two ATMs (which is unlikely) – would give us a total 93 extra trips.

St Gallen, a smaller airport than Zurich, gets an average of 120 private flights per week, or 17 per day, during the year. This would suggest that 51 of the 136 movements into and out of there in the past three days were unrelated to Davos and therefore that 85 movements, or 43 extra there-and-back trips, involved Davos participants.

These numbers refer only to the first three days of the meeting. However they are a far cry from the 1,500 flights mentioned in some news reports, which appear to be based on marketing literature from a commercial operator.

This year’s drop in private air traffic is a sign that participants are taking the environmental impact of their travel more seriously.

It’s certainly something we have been encouraging. We have been offering incentives to participants to use public transport for some years. We also ask that they share planes if they have to use them; something that has been gaining popularity in recent years.

2018 was the year when the Forum’s Annual Meeting was certified to ISO 20121 for sustainable event management, following independent audits. Since then, the Forum must demonstrate continual efforts in the field. This is part of the Forum’s wider sustainability strategy 2021.

For those who do travel to Davos by plane, we fully offset the flights – private or otherwise.

Share https://www.weforum.org/agenda/2019/01/fewer-private-jets-in-davos-2019/

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Past Issue:

The Most Energetic Area of Lean Practice

James Womack: The Lean MovementWith the current activity to increase the minimum wage, we need to review what James Womack said in 2008 when he was reflecting on the progress of the Lean Movement: “One critical indicator is our success in extending lean thinking to new industries and activities. In recent years I have been greatly encouraged that lean thinking is moving far beyond its origins in manufacturing to distribution, retailing, maintenance and overhaul, consumer services, construction, and – perhaps most striking – healthcare. Indeed, the latter may be the most energetic area of lean practice today.”  (more…)

Past Issue:

It begins and ends with the patient

www.lean.org.

Lean Production Begins with LPPD by John Y. Shook Lean Product and Process Development  (Insert PATIENT everyplace you see CUSTOMER/

Lean Production isn’t just about the factory. It doesn’t even begin there and certainly doesn’t end there. It ends with the customer. Where does it begin? Also with the customer. But that pithy statement (it begins and ends with the customer, kind of like a farm-to-table circular economy mantra) doesn’t mean much. Not because it isn’t true, but because it isn’t helpful. Many statements that are true aren’t necessarily helpful.

More helpful is to recognize that Lean Production begins with addressing this question: What value do you want to provide for a customer in the form of a product or service? As for the term “lean production,” let’s call it lean thinking to highlight the fact that it applies everywhere. You can apply lean thinking to any activity, any endeavor.  (more…)

Past Issue:

Automatic if Doctor and Patient are totally in charge

There are many forces dealing with controlling health care costs. All efforts have failed. In fact, most of these efforts have increased health care costs and also eliminated essential care. This has caused a decrease in the Quality of Care (QOC), the purported reason for policing doctors and hospitals. Controlling health care costs from the top down is a policing effort. The Electronic Medical Record (EMR) has facilitated this policing effort.  (more…)

Past Issue:

A Deductible and Co-payment on everything Medical

Some health insurance carriers still tout zero deductible or zero copayment as the best deal in medicine. But this best deal is just temporary because it leads to excessive healthcare costs because of overutilization. This then eventually will lead to increasing insurance cost. When money is no object, price does not matter. If price does not matter, e.g. when health care is free, it eventually leads to increased utilization, which increases scarcity and then increases the price and costs.  (more…)

Past Issue:

A high deduction plus a copay on every interface with health care

This is the sine quo non-that will provide lean health care and reduce the cost of total health care.

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Past Issue:

Practice Fusion

San Francisco-based ambulatory care electronic health record vendor Practice Fusion has laid off 75 employees, about a quarter of its work force, according to articles in Fast Company and TechCrunch.

The personnel affected involved those in the engineering, product, marketing and customer success departments. The articles indicate that only mid- and lower-level staff, not executive personnel, were impacted. TechCrunch confirmed that the restructuring, which was announced at a company-wide meeting, was done to enable the vendor to “become cash flow positive.”

Practice Fusion, which calls itself the top cloud-based EHR platform for doctors and patients, announced just last month that it had accelerated year over year revenue growth of more than 70 percent and had added 5,000 new active practices in 2015. It has gone through other recent changes, however. For instance, founder Ryan Howard stepped down as CEO in August 2015, according to the Wall Street Journal, and was replaced by Tom Langan. The company also has moved into new product lines, such as the offering in 2015 of prescription coupons in its EHRs that physicians can pass on to their patients and the creation of a national healthcare data base for professionals, public health organizations and research institutions.

Marla Durben Hirsch Read her Bio

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The Future of Health Care Has to Be Lean, Efficient and Personal.

Past Issue:

Practice Fusion, our premier Electronic Health Record is restructuring

San Francisco-based ambulatory care electronic health record vendor Practice Fusion has laid off 75 employees, about a quarter of its work force, according to articles in Fast Company and TechCrunch.

The personnel affected involved those in the engineering, product, marketing and customer success departments. The articles indicate that only mid- and lower-level staff, not executive personnel, were impacted. TechCrunch confirmed that the restructuring, which was announced at a companywide meeting, was done to enable the vendor to “become cash flow positive.”

Practice Fusion, which calls itself the top cloud-based EHR platform for doctors and patients, announced just last month that it had accelerated year over year revenue growth of more than 70 percent and had added 5,000 new active practices in 2015. It has gone through other recent changes, however. For instance, founder Ryan Howard stepped down as CEO in August 2015, according to the Wall Street Journal, and was replaced by Tom Langan. The company also has moved into new product lines, such as the offering in 2015 of prescription coupons in its EHRs that physicians can pass on to their patients and the creation of a national healthcare data base for professionals, public health organizations and research institutions.

Marla Durben Hirsch Read her Bio

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The Future of Health Care Has to Be Lean, Efficient and Personal.

Past Issue:

Douglas Farrago MD, Editor, Creator & Founder

SPEAKING HONESTLY AND OPENLY ABOUT OUR BROKEN HEALTHCARE SYSTEM

The mission of Authentic Medicine is to rediscover how much the art of medicine means and allow us to reconnect to our roots once again. It is about fighting back against those things that are taking us away from the direct care of patients while still pointing out the lunacy and hypocrisy of this job. Be part of the movement that will take back the healthcare system from the idiots who are ruining it.

Why we are moving to an era of Industrialized Medicine

The Quality Movement and why it is a scam

The ever expanding Medical Axis of Evil

Medical Dogma and the Alphabet Soup (JC, HIPAA,etc)

Bureaucratic Drag and the distractions from treating patients

Burnout and depression amongst healthcare professionals

Humor in caring for the patient and the caretaker

 

 

  • Reason Foundation: http://reason.com/about: Reason and Reason Online are editorially independent publications of the Reason Foundation, a national, non-profit research and educational organization.
    Reason is the monthly print magazine of “free minds and free markets.” It covers politics, culture, and ideas through a provocative mix of news, analysis, commentary, and reviews. Reason provides a refreshing alternative to right-wing and left-wing opinion magazines by making a principled case for liberty and individual choice in all areas of human activity.
    Reason Online is updated daily with articles and columns on current development in politics and culture. . It also contains the full text of past issues of the print edition of Reason. Reason Online is entirely free.
  • Entrepreneur-Country. Julie Meyer, CEO of Ariadne Capital, (Sorry about the nepotism, but her message is important) recently launched Entrepreneur Country. Read their manifesto for information: 3. The bigger the State grows, the weaker the people become – big government creates dependency . . .   No real, sustainable wealth creation through entrepreneurship ever owed its success to government . . .  11. The triple play of the internet, entrepreneurship, and individual capitalism is an unstoppable force around the world, and that Individual Capitalism is the force that will shape the 21st Century . . .  Read the entire  manifesto  . . .
  • Americans for Tax Reform, atr.org/, Grover Norquist, President, keeps us apprised of the Cost of Government Day® Report, Calendar Year 2014. Cost of Government Day (COGD) is the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of spending and regulatory burdens imposed by government on the federal, state and local levels. Cost of Government Day for 2014 was July 6th a ten-day increase above last year’s revised date of July 16th. With July 6th as the COGD, working people must toil on average 186 days out of the year just to meet all the costs imposed by government. In other words, the cost of government consumes 53 percent of national income. If we were to put health care into the public trough, the additional 17 percent of GDP that healthcare costs, would allow the government to control 70 percent or nearly three-fourths of our productivity and destroy our health care in the process. We would have almost no discretionary income.
  • National Taxpayer’s Union, ntu.org/main/, Duane Parde, President, keeps us apprised of all the taxation challenges our elected officials are trying to foist on us throughout the United States. To find the organization in your state that’s trying to keep sanity in our taxation system, click on your state at www.ntu.org/main/groups.php. On August 13, you can start working for yourself. It takes nearly 8 months of hard work for every American to pay for the cost of government. Read more . . .
  • Citizens Against Government Waste, CAGW.org, America’s Taxpayer’s Watch Dog.

Since 1984, Citizens Against Government Waste has been the resource that policymakers, media, and the taxpaying public rely on for the bottom line behind today’s headlines. Waste News is the first stop for reporters covering government spending. Members of the Media visit our media page to sign up for email updates or to set up interviews with CAGW policy experts.

Porker of the Month will introduce you to some of government’s worst pork-barrel offenders.

“To advocate an efficient, sound, honest government is neither left-wing nor right-wing, it is just plain right.” –J . Peter Grace, CAGW Co-Founder

  • Evolving Excellence—Lean Enterprise Leadership. Kevin Meyer, CEO of Superfactory, (Sorry about the nepotism, but his message is important) has started a newsletter which impacts health care in many aspects. Join his evolving excellence blog . . . Excellence is every physician’s middle name and thus a natural affinity for all of us.  This month read The Customer is the Boss at FAVI “I came in the day after I became CEO, and gathered the people. I told them tomorrow when you come to work, you do not work for me or for a boss. You work for your customer. I don’t pay you. They do. . . . You do what is needed for the customer.” And with that single stroke, he eliminated the central control: personnel, product development, purchasing…all gone. Looks like something we should import into our hospitals. I believe every RN, given the opportunity, could manage her ward of patients or customers in similar lean and efficient fashion.
  • FIRM: Freedom and Individual Rights in Medicine, westandfirm.org, Lin Zinser, JD, Founder, researches and studies the work of scholars and policy experts in the areas of health care, law, philosophy, and economics to inform and to foster public debate on the causes and potential solutions of rising costs of health care and health insurance .

Ayn Rand, a Philosophy for Living on Earth, www.aynrand.org/site/PageServer, is a veritable storehouse of common sense economics to help us live on earth. To review the current series of Op-Ed articles, some of which you and I may disagree on, go to www.aynrand.org/site/PageServer?pagename=media_opeds

Past Issue:

Lean HealthCare requires defunding ObamaCare

Viewpoints: ObamaCare should be defunded – now
Sally Pipes – Special to THE BEE – Friday, Apr. 01, 2011

Last week, the Obama administration’s top lawyer, acting Solicitor General Neal Katyal, asked the Supreme Court not to honor Virginia Attorney General Ken Cuccinelli’s request to fast-track his state’s constitutional challenge to the federal health care law. Katyal argued that there was “ample time before 2014” – the year by which all Americans must have health insurance – so the high court need not rush to hear the case.

Unfortunately, between now and then, the majority of the Patient Protection and Affordable Care Act’s other provisions will take effect. Implementing those provisions will require billions of dollars – money that could be for naught if the Supreme Court invalidates the law.

With this year’s budget deficit near $1.4 trillion, that’s also money we don’t have. Now is the time to defund the law – not just because the law’s fate is uncertain, but because we can’t afford to implement it.
At least 44 states and the District of Columbia are facing deficits that total $112 billion over the next year. They may welcome the initial seed money that Obamacare provides to expand Medicaid – the joint federal-state health insurance program for the poor – and fulfill other provisions of the law. But they’ll be left holding the bag in just a few years, when the federal subsidies run out.

A report commissioned by Sens. Orrin Hatch, R-Utah, and Fred Upton, R-Mich., projects that Obamacare “will cost state taxpayers at least $118.04 billion through 2023” thanks to the required expansion of Medicaid. When it passed, the health care reform law contained $105 billion in approved funding through 2019. This year, the legislation is set to spend $23 billion.

Congress could put a stop to these expenditures. Republicans have professed their opposition to the law, but they appear to be balking at the prospect of actually cutting off funding.

That’s too bad, as several of Obamacare’s newly established programs have no business drawing on taxpayer funds. . .

In the past, Berwick has expressed admiration for government-run, single-payer health care systems – which control costs by rationing care. American patients accustomed to receiving the world’s most advanced care should hope that the Center for Innovation doesn’t deem single-payer a payment model worth testing.

Another reform worthy of the chopping block is the minimum medical loss ratio, which requires that health insurance firms spend 80 percent of premiums in the individual and small-group markets – and 85 percent of premiums in the large-group markets – on medical claims.

Minimum medical loss ratios will cripple competition by forcing smaller insurers that don’t have the economies of scale needed to comply with the rules from the marketplace. Indeed, research from PricewaterhouseCoopers has shown that residents of states with minimum loss ratios face lower levels of competition – and higher prices – than their counterparts in states without them. . .

Absent action, the nonpartisan Congressional Budget Office projects that from 2014 to 2023, America will spend $2 trillion – a little over 14 percent of the national debt – on the president’s health care reform effort.

Simply put, the American people can’t afford Obamacare – and would like a defund.

To read the entire OpEd by Sally Pipes . . .
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Past Issue:

Every industry is getting lean; we no longer have a choice

David J. Gibson, M.D.
Director, Clearway Health Solutions

You may have missed reading a thought provoking article from Thomas Freedman in the NYT yesterday.  The article entitled Average Is Over (see attached below), is particularly relevant as it relates to the political debate that is evolving with a trajectory that is progressively being divorced from reality.  All the politicians are promising jobs, jobs, jobs.  Obama wants more government spending to bring back jobs as demonstrated in his SOTU speech last night.  The Republicans are promising that the market will return jobs if the government is downsized and taxes are lowered.  What happens when both are proven to be wrong which will become evident soon after the election later this year?  It is not a pretty picture to contemplate.

The following are a couple of excerpts from Freedman’s article: “In the 10 years ending in 2009, [U.S.] factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs — about 6 million in total — disappeared.”

Most of the current job creation is now focused in the relative low paying and previously non-exportable service sector.  Hospitality jobs such as waiters and waitresses are an example.   Now, these jobs can be exported to the IT sector.  Consider the following”

Last April, Annie Lowrey of Slate wrote about a start-up called “E la Carte” that is out to shrink the need for waiters and waitresses: The company “has produced a kind of souped-up iPad that lets you order and pay right at your table. The brainchild of a bunch of M.I.T. engineers, the nifty invention, known as the Presto, might be found at a restaurant near you soon. … You select what you want to eat and add items to a cart. Depending on the restaurant’s preferences, the console could show you nutritional information, ingredients lists and photographs. You can make special requests, like ‘dressing on the side’ or ‘quintuple bacon.’ When you’re done, the order zings over to the kitchen, and the Presto tells you how long it will take for your items to come out. … Bored with your companions? Play games on the machine. When you’re through with your meal, you pay on the console, splitting the bill item by item if you wish and paying however you want. And you can have your receipt e-mailed to you. … Each console goes for $100 per month. If a restaurant serves meals eight hours a day, seven days a week, it works out to 42 cents per hour per table — making the Presto cheaper than even the very cheapest waiter.”

This is relevant within the context of our unleashing market forces within the health care sector of the economy.  Informed consumers, as has been demonstrated in every other sector of the economy, will predictably reform the industry and drive creative destruction that has been avoided in the past for all the reasons we have previously discussed.  The provider cost per unit of service will be quickly reduced in order to compete in a competitive market.  The use of IT to increase productivity will become an imperative.  The resulting loss of HC jobs and the reduction in compensation will be an assault on one of the last relatively affluent job option within today’s U.S. economy.

This message is not intended to argue against our introducing available market consumer forces into the HC industry.  This will occur with or without our involvement.  Rather, I am speculating on the collateral unintended effect that this fundamental shift in the industry’s structure and organization will have on the general economy.

David J. Gibson, M.D.
Director
Clearway Health Solutions
davidjgibson@reflectivemedical.com

AVERAGE IS OVER
By THOMAS L. FRIEDMAN, NYT | January 24, 2012

In an essay, entitled “Making It in America,” in the latest issue of The Atlantic, the author Adam Davidson relates a joke from cotton country about just how much a modern textile mill has been automated: The average mill has only two employees today, “a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machines.”

Davidson’s article is one of a number of pieces that have recently appeared making the point that the reason we have such stubbornly high unemployment and sagging middle-class incomes today is largely because of the big drop in demand because of the Great Recession, but it is also because of the quantum advances in both globalization and the information technology revolution, which are more rapidly than ever replacing labor with machines or foreign workers.

In the past, workers with average skills, doing an average job, could earn an average lifestyle. But, today, average is officially over. Being average just won’t earn you what it used to. It can’t when so many more employers have so much more access to so much more above average cheap foreign labor, cheap robotics, cheap software, cheap automation and cheap genius. Therefore, everyone needs to find their extra — their unique value contribution that makes them stand out in whatever is their field of employment. Average is over. . .

What the iPad won’t do in an above average way a Chinese worker will. Consider this paragraph from Sunday’s terrific article in The Times by Charles Duhigg and Keith Bradsher about why Apple does so much of its manufacturing in China: “Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly-line overhaul. New screens began arriving at the [Chinese] plant near midnight. A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day. ‘The speed and flexibility is breathtaking,’ the executive said. ‘There’s no American plant that can match that.’ ” . . .

Read the entire article at the NYTimes . . .
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The Future of Health Care Has to Be Lean, Efficient and Personal.

Past Issue:

A Medical Correlative

Many patients never learn or even suspect that the CT examination, the echocardiogram, or the magnetic resonance imaging study that they underwent was neither necessary nor indicated.

Chaos in the Cockpit

Herbert L. Fred, MD, MACP
Tex Heart Inst J. 2012; 39(5): 614. PMCID: PMC3461665

On 1 June 2009, Air France Flight 447, an Airbus A330 en route to Paris from Rio de Janeiro, plunged into the south Atlantic, killing all 228 people aboard. French authorities finally concluded that the plane’s 3 pilots had not been trained adequately to fly the aircraft manually in the event of equipment failure or a stall at high altitude.

According to a report issued on 5 July 2012,1 the Bureau of Investigation and Analysis found that ice crystals had misled the plane’s airspeed sensors and that the autopilot had disconnected. Confusion heightened when faulty instructions emerged from an automated navigational aid called the “flight director.” Amid a barrage of alarms, the crew struggled to control the plane manually, but they never understood that the aircraft was in a stall and never undertook the appropriate recovery maneuvers. In fact, they followed the flight director’s instructions and went into a climb instead of into a dive, as they should have to correct a stall.

William Voss, president of the Flight Safety Foundation in Alexandria, Virginia, offered the following comment on the accident: “We are seeing a situation where we have pilots that can’t understand what the airplane is doing unless a computer interprets it for them. This isn’t a problem that is unique to Airbus or unique to Air France. It’s a new training challenge that the whole industry has to face.”

The whole healthcare industry faces training challenges that are eerily similar to those now evident in the airline industry. Indeed, we continue to graduate physicians who lack sufficient clinical skills to render good patient care without routinely reverting to and relying upon computers and other technologically advanced devices.2 In contrast to commercial aircraft accidents that typically injure or kill many people at once—and in spectacular fashion—medical misfortunes rarely make headlines. No one, for example, ever hears about the absolute halting of patient-care activities when the hospital’s computed tomographic (CT) scanner breaks down.3,4 And many patients never learn or even suspect that the CT examination, the echocardiogram, or the magnetic resonance imaging study that they underwent was neither necessary nor indicated.

Although computers and like devices offer tremendous advantages, they have important drawbacks as well. They occasionally malfunction, are not always available, and produce findings that can be misinterpreted. They have no judgment, common sense, or understanding. And they cannot reason, overcome their deficiencies, or show concern for the welfare of human beings. A well-trained doctor—or a well-trained pilot—can.5

Go to:

Footnotes

Address for reprints: Herbert L. Fred, MD, MACP, 8181 Fannin St., Suite 316, Houston, TX 77054
Author information ► Copyright and License information ►
References
1. Clark N. Report on ’09 Air France crash cites conflicting data in cockpit [Internet]
2. Fred HL. Hyposkillia: deficiency of clinical skills. Tex Heart Inst J 2005;32(3):255–7.[PMC free article] [PubMed]
3. Fred HL. The downside of medical progress: the mourning of a medical dinosaur. Tex Heart Inst J 2009;36(1):4–7. [PMC free article] [PubMed]
4. Fred HL. C.T. scanner dies. Hosp Pract (Minneap) 2001;36(1):23. [PubMed]
5. Fred HL. Gimmicks. South Med J 1983;76(8):953.

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Past Issue:

The Most Energetic Area of Lean Practice

James Womack: The Lean Movement

With the current activity to increase the minimum wage, we need to review what James Womack said in 2008 when he was reflecting on the progress of the Lean Movement: “One critical indicator is our success in extending lean thinking to new industries and activities. In recent years I have been greatly encouraged that lean thinking is moving far beyond its origins in manufacturing to distribution, retailing, maintenance and overhaul, consumer services, construction, and – perhaps most striking – healthcare. Indeed, the latter may be the most energetic area of lean practice today.”

“There is much consolidation going on in the health care industry. Groups are merging; Hospitals are merging, ancillary facilities are merging; all in the name of efficiency. What is over looked, is that no value is created with like firms merge.  These actions quickly shift wealth from customers, employees, suppliers, and former owners to the new owners. This may do more good than harm, because otherwise the firm in question may completely fail. But it is often unclear that any additional value has been created in the sense of better satisfying customer needs with a given amount of human effort and capital investment. And, from society’s standpoint, the only way to increase living standards is to change the ratio of human effort and capital going into firms to the amount of value coming out. Otherwise the outcome is basically zero- sum, with some winners and some losers.

“By contrast, the objective of a lean transformation is to analyze the core value creating processes of organizations in light of customer needs (which may have changed), then figure out how to create more value with the same resources so the organizations can grow and society can prosper. It’s the difference between shifting wealth from one party to another and creating more value, ideally value that can be shared with customers, employees, suppliers and owners.”

(Note that Womack never uses the term “adding value” because this is an accounting convention for the difference between the input costs of a firm and its output prices. Often Womack finds that only cost is added by the firm as inputs are converted to outputs, not value from the customer’s [or patient’s] standpoint.)

Managers (and owners) will try anything that is quick and easy even if it doesn’t work before they try anything long and hard that does work (e.g. intense process analysis linked to customer needs to create more value from the same resources.)

We thank James Womack for keeping us informed of the lean enterprise goals and will follow through with relevance to health care, which he feels is one of the “more energetic areas of lean practice today.”

Please peruse the Lean Enterprise Institute, at www.lean.org.

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Past Issue:

Healthcare Mergers are not lean but are in a race to the bottom

I’ve been following the Lean Marketing column from Kevin Meyer’s “Superfactory” site for a decade or so. Medicine and Healthcare in General has a lot to learn from other industries. A recent posting by his associate, Bill Waddell, was very instructive. Mr Waddell states that he is “glad to have grown up in America before “InBev” existed – in a time when good beer was plentiful and cheap.”

With the wave of mergers going on in our medical industry, we should be taking a lesson from the breweries. Hospitals are merging, as are healthcare insurance companies; physician groups are getting larger. There are cross mergers between hospital and physician groups; between insurance companies and hospitals. However, healthcare costs are going up and patient satisfaction is going down. These are reversions from a horizontal industry to a vertical integrated industry, the antithesis of what we are proposing to make healthcare more affordable. Where are the benefits to our clients, the patients we invested 12 to 16 years in training to serve? Why are we accepting this interference with our mission in life?

AB InBev is the Brazilian led, Belgium based outfit that is systematically buying and trashing the leading global beer brands.  An interesting article on Bloomberg Businessweek describes the unfolding debacle: Profits up, cash flow strong, but sales shrinking.  It is a step-by-step story of exactly how the short-term focus on profits, financial and marketing driven, disregard for the product and customer value approach takes place.

Beck’s was once a highly regarded German beer with a small but devoted core of American customers. Same with Bass, a British beer.  AB InBev bought them, started producing them in the USA, losing quality but at a lower cost, and sales are down.  It is a clear example of how focus on being the low cost producer is not a strategy for success, but merely a race to the bottom.

Selling Budweiser in the United States should be about as tough as selling sex on a troop ship, but AB InBev has demonstrated how to fail at it.  The high quality hops growers in Germany used to get an annual visit from August Busch III, but those days are long gone:

A former top AB InBev executive, who declined to be identified because he didn’t want to get in trouble with his old employer, tells a different story. He says the company saved about $55 million a year substituting cheaper hops in Budweiser and other U.S. beers for more expensive ones like Hallertauer Mittelfrüh. It is hard to say whether the average Bud drinker has noticed. But then, the average Bud drinker is not drinking as much beer.”

InBev is doing some leanish sort of cost management.  AB InBev CEO “Brito was just as ruthless when it came to the perks to which Anheuser-Busch employees had grown accustomed. He cut the number of BlackBerrys in half. Executives who once traveled in corporate jets now flew commercial. He removed the interior walls at One Busch Place in St. Louis and turned the office into an open-plan space. Everyone would work under the same Spartan conditions that Brito embraced. (In New York, Brito shares a large table with his head of sales and his finance chief.) ‘We always say the leaner the business, the more money we will have at the end of the year to share,’ he said in a speech at Stanford in 2008. ‘I don’t have a company car. I don’t care. I can buy my own car. I don’t need the company to give me beer. I can buy my own beer.’

It is a good idea to pick up pennies in the non-value adding areas like offices and cell phones.  The problem is that Brito doesn’t know the difference between expenses that add value for customers and those that don’t.  Costs are costs everywhere with equal enthusiasm in the minds of financially driven leaders who don’t really understand and appreciate the products and customers.

He laid off approximately 1,400 people, about 6 percent of the U.S. workforce. He sold $9.4 billion in assets, including Busch Gardens and SeaWorld. AB InBev also tried to save money on materials. It used smaller labels and thinner glass for its bottles. It tried weaker cardboard for its 12-packs and cases. The old Anheuser-Busch insisted on using whole grains of rice in its beer. AB InBev was fine with the broken kind.”

The results are predictable: “AB InBev’s CEO is a skilled financial engineer, but he has had trouble selling beer. The company’s shipments in the U.S. have declined 8 percent to 98 million barrels from 2008 to 2011, according to Beer Marketer’s Insights. Last year, Coors Light surpassed Budweiser to become America’s No. 2 beer.”

Of course AB InBev’s mismanagement opens doors for local and regional companies focused on the quality and value of their product; “The craft brewing industry grew 13% in 2011.  There haven’t been this many U.S.  breweries since before Prohibition“.  What InBev has done to beer is what so many companies have done in China in pursuit of a low cost strategy.  Without a keen understanding of value and mama bear-like defense of it, broad brush pursuit of low cost inevitably leads to low value, which can only lead to lost sales, either in fewer units or lower prices.  It is also a good example of the myth of mass markets and mass production.  Mass thinking is based on one-size-fits all products and they rarely delight many customers.

Read more postings at superfactory.com

Editor’s note: What AB InBev has done to beer, hospitals, HMOs, insurance carriers have done to medical care. They fail to understand the value of healthcare. Thus they have cheapened it for the masses with a broad brush pursuit of low cost which inevitably leads to low value. The serious beer drinker has noted that the lower cost has decreased the quality of beer and has spawned the craft brewing industry. Many patients have figured out the reason for the exorbitant cost of healthcare has also cheapened healthcare. They are now beginning to understand that by paying the average yearly costs of their healthcare out of their pocket and have major medical or high deductible health insurance to cover unexpected diseases, major surgery, trauma surgery, and other unexpected costs, has lowered their total health care costs. Americans are also observing that such insurance costs only half as much as their present policy. This also reduces overall healthcare costs significantly.

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Past Issue:

A Challenge

This year we were obligated to take on 250 ObamaCare patients. These were patients without insurance, on welfare, on Medicaid who were given HMO insurance. This was a more massive change in our practice than I could have anticipated in my wildest imagination. I had to promise my front office this was an obligation to the poor and disenfranchise to provide this care. We’ve always had 20 percent of our patients on Medicaid as our obligation. But this 20% had meshed with our private practice and handled themselves much like private patients. They made appointments, follow our recommendations, kept their return appointments, and presented themselves in a manner that didn’t disturb our private patients.

The first day when those 250 ObamaCare/Welfare/Medicaid patients were place in out HMO panel, we had rude awakening. My front desk was managed by my wife, Linda for the past decade or so. Normally when she arrived at my reception front desk, she would have three or four messages on the phone.  She would respond to these and then get on with her work.

She arrived at the usual time, and found 65 messages on the phone. It took her two hours to record these and another three hours to respond to them. We thought this was just the preliminary response from patients who may have been waiting to obtain care. However, this continued on a daily basis. This extra five hours of work on a daily basis would add up to and extra 25 hours per week or 100 hours per month. The going rate in our community is $30 per hour. One hundred hours at $30 per hour is an extra $3,000 per month of medical costs.

These calls didn’t come in during normal business hours but all hours of day and night. We quickly realized that these patients were not employed and hence were up at all hours of day and night. They all had cell phones and would call and leave lengthy messages at midnight or three o’clock in the morning.

They were also very demanding, many insisting on being seen immediately. If we didn’t fit them in soon enough, they would call our HMO who assured them it was their policy that appointments were to be made in 24 to 48 hours. Then we received letters of reprimand for not providing prompt service. These complaints would then go to the state HMO program who would demand an explanation to be routed through our HMO.  We would then respond to our HMO and maybe it would then be dropped. However, some were appealed. Appeals through a state bureaucracy could be very time consuming with a serious loss of income. The harassment was a much larger emotional cost.

The operation of our reception area was devastated. Along with the changes in ObamaCare, Medicare and Medicaid placed numerous restrictions on care.  For forty years, I could write a prescription, or order a test or x—ray and the reception area would route the patient to the appropriate facility. This along with the billing and making further appointments fell in the range of 5 minutes of work.

This past month new Medicare restrictions implemented through our HMO required changes in the medications that the patient may have been on for a decade or two. They were upset that they were unable to get the medications they were used to obtaining.  The pharmacy would tell them “just have your doctor do a prior authorization” simply known as a PA. We did several of these and they took hours to finally obtain a medication that Medicare through our HMO covered. This could take hours of my office manager’s time over several days to process something that was covered. Medicare always demanded a listing of all the drugs that had been tried. Since, the trial process may have occurred a decade or two previously by another physician, this became an indeterminable process. My prescription writing time of a minute or two became 10 or 15 minutes after several rewrites.

As a pulmonologist who had treated respiratory failure for more than 40 years, this became a nightmare. For 40 years, after measuring the oxygen saturation, I would complete an oxygen prescription form, and my receptionist would fax this to the oxygen company. The oxygen would normal arrive at the patient’s home by the time they were home from my office. The first oxygen requisition I wrote after the new regulation, took several lengthy phone calls to the oxygen company. They range that must be written on the new Medicare forms. They required the low oxygen (hypoxia) documentation. After several phone calls, we fax the entire three page office visit documenting the low oxygen which we underline with heavy black ink that would transmit via fax. After hours, the lady at the oxygen company said the oxygen was in my own hand writing, not a printout from a machine. Most of us don’t have the multi-thousand dollar fancy hospital equipment and have always use the standard pulse oximeter that clamps on the finger. My first one cost me $350. The large Blood pressure, pulse, oxygen apparatus costs about $3500 and is no more accurate. I finally gave up on further phone calls. The first patient whose arterial oxygen was down to 78% from the normal of 98%,  (blue venous blood is 75%) was so short of breath I had to help her to the car. She declined to be hospitalized. She had to spend two months gasping for each breath before the oxygen could be approved. From a usual two hour wait to a two month wait. These types of costs, monetary (staff), time (hours to days to weeks etc.), patient increased risks (including dying in organ failure), increased suffering (shortness of breath – gasping for two month) never show up on a government or Medicare cost analysis even though they were doubled or tripled or quadrupled). Doctors or staff time is never measured. The pharmacists have similar increase in costs. Hospitals just hire more accountants, bookkeepers, insurance billers, Medicare, Medicaid experts and can usually recover costs including their significant increase because of government regulations.

(N.B. we once researched the reimbursement of our seeing a patient in lung failure on two tanks of oxygen in her home and the hospital reimbursement for a similar visit by their nurse or therapist. The hospital was able to charge more than 10 times what we were able to charge for the same work. Only we were the ones that were able to make the assessment and write orders that the hospital therapist would follow on his home visit. Normally they would call us to give them the oxygen and treatment orders which Medicare considers an irrelevant cost.)

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Government health care costs are Time consuming, Bloated, Inefficient, and Impersonal.

Past Issue:

Solo or small groups have the leanest healthcare

Abstract

Nearly two-thirds of US office-based physicians work in practices of fewer than seven physicians. It is often assumed that larger practices provide better care, although there is little evidence for or against this assumption. What is the relationship between practice size – and other practice characteristics, such as ownership or use of medical home processes – and the quality of care?

We conducted a national survey of 1,045 primary care – based practices with nineteen or fewer physicians to determine practice characteristics. We used Medicare data to calculate practices’ rate of potentially preventable hospital admissions (ambulatory care – sensitive admissions). Compared to practices with 10-19 physicians, practices with 1-2 physicians had 33 percent fewer preventable admissions, and practices with 3-9 physicians had 27 percent fewer. Physician-owned practices had fewer preventable admissions than hospital-owned practices. In an era when health care reform appears to be driving physicians into larger organizations, it is important to measure the comparative performance of practices of all sizes, to learn more about how small practices provide patient care, and to learn more about the types of organizational structures – such as independent practice associations – that may make it possible for small practices to share resources that are useful for improving the quality of care.

Small Primary Care Physician Practices Have Low Rates Of Preventable Hospital Admissions

  1. Lawrence P. Casalino 1,*,
  2. Michael F. Pesko 2,
  3. Andrew M. Ryan 3,
  4. Jayme L. Mendelsohn 4,
  5. Kennon R. Copeland 5,
  6. Patricia Pamela Ramsay 6,
  7. Xuming Sun 7,
  8. Diane R. Rittenhouse 8 and
  9. Stephen M. Shortell 9

Author Affiliations

1. Lawrence P. Casalino (lac2021@med.cornell.edu) is the Livingston Farrand Professor in the Department of Healthcare Policy and Research at Weill Cornell Medical College, in New York, New York.
2. Michael F. Pesko is an assistant professor in the Department of Healthcare Policy and Research, Weill Cornell Medical College.
3. Andrew M. Ryan is an associate professor in the Department of Healthcare Policy and Research, Weill Cornell Medical College.
4. Jayme L. Mendelsohn worked on this project as a research coordinator in the Department of Healthcare Policy and Research, Weill Cornell Medical College. She is currently a postbaccalaureate premedical student at Bryn Mawr.
5. Kennon R. Copeland is senior vice president and director in the Department of Statistics and Methodology, NORC at the University of Chicago, in Illinois.
6. Patricia Pamela Ramsay is a research specialist at the School of Public Health, University of California, Berkeley.
7. Xuming Sun worked on this project as a research biostatistician in the Department of Healthcare Policy and Research, Weill Cornell Medical College. She is currently working as a statistician in the New York City Department of Health and Mental Hygiene.
8. Diane R. Rittenhouse is an associate professor in the Department of Family and Community Medicine and Center for Excellence in Primary Care, University of California, San Francisco.
9. Stephen M. Shortell is the Blue Cross of California Distinguished Professor of Health Policy and Management at the School of Public Health, University of California, Berkeley.

http://content.healthaffairs.org/content/early/2014/08/08/hlthaff.2014.0434

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