Maximizing impact of healthcare dollars for employers

Published 9:00 am Friday, November 13, 2020

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By Jack Bernard

Bernard is a retired corporate executive.

Per capita medical costs in the USA far exceed those of other developed nations (OECD). Yet, our morbidity rates and mortality rates are higher, as shown by the recent pandemic. Our current diverse, uncoordinated, system of healthcare financing and delivery is just not very effective versus Europe and others. 

Modern Healthcare, a highly respected industry magazine, had a column regarding a leading Virginia multi-hospital system (Inova) reducing “low value care” (i.e. care that produces relatively little versus the money spent). As someone who worked closely with Inova regarding supply chain, I’m not surprised to see them employing “Best Practice” techniques. 

“Best Practices” is a relatively new business term, but the concept has been with us for many decades.  I worked my way through school in Atlanta as a bank industrial engineer and after graduation was an industrial consultant before moving into healthcare. When I would go into a textile mill, garment factory or mass food processing operation in the South, I would look for who was utilizing the best approach to achieve maximum productivity or come up with something on my own as a last resort. Then management would mandate that process be used throughout the operation, cutting costs and improving outcomes.   

The real question is “why aren’t these techniques employed in all hospitals?” I believe there are two factors. 

First, there’s the history of healthcare reimbursement in the USA. When I first got into healthcare in the ’70s as Director of Health Planning for Georgia, hospitals were cost plus operations, similar to the way that inefficient defense contractors still are today. Providers were simply incentivized to spend. The more you spend, the more you make. 

It has taken many decades to break that thought pattern and it is still not completely gone from the healthcare scene. Some less ethical providers (hospitals and physicians) will still provide any service that the insurance carrier will cover, effective or not, so long as they make money doing it. Occasionally, one of the extreme cases will make the news. But many others are never identified or caught. 

Further, it’s a lot easier to standardize an industrial process than a healthcare treatment given to a patient. Back in the 90s when Bill Clinton proposed his health reform plan, I gave a speech to a very large national association of orthopedists. When I mentioned standardization, they rightly brought up the fact that people react differently to the same treatment plan. And, when it comes to back pain, a frequent ailment, patients certainly do respond in unique ways. Many dedicated physicians want to go the extra mile when they have a patient who is ill, even if the odds are against the procedure working. 

In one form or another, similar cost/benefit analysis has been around for many decades in industry. The bottom line is that healthcare planning and best practices are not easy, as can be seen by the USA’s recent COVID-19 pandemic response. But that doesn’t mean that we should stop trying.