Today’s Managing Health Care Cost Quote is

"A blog isn't writing. It's graffiti with punctuation"

I went to see Contagion, the newish Steven Soderbergh film, last night.   The story of the film is dreadful – an executive returns from Hong Kong with a new epidemic virus, which kills millions across the world, and threatens to kill a billion people.  The virus kills a quarter of those infected, and is highly transmissible.  It doesn’t spare kids, medical workers, or epidemiologists, although Matt Damon is immune.

A deadly worldwide epidemic brings out the worst in many (looting, rioting, favoritism, and profiteering), although it brings out the best in others (virologists toiling day and night, and testing a potential vaccine on themselves).   A virologist fires the quote above at the Jude Law character, a blogger with terrible teeth who earns millions pitching conspiracy theory and a useless nostrum for the epidemic .

Contagion is scary – an apocalyptic tale where governors seal borders of their states in the vain hope of preventing viral spread, while public health officials in China kidnap World Health Organization officials to gain preferential access to the vaccine for their villages.

I’m reminded by the scrum at the University of Minnesota Hospital about the need for surge capacity within our health care system.  As much as we want health care to be “lean,” we also want to have enough hospital beds to care for the unexpected –whether it is natural disaster, terrorist attack, or infectious disease.

It’s hard for hospitals and provider organizations to justify huge disaster preparedness expenditures in tight budgets – and this will get more difficult still as providers face reimbursement cuts in the coming years.  We’ll be wise to put most disaster preparedness dollars into public health budgets rather than indepedent institution budgets- which can allow flexibility to set up temporary facilities and even structures wherever they are needed.

The movie shows the heroism of the high-tech virologists who are able to get a vaccine to market in just over 4 months, and the public health officials who quickly convert stadiums into hospitals.  Contagion also notes that the best way to save lives is decidedly low tech.  Hand sanitizers, quarantines, and keeping more personal distance are critical weapons in the battle against this harrowing new epidemic.

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Today’s Managing Health Care Costs Indicator is

$180  million

That’s the amount that the Seattle Children’s Hospital says it has saved in capital costs over the last six years by instituting lean techniques, or the Toyota method.  The effort is highlighted in an article in today’s New York Times.  

Seattle Children’s Hospital has invested in training and measurement and consulting services to adopt the Toyota method,  and has studied its processes and standardized, overcoming physician demands for autonomy and nursing demands for high (and fixed) staffing ratios.   The hospital has been able to increase its volume while resisting large new capital investments in its facilities. That’s important, because capital investments require higher reimbursements in the future.  The cost of servicing this type of debt (3%, 10 year amortization) is $5.6 million per month – so avoiding this new investment really matters

One of the ‘wastes’ that the Toyota system focuses its attention on is waiting.  Keeping patients waiting a long time isn’t just bad for patients – it’s really expensive.  An efficient system that eliminates the waste of waiting needs fewer staff, fewer  chairs, and even fewer new parking spaces.  The result is that a “lean” health care system is able to deliver care that is more likely to satisfy patients, and do it for less.

This is especially important as we travel into the post-health-reform world.  The pressures on hospitals to lower their costs will be very large.  Hospitals will receive $245 billion less  in increased reimbursements over the next ten years as part of the PPACA Act, and more patients will be enrolled in Medicaid, which historically pays very low rates.  It will be hard for hospitals to simply shift those costs onto those with employer-sponsored insurance, since that would raise employer premiums so much that more would exit offering health insurance altogether.

It’s heartening to see institutions reengineering to lower their resource costs. That’s the only way that we can succeed in expanding access dramatically without continuing to have rampant health care inflation.   Seattle Children’s Hospital is using techniques honed in the best manufacturing plants in the world to provide higher value.

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