Take Control of Your Healthcare Process
One of the draws of process and organizational improvement work is the limitless boundaries of their application. Over the 21 years of my work in process improvement, I have been fortunate to apply these approaches in traditional manufacturing, distribution, sales, service, call centers, IT Operations, local government, and if you can believe it, even lobbying! Many of these sectors are fully embracing the methods and returns from Continuous Improvement. So it is notable that in healthcare we are only scratching the surface.
When most of us think of process improvement in healthcare we think of Lean experts and Black Belts in hospitals investigating wait times, bed utilization, and staffing, then implementing visual management, 5S, and other operational best practices. That is all great, but there is a much bigger opportunity for Continuous Improvement, Transformation, or Innovation experts to explore. The organizations that we support and frankly society as a whole, are wasting vast amounts of cash on the processes for our use of healthcare and how it gets paid. Traditionally, employers have looked at this as a service that they are purchasing “off the shelf” with no real input or influence into how it works or how it could work better.
This narrow thinking is a missed opportunity to provide better healthcare support for employees and return large savings to the organization. Our opportunity is to help the organization break down and understand the drivers of the problem and provide change management guidance to ensure the successful deployment of new solutions.
First, I need to lay some groundwork to connect this discussion with process improvement. Healthcare is a generalized term used to encompass the myriad of services, specialty care, surgeries, and procedures that makeup healthcare. As I often say, “Everything is a process!” To that end, healthcare is a series of processes. And of course, all processes have waste and variation which can be measured, analyzed, and improved. For the sake of simplification in a short article let’s consider these main processes:
- The Patient Process – Important! We talk a lot about different aspects of healthcare, at a macro level, this is the only healthcare value stream! Patients are the widgets that flow through primary care and are then directed to specialty care, where they are treated and ideally cured. This is why the healthcare system exists. Of course, this is not a linear path; there are many branches and repetitive cycles that occur throughout the same steps. All of this activity can drive up our healthcare costs.
- The Claim to Cash Process – This is the Order to Cash process in healthcare, where the claim is incurred by the patient, submitted for payment by the doctor, reviewed by the insurance company, and the provider is ultimately reimbursed by the insurance company and member.
- The Contracting Processes – These processes are familiar to all of you in the supply chain. It is somewhat the same in healthcare with a significant difference: there are more than two parties with interests in the negotiation process. The payer (insurance company), the provider (typically a regional health care network), and the other payer (typically an employer). Unfortunately, only the insurance company and provider participate in this process.
These are complex processes, which can be overwhelming for employers to manage effectively themselves. This often leads to an “outsourcing” of these processes to a broker or consultant. It should be no surprise that brokers or consultants don’t think like us Continuous Improvement professionals. We tend to look at opportunities by comparing pricing and negotiations. We take a more powerful approach to understanding the root cause and creating solutions that change people’s behavior. When we purchase something off the shelf, much like health insurance purchased from an insurance company, we check the quality and the cost of that service. We verify and drive high quality at a good price from the selected vendor, either through comparison with competition or comparisons we make over time.
This is not the case with healthcare brokers or consultants, for a few key reasons, which provide us a significant opportunity for improvement.
1) Quality – Any insurance company network is composed of specialty doctors and surgeons, the likes of which all have varying degrees of quality and outcome scores in their particular specialty.
2) Variance in Cost – Providers that offer services like MRI’s and CAT Scans are allowed to bill at prices that can vary by over 1000%. The reason being the location of where the service is rendered (i.e. hospital settings are the most expensive). The system encourages overuse and inefficiency. Imagine your most expensive manufacturing activity and think about if every part of your plant had to go through that process. We design our operations to balance quality and cost to give our customers the best of both. Our healthcare system is designed to send everyone through that most expensive process. It’s no wonder why our healthcare costs increase every year!
3) Misalignment of Incentives – In Continuous Improvement, we seek the best outcomes for our customers on behalf of our employer. This is misaligned in healthcare, historically insurance brokers are compensated as a percentage of the premium. When they save their client money their compensation goes down. There is a multiplier here to the negative side because when the brokers do help “manage the costs” they don’t have the distinctions to manage what matters most in the coverage. They manage symptoms and not the root cause. So, the “best broker” doesn’t have the skills like we do to get to the root cause. The “best” brokers are rewarded to be the best at managing metrics that don’t matter the most and they don’t even know it. This is almost akin to manufacturing having zero defects in production for a product that no one bought. There is a disincentive to find improvement. And the lack of countermeasures applied on behalf of the employer, such as improved efficiency, results in an ongoing system that is both overpriced and lacking in quality.
We must identify and explore the root cause of waste and inefficiency, then collaborate with our partners and with experts to develop new processes that are more effective and less costly. Each process area must be studied.
The Patient Process
In this process, it is important to study the role of primary care doctors. They are analysts and routers. Data will expose if the primary care network is successful in correctly identifying ailments quickly and effectively routing the patient to the most effective and cost-efficient treatments. Alternatively, data will expose that the motives behind referrals are driven by the doctors alignment with a particular hospital system rather than strictly on the needs of the patient. This is where Continuous Improvement professionals will expose rework loops, pricing variances across healthcare networks, opportunities to gain efficiencies from scale, and opportunities to improve patient behaviors and experience. Data on this process is the window into the patient experience. Remember, the patient process is the only value-stream of the healthcare system. All other processes should be evaluated based on their necessity for this process and patient experience.
The Claim to Cash Process
The reality is this process has become more cumbersome and risk-laden for the provider over the years. The administrative burden on providers has increased significantly with the introduction of higher and higher deductibles and Health Savings Accounts to drive employer costs down. Providers are forced to “chase” their patients for a greater balance of their reimbursement. Unfortunately, this increasing cost of administrative burden is factored in the cost of services. This is the typical “squeeze the balloon” solution that we see so often in operations. For example, mindlessly reducing on-hand inventory to save money causing poor on-time delivery, and resulting in lost sales or incurred penalties. Continuous Improvement professionals know that this is an interconnected system and we have the skills to evaluate it and find solutions as a system rather than sub-optimize one component in favor of another.
The Contracting Processes
Throughout my 20 years of Continuous Improvement programs, I have saved companies millions of dollars by investigating how contracts are created and enforced. There are many contracts required for healthcare processes to work and there is little to no input from employers and employees, who effectively bear the cost of these contracts. The two significant parties negotiating these contracts (insurance companies and healthcare providers) are incentivized to drive up costs while limiting services. Opening up the inner workings of the healthcare system exposes contracting issues that drive up the price. By studying and challenging this area, both healthcare costs and patient experiences can be greatly improved.
Much of this is already known within the healthcare industry. Some very large companies, such as Walmart, have started their experimentation to manage and change these processes. Refer to the link below. There are pockets of mid-size manufacturers that are doing the same. Unfortunately, most companies are not doing anything because:
- They believe they have an optimal healthcare structure. (Sorry, it is just not likely. I have yet to see anyone that can deconstruct their healthcare costs into activity level drivers as they must do with the products they produce.)
- They accept the status quo. (This sounds familiar to us Continuous Improvement professionals; it is unacceptable for high performing organizations.)
- They do not see the inner workings and inefficiencies of the healthcare system as an employer problem. (For those of us in change roles we know that people make the company work. A problem for our employees is a problem for the employer to solve.)
- The healthcare system is too complex to tackle. (Inside and outside the organization some experts can help!)
For those of us in Continuous Improvement, Transformation, and Innovation roles, none of these reasons should sit well. Healthcare is critical to our employees and in the top 5 costs for your company. It adds to the areas we can positively impact our organization and to initiatives that we can use to drive greater performance, greater employee engagement, and greater cost-efficiency.
In closing, I encourage you to do six things:
- Investigate healthcare costs within your company. (Again, it is probably in the top 5.)
- Talk to your finance controller or CFO to learn the impact of this cost to your company’s financial performance.
- Learn from your benefits manager about how healthcare is procured and managed.
- Map the whole system, how you use the system, and what drives the costs.
- Educate yourself on the mechanics of these processes.
- Get out of your comfort zone! Healthcare is a space for us to investigate and improve to positively impact on our organization.
When you do these things, you will likely start to see opportunities for improvement emerge. An eye-opener for me was learning about the work at the Surgery Center of Oklahoma. Refer to the link below. I also like the Health Rosetta organization; they are passionate about this topic. And if you are still of the mind that this is not a process problem for employers to fix, Health Rosetta will change your mind. Refer to the link below.
Finally, when you see an opportunity to make grassroots change to our healthcare system benefiting our organizations, our employees, and society, then reach out to me. I will share more of my experience and help you get started.
Walmart changes to benefits program: https://www.fiercehealthcare.com/payer/walmart-piloting-benefit-programs-aimed-at-curbing-healthcare-costs
Surgery Center of Oklahoma – Free Market Health Care