By December 30, 2006 0 Comments Read More →

Quality is Free in Healthcare?

Hospital cost, quality are at odds

In the manufacturing world, the old “mass production” thinking said there was a tradeoff in cost and quality, that high quality must inherently cost more to produce (due to more inspections, high quality materials, etc.). Toyota and lean thinking helped us understand that quality can be free if you build in quality, if you practice continuous improvement, etc.

A lower cost product CAN be high quality. People didn’t believe that with Toyota and some Americans assumed they were “dumping” products below cost. They thought high quality had to be expensive and Toyota was cheating somehow if good quality cost less.

Now, in healthcare, some of these same assumed tradeoffs pop up — that high quality healthcare somehow MUST cost more to provide. This ignores the idea that healthcare quality can be improved through lean methods and by preventing quality problems from occurring.

The article I’ve linked to, above, says:

In metro Denver at least, UnitedHealthcare found that, on average, hospitals charging the least also provide the highest-quality care.

Hospitals and health care experts say that’s because lower quality often leads to more complications and infections, which means more days in the hospital and much higher medical bills.

That shouldn’t be surprising at all. Preventing hospital-acquired infections is something that can be achieve through lean methods, namely Standard Work, and following best practices consistently. More days in the hospital doesn’t necessarily mean more revenue for the hospitals, especially when Medicare is paying a fixed amount for the patient.

For those who have discussed the idea of the healthcare “market”, page 2 of the article highlights some cases of how different hospitals charge different prices for the same procedure. I guess that’s an argument that prices are NOT being set by the market, as some of you have pointed out before. People are learning that the hospitals that charge the most aren’t necessarily offering the highest quality of care.

Here’s an earlier article on this same topic, of how quality problems hurt hospitals’ bottom lines. That shouldn’t be such a news story, eh? The old thinking was that hospitals might actually MAKE money off of an infection, but it actually costs them more to treat the patient than they might receive in additional payments for giving that care. Hospital acquired infections SHOULD cost hospitals — it provides the right incentive to focus on improving quality through lean methods.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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