Tour Preview: The Japanese Health Care System at a High Level

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For anybody who is interested in a comparative view of health systems in the world's major countries, I highly recommend this book: The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health CareIn the book, journalist T.R. Reid compares how the health system in different countries would treat his bad shoulder: what treatment could he get, how long would he wait, and how much would it cost? The book is from 2009, but it's still an interesting and valid compare-and-contrast.

As I prepare to leave for Japan in about 10 days (for my third Lean healthcare study trip), I thought to revisit the chapter from the book about Japan and I'll share some highlights here in this post.

When I asked how long I would have to wait if I chose the full-scale shoulder-replacement surgery, the doctor checked his computer. “Tomorrow would be a little difficult,” he said. “But next week would probably work.”

“A little difficult” means “no” in Japan, as I've learned from previous trips :-)


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Reid is told the total price would be about $10,000 and that includes five nights in the hospital. It would cost about four times as much in the U.S. with just one hospital night. Insurance pays 70% of the bill in Japan, but there's a $650 monthly limit, so Reid would pay only $650 for that surgery.

His doctor first recommended many alternatives to surgery.

Big companies are required to provide and pay for insurance. Smaller companies get a 14% subsidy. And, there's a “Citizens Health Insurance Plan” for retirees and self-employed people. The individual and local government share the cost (Reid doesn't say what the split is).

“It's worth noting that this happens in a largely private-sector system; Japan relies on private doctors and hospitals, with the bills paid by insurance plans. In fact, Japanese doctors are the most capitalist, and most competitive, that I've seen anywhere in the world.”

The insurance companies are non-profit (as they are in every country except the U.S.) and there are about 3500 plans, but employees don't get a choice (they can choose their doctor or hospital). Generally, the patient pays 30% of the bill and the insurer picks up the rest. People cannot be denied coverage (they are required to have it) and claims cannot be denied.

“As in other nations (except the United States) that use the Bismarck Model, Japanese health insurance companies are nonprofit; they exist to pay medical bills, not to earn a profit for investors.”

I heard about this in my previous visits, but the average Japanese sees their primary care doctor an average of 14.5 times a year (that's very high compared to the U.S.). Nearly all GPs make house calls.

Usage of healthcare is high:

  • 2x as many CT scans as Americans
  • 3x as many MRIs as Americans
  • 2x as many hospital beds per capital than in the U.S.
  • 6x longer length of stay; the average is 36 days, compared to 6 (now lower) in the U.S.

Japanese are less likely to have surgery.

“This is partly economics–since the fees for surgery are low, doctors don't recommend it as often–and partly cultural. As a rule, Japanese doctors and patients prefer drugs to cutting the body. On a per-capita basis, the Japanese take about twice as many prescription drugs as Americans do.”

Japan has high life expectancy, which Reid attributes to societal factors, lifestyle, and the Japanese health system.

Japan spends only 8% of GDP on healthcare, about half that of the U.S. spending.

One factor in keeping costs down is “strict cost controls” that “sharply limits” the income of medical providers.

“In fact, the secret to Japan's low health care costs is simple: The system shafts doctors and hospitals, paying some of the lowest fees on earth for medical treatment..,,

‘In Japan, doctors don't get rich… we make a decent income.'”

There is a thick reference book that lists prices that will be paid.

“The insurance plans are mostly private. But the Ministry of Health and Welfare determines which treatments and drugs the insurance plans have to pay for, and negotiates the prices that insurance has to pay. So you have a multipayer system that works like a single-payer system. The single national Fee Schedule gives the ministry enormous power.”

The price of a head MRI is $105 in Japan compared to about $1000 to $1400 in the U.S., which explains why high utilization doesn't lead to huge costs. Reid tells a story in the book about Japanese doctors approaching the MRI manufacturers to demand newer, smaller, cheaper MRI machines. The new scanners are one-tenth the cost of what an American hospital would buy. They are being sold in developing countries, but it sounds like American hospitals don't prefer them because they lack high-end features.

Are American hospitals demanding cheaper equipment or are they all happy competing in the medical equipment arms race for equipment like robotic-assisted surgery tools or proton therapy equipment?

The focus on cost has helped drive innovation instead focusing on the rationing of care.

Reid says “many Japanese hospitals are severely underfunded.”

From what I've seen in past visits, the hospitals are nice and clean, but not luxurious. They're modern, but you don't see marble lobbies with fountains (features that I'd argue don't add any value). Reid is a bit less kind, writing the hospitals tend to be “dumpy, gray concrete structures with sparse facilities and crowded spaces.”

“The national association of private hospitals says that about 50 percent of hospitals and clinics in Japan are badly underfunded, with many on the verge of bankruptcy…

The one saving grace for Japanese hospitals is that many of them were built, and are maintained, by big Japanese corporations to serve their employees.”

Reid writes that those companies often pick up the cost of capital or expansion, providing a subsidy to those hospitals.

On the topic of doctors, Reid describes busy doctors in drab offices who often “struggle to break even.” The one doctor he interviewed complained a bit about patients not wanting to make appointments. They just show up. The doctor feels pressured to keep waiting times down in the lobby because of competition. That doctor and his wife get a combined income of $160,000 from the clinic.

As the book points out, doctors in countries other than the U.S. generally don't graduate medical school with huge student loan debts to pay off. This is true in Japan too. The doctor Reid interviewed has never faced a malpractice suit, nor have any of the doctors who work in his clinic over the past 40 years.

“Despite the Scrooge-like Fee Schedule and the intense competition among physicians, there has been no doctor shortage in Japan (although some rural areas have seen their doctors move to big cities recently).”

Doctors are considered to have high status and highly-prestigious jobs in Japan. Patients honor their doctors by bringing gifts or paying voluntary gratuities, although Reid wrote about his doctor's office having a sign asking that patients pay no more than the stated fees.

That's interesting about the gratuities, since there's no traditional of leaving a tip in Japanese restaurants. During my last trip, a participant from Europe insisted on leaving cash on the table. We were half a block down, waiting to cross the street, and the waitress came running after us, trying to give the yen note back to the customer because she thought he had left it behind. After much back and forth, he convinced her to keep it (or she gave up even though it might have been a bit shameful for her to accept that tip).

Reid summarizes his time there:

“I saw both sides of Japanese medicine. There was instant access to fine doctors, a considerable range of choice for the patients, and a private insurance system that seemed to cover just about everything. There was also a sense of a medical infrastructure that was overstretched and pinching pennies. In a sense, that makes Japanese medicine the mirror image of America. Our country spends too much on health care and gets too little in return; Japan gets lots of health care but probably spends too little to make its excellent system sustainable.”

Reid, T. R.. UC-The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care (Kindle Locations 1425-1428). Penguin Group US. Kindle Edition.

I don't think any country has a perfect health system. There are pros and cons, advantages and disadvantages.

I'm curious to come back again to see what is happening in terms of Lean and Kaizen. I'm curious to learn more about the business pressures the hospitals we visit might be facing. I'll look back through my 2012 and 2014 notes to see if I can recall what the hospitals and their leaders said then.

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Mark Graban is an internationally-recognized consultant, author, and professional speaker who has worked in healthcare, manufacturing, and startups. His latest book is Measures of Success: React Less, Lead Better, Improve More. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. He also published the anthology Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also a Senior Advisor to the technology company KaiNexus.

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