The Cost of Quality

In a healthcare system that is striving for cost savings, how do we preserve quality?  Ultimately healthcare is about care.  If we erode the quality of our products and tools, do we not also risk compromising our outcomes?  That is the questions healthcare administrators are asking.  They have a proverbial three legged stool with the legs being cost, quality and outcomes.  They are being asked to cut one of those legs shorter while maintaining the other two legs.  Any furniture maker would immediately point out the problems you would face with such a stool.  These three facets of healthcare are interconnected and directly related.  How do we reduce costs without reducing quality and ultimately outcomes?  There appear to be only a few alternatives that have a possibility of success.

  1. Reduce waste
  2. Improve efficiencies
  3. Reduce profit margins

The other alternatives would require some reduction in care.  The reduction of care has certainly been considered as an alternative.  Before I address the three points noted above let’s look at reduction of care because healthcare providers are.  We do not like to think that we are reducing care but let’s look at a few examples.

  1. Taxation of Cadillac Healthcare Plans – the government has set a bar for the acceptable level of healthcare benefits a person should receive.  If they pay for better care they are taxed.
  2. Reductions of services – hospitals are being forced to reduce their extended services and concentrate on their core competencies.  This means reducing neighborhood clinics, and specialty care facilities.  It also means that some hospitals will only take patients in need of their specialties and transfer everyone else to another facility.
  3. Reduction of formularies – more and more brand name drugs are being dropped from formulary lists in favor of either generics or patient funding
  4. New Technology restrictions – more and more restrictions are being placed on new technology to keep it out of hospitals and thus cut their investment
  5. Reduction in requirements for caregivers – care is moving from specialists to general practitioners to nurses to online inquiry.  It is unlikely that the quality of care goes up as the education of the caregiver goes down.
  6. Reduction in procedures considered – medical procedures are being evaluated from a financial vs clinical point of view.  The more expensive procedures are being discouraged.
  7. Evaluation of the need for care – this is the determination that someone may not warrant additional care because of non-health factors.
  8. Medicare and Medicaid reimbursement reductions – we have increasing numbers of aging citizens and a declining per person reimbursement.  Care has to suffer
  9. Reduction in nursing homes and rehab centers – In my home state the number of nursing homes has actually dropped in the last ten years.

Now let’s go back and look at the three points noted above that should not affect quality of care.  As in most large organizations, there is waste in hospitals.  Simple procedural changes can go a long way to reduce this waste.  With careful considerations and thought we can reduce the amount of product wasted in many hospitals.  This might include the use of reusables instead of disposables.  It might reduce waste by allow all of a product to be used and not disposed of after single patient use.  Scheduling can improve labor costs.  Regulations can significantly impact hospitals and result in administrative cost and material waste.

Technology can be found all over a hospital but most of that technology is stand alone.  As a result it has high capital cost and limited return.  The use of technology to track equipment, medicines and patients is improving care but there is still a lot that can be done.  One critical issue in healthcare is patient compliance.  Failures of compliance result in recidivisms, infection, complications and death.  Technology can assist care givers in improving compliance.

Finally, profit margins can be invaded to some extent without reductions in quality but this pool is shallow.  It involves the entire sales channel and some of the margins in that channel are slim now.  Part of these margins has already been invaded by the government with new taxes related to the Affordable Care Act leaving less to the manufacturers, distributors and hospitals.

I think that the unavoidable conclusion that we need to concede is that in the current environment we are going to have to accept a lower level of care that we have had in the past in our major healthcare systems.  We need to find acceptable alternatives to what we expected in the past.

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