Huge Opportunity to Drive Down the Cost of Healthcare

One statistic from the Wharton Healthcare Conference I attended last month keeps replaying in my mind.  Keynote speaker Glenn Steele, the President and CEO of Geisinger Health System, highlighted a New England Journal of Medicine study evaluating the quality of care which determined that only 55% of patients received the recommended care.

  Now, the study is a bit old (2003) but it was comprehensive, based on the patient medical records of a random sample of 12 metropolitan US areas and included an initial sample of 20,028 adults (email me and I will send you the link to the study ckraft@jacobsmgt.com).  Think about it, – that means 45% of people are not receiving recommended care!  Even if you cut that in half, or more, reduce it to 20%, it is still a scary number.  If you take one of the low estimates, that we spent a little over $2.5 trillion dollars on National Health in 2011 – that’s $500 billion wasted dollars.  I completely understand why Dr. Steele talked about applying Six Sigma principles to healthcare; if we did it nation-wide, we could save a fortune!

Geisinger is in an interesting position because they own the hospital, the physician practices, and the managed care health insurance company.  All of their combined revenues roll up to the same profit model.  While they are a microcosm of our bigger ecosystem, they truly have a financial motive to drive out the cost from healthcare.  One of their recent initiatives has been around adopting a process orientation for which they have had much success.  They are systematically taking their key areas of care, determining best practice techniques, and then systematizing them out to their organization.  Their results are impressive.  In their first practice area, CABG surgery (Coronary Artery Bypass Graft), they have driven down factors such as hospital mortality rates by 67%, taking over $1,000 out of the cost per case.  It is a compelling result and one they are extending to other areas of care.

If you are reading this blog, you are most likely on the commercial side of a pharmaceutical, biotech or medical device company wondering - so what does this mean to me?  Many of you have already thought through what I am about to say, but if not, here it is: I think this provides an opportunity to create a new benefit to our products.  There is certainly a great deal of KOL interaction that you drive.  What if you could generate benefits beyond your product by driving the Six Sigma-“izing” of the entire procedural area?  I definitely don’t have all the answers on this one, but hopefully this sparks your imagination.

 - Cari Kraft, President, Jacobs Management Group, Inc.

For more information, please email me at ckraft@jacobsmgt.com.