Industrial Methods Can Reduce Health Care Costs

by William A. Levinson

According to some estimates, 30 to 60 cents of every health care dollar are wasted on the cost of poor quality. This comes to $2,500 to $5,000 per American per year. The recently enacted federal legislation, however, fails on almost every count to address the underlying root cause: deficiencies in the complex systems in which today’s doctors and nurses must work.

There was a time when most medical care was similar to that of a skilled trade such as shoemaking, blacksmithing or carpentry. The skilled trade worker, or the master of the shop, controlled the entire job from beginning to end and could therefore take complete responsibility for its quality. The individual physician was similarly in complete charge of the patient’s care, so the results were not dependent on the operation of an extensive and complex system where the doctor has little or no control.

The complexity of the medical system, however, has increased substantially during the past 50 years, much as division of labor created manufacturing systems in which no single trade worker or master could possibly control the quality of the end product. In other words, the patient is no longer the customer of an individual medical practitioner but of a complicated system.

Most manufacturing engineers and quality practitioners would find the flowcharts for many medical processes appalling in the absence of a quality management system such as ISO 9001:2008 or ISO/TS 16949, but the truth is that many medical service processes have no such controls whatsoever.

It also is a general rule that 80% to 85% of all quality problems are system-related, and we have read about enough medical catastrophes to know that the same proportion applies to our health care system. No self-respecting factory would allow the wrong parts to be stored where they might be assembled into the product, nor would it allow the storage of an oxidizing chemical next to a flammable one. The consequences of these easily preventable medical tragedies affect not only patients but also doctors who must pay higher malpractice insurance premiums as a result.

The only way to insure more patients, cover pre-existing conditions and reduce health care premiums at the same time is to eliminate this enormous waste from our health care system. The legislation the president recently signed does almost nothing to address this issue. The sole exception appears to be a provision that Medicare should begin to “look at” bundled payments for care, i.e. payment by condition or outcome as opposed to individual medical procedures.

This does not mean, however, that manufacturers and other businesses cannot take matters into their own hands. The automakers require their suppliers to meet the requirements of ISO/TS 16949 because they are unwilling to pay for their suppliers’ cost of poor quality — even if rework and finished-goods inspections prevent the shipment of nonconforming parts. They and other manufacturers should be no more willing to pay for poor-quality health care that runs up their costs while harming their employees and retirees. It is entirely reasonable for them to require, whether directly or through the insurers with whom they do business, that the health care systems that treat their work forces meet the requirements of a quality management system standard such as ISO 9001:2008 or the health care-specific modification developed by the Automotive Industry Action Group and American Society for Quality.

William A. Levinson, P.E., is the author of “Henry Ford’s Lean Vision: Enduring Principles from the First Ford Motor Plant”.