The Cost Challenge - There are not alot of positive trends in healthcare. The number of uninsured is increasing (at the moment). Quality is improving in the areas that are getting the most attention (CMS demonstration project, Core Measures, IHI), but still lagging in others. There is huge variation in the standard of care across the country and between racial groups. Insurance premiums increased by only single digits last year - that is sort of good news. But one of the key trends to watch is the cost of care. The cost of care just keeps on going up and I believe it is a trend that providers will have to reverse if we are going to create a healthcare system that is accessible to a majority of Americans in the future.
Cost is a very difficult problem. Almost no individual line item of cost is getting cheaper over time. Wages increase annually. Facilities become more costly to build. Technology is in constant need of refreshing. Supplies may be the one area where significant, industry-wide efforts have been made to control costs. Whether it is through group purchasing or supply chain management, we have at least been able to come up with reliable tools for managing the cost of supplies. Unfortunately, supplies are the least of the costs mentioned in this paragraph.
To further complicate the problem, there is a general sense that the industry, from a provider perspective at least, has already gone through the "easy" cost-cutting phase - streamlining the organizational chart, reducing staff to bare minimums, and being stingy with other expenses. With the new prospective payment system in the eighties and HMOs in the nineties, healthcare providers had to bring costs more in line with reimbursements. Even so, a stasis was not reached and real costs resumed their steady march upward.
This leaves us with the task of reducing costs in a system that has already had alot of the fat squeezed out of it. If the "easy" cost-cutting is done, then what is there left to do? The difficult, hard-to-see cost-cutting, obviously. I have heard from a number of sources now that there is probably about 30% waste in the healthcare system. Where is it? It is hiding in management practices that don't rely on data, process that have never been designed for efficiency, systems for care delivery that are not based on the patient, and staffing models that are not sensitive to predictable volumes. Certainly, there could be more added to this list.
There are at least two challenges for healthcare providers here. One challenge is to find the waste in the system and extract it without compromising quality care. Work smarter, not harder, as they say. But before that, providers need to come to believe that we need to reduce costs, not just for the financial health of the individual organization, but to lower the cost of healthcare across the board.