Can Standardization Cut Costs & Improve Quality?

A couple of articles in today's USA Today identify a growing - and seemingly controversial - trend at US hospitals: standardizing approaches to clinical care delivery in order to reduce costs.

Medical cost-cutting also can improve care

Hospitals try to find savings, cut unnecessary care

There is nothing really new here to drive the controversy as numerous healthcare organizations around the country are implementing Lean, Toyota Production System, or other methodologies in order to reduce waste. Some of that waste comes in the form of avoidable costs - which it would be good to remove from the system. 

The controversy lies in the insinuation that this cost reduction comes at the expense of patient care or improvements in quality. In reality, numerous organizations have demonstrated that standardization of clinical processes leads to both improvement in quality as well as reduction of costs.

• Virginia Mason Production System
• Intermountain Health - Brent James 
• Institute for Healthcare Improvement - Breakthrough Collaboratives

Doctors worry because they feel that their decision-making authority will be taken away from them in the process of "standardization"; but if you study the improvement efforts closely you realize that the common thread is that doctors and frontline staff are integrally involved in the standardization efforts, without whom the efforts would surely fail. Once the team has determined, with a lot of careful input and thought process, that "one particular approach" makes sense for their organization in order to improve quality AND reduce waste, individual physicians and staff would certainly be encouraged to implement that approach. 

As clinicians will readily point out, the "one size fits all" approach doesn't work in medicine. That's when professional judgement is truly needed - knowing when to deviate from the standard approach, and personalizing the protocol or treatment to the individual patient and the particular scenario. However, the fact that we need to deviate from a standard should not be an argument against the development of standards, merely the recognition of the limits of standardization. 

The real message of the critics of standardization should be that organizations pursuing standardization need to be vigilant in also building in appropriate mechanisms for deviation from the standard.

Some MA Hospitals May Have to Fund Coverage

Cost pressures continue to rise in the Commonwealth, as well as indications that there may be some "redistribution of wealth" in the healthcare provider community ..

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Hospitals face levy to fund coverage

By Kay Lazar

Globe Staff / May 15, 2010

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Many Massachusetts hospitals would be required to make a one-time contribution to a fund to help small businesses pay for health insurance, under legislation that the state Senate will vote on Tuesday.

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Senate President Therese Murray inserted the measure yesterday into a more sweeping bill she unveiled last month because almost no hospitals answered her call for voluntary contributions — other than Partners HealthCare, which pledged $40 million.

Murray, who formally filed the bill yesterday, hopes to raise $100 million to help small employers, who have faced double-digit health insurance rate increases. She said the money would reduce their premiums by about 2.5 percent.

“This bill will have an immediate and positive impact on small businesses that cannot be ignored,’’ Murray said in a statement. “It is not a permanent fix, but the shared sacrifice from both providers and insurers will bring necessary relief in the short-term as we continue to work on complicated, long-term cost-control measures.’’

The Massachusetts Hospital Association expressed reservations yesterday about the proposal, saying it is “concerned about the impact of the mandatory assessments this legislation levies on hospitals and how those assessments would be implemented.’’

The association said it will “continue to advocate to ensure that there is shared responsibility in addressing the healthcare cost issue that involves all stake holders — hospitals, insurers, employers, consumers, and state programs.’’

Partners HealthCare, whose Boston teaching hospitals have been blamed for helping to drive up medical spending, may end up owing more than the $40 million the health care giant already pledged, because Murray’s bill provides an exemption for small and financially struggling hospitals.

The complex formula requires hospitals that have more than a 2.5 percent profit margin to contribute money based on their patient population, with facilities that mostly treat patients who have private insurance kicking in more than those that typically care for lower-income patients on Medicaid.

Murray’s bill requires hospitals to deal directly with the health insurers, who would then distribute the refunds to small businesses over a two-year period, to be completed by September 2012. The state Division of Insurance would have to issue a public report by Oct. 1 that lists the names and the amounts to be contributed by each hospital.

Murray’s bill also includes a so-called transparency provision, which would require insurance companies to report annually to the state the rates it pays each of the hospitals for their services.

Partners, the parent organization of Massachusetts General and Brigham and Women’s hospitals, has come under scrutiny by the attorney general’s office and other regulators because it is among providers paid far higher rates than their competitors for similar services — payments Partners has been able to negotiate because of its market clout, regulators said. Partners says its higher rates reflect the complexity of the care its hospitals provide.

Kay Lazar can be reached at klazar@globe.com.