In our last session, we discussed waste, and one of the most important forms of waste, overproduction, can be illustrated by the car industry. In 2008, the US financial crisis highlighted how two business models can affect the competitors of automobile manufacturers. General Motors subscribed to the PUSH model, that is they batched manufactured. By that I mean, they manufactured large numbers of one model and one color of a car at one time. As an example, let's say they made 10,000 blue Malibu sedans. From an operational standpoint, this allowed them to use the same exact processes, and paint and color over and over again. However, there is one problem. The customer. Customers had not been asking for blue Malibu sedans. So how did GM convince customers to buy them? GM advertised and with sales promotions and discounts and therefore convinced people to buy this particular car. In other words, they artificially increase the demand. They push the blue Malibu onto the customer. In good financial times, this worked. However, when the economy tightened and the car buyers became more cautious, this strategy failed and General Motors went bankrupt, requiring a government bailout. Toyota, on the other hand, did not push cars on their customers, but rather only manufactured the car that the customer had ordered. In other words, the preferences and needs of the car buyer pulled the manufacturing of a specific color and model of car. For example of the car buyer ordered a red Camry. The frame of a Camry was placed on the assembly line along with all the parts and paint using a highly efficient just-in-time supply system. They manufactured exactly the car the customer desired. During the great economic downturn, Toyota became the number one manufacturer in the world indicating the success of the pull model which created minimal waste. I'm sure you're scratching your head and asking how did these business models apply to healthcare? Let me explain. Physicians too often perform tests and procedures that are unnecessary and have no proven benefit. In other words, they push expensive tests and procedures on their patients. But unlike General Motors, they do not have to create promotions or offer discounts. They simply tell the patients that they require the test or procedure. Let's look at an example of a PUSH model in medicine which occurred in McCallum, Texas. Medicare reimbursement data in 2009 revealed that the average per capita cost of healthcare in McCallum, Texas, was $14,946, while nearby, El Paso, the per capita cost was half that, $7,504. The health outcomes of patients in the two locations were identical of physicians in McCallum ordered more diagnostic tests and performed more procedures. As one local surgeon noted, this is represented over-utilization pure and simple. And what we are beginning to realize is that when it comes to healthcare more is not always better. We are finding that the ordering of unnecessary tests and procedures often explains higher healthcare costs. And we're also learning that the more we do, the greater the likelihood of errors. Now is the PUSH model only being used in McCallum, Texas? The answer to that is no. Analysis of fear reveals wherever there are more sub-specialists, particularly those that do costly procedures, the cost of healthcare per capita is higher. Despite these higher costs, no significant differences in health outcomes have patients have been observed. Let's look at the latest data from the Dartmouth Atlas from 2010. This data is derived from Medicare reimbursement figures. The average per capital expenditure per Medicare patients throughout the country is $9,584. While in Miami, Florida the cost is greater than 50% higher, $14,424. And New York City and Los Angeles are not far behind. While in another large city, Portland Oregon, the cost is $7,922. We need to figure out what they are doing in Portland. These examples prove that in healthcare you don't always get what you pay for. Let's dig a little deeper. I want to share a personal example of a friend of mine and colleague. We will call her Jane, so as not to disclose her real identity. Jane was worried that she might have a sleep apnea, and her physician referred her to a sleep laboratory where she had to spend the night. During this study, she never saw a physician. Several months later, to Jane's surprise, she received a statement from the sleep center cost that was billed to the insurance company of nearly $8,000 as well as a $525 physician bill for reviewing the study. But the physician, she never did see. To make things even worse, Jane had not received the results of the study. After an emotional phone call to the sleep lab she received the results that showed rare pauses of breathing called apnea. They recommended a special test to see if a pressure mask might be helpful, so she had to go back to the sleep lab. And this by-pap mask is thought as in some cases does eliminate these brief pauses in breathing called apnea. Jane spent another night in the sleep laboratory to test the effectiveness of the mask. During her second night, she slept on her side, a condition that eliminated her apneic spells and interfered with the tests. Jane recently received a second statement, which revealed greater than $9,000 bill for this sleep study. She decided to return the mask and has decided to sleep on her side. She now realizes that these test were unnecessary waste of time. Not to mention a huge unnecessary medical expense of nearly $20,000, combining the physician fees and the sleep studies. As you can see from these statements, the insurance company did not pay these astronomical fees. They simply paid approximately $1,100 and that's all that they allowed. And the patient actually owed a significant amount, almost equal to the insurance company. Now what if Jane had not had insurance? She would have been required to pay the entire $20,000. No wonder medical expenses are the leading cause of bankruptcy in the United States. How can we guard against push medicine? As a patient, you need to ask your physician, what is the probability that this procedure will improve your health? Also, you wanna ask, do the benefits outweigh the risks? If your physician is unwilling or unable to provide a percentage and site specific evidence or if the risks of the procedure are greater or equal to the benefits, don't agree to the procedure. And if your physician insists, obtain a second opinion. One of the most notorious procedures as far as push medicine goes is the cesarean section. To avoid medical liability and to achieve a higher income, many obstetricians are choosing surgery over natural child birth. Back in 1998, the Dartmouth Atlas looked at this problem in Pennsylvania, and discovered wide variations in the frequency of cesarean section. Depending on the area, they varied from 10%, or 107 per 1,000, to 40%, or 414 per 1,000. The Journal of Health Affairs, we examined this issue in 2009 and discovered C-section rates varied from 15 to 70% with an average percentage of 33%, one-third of the deliveries in the United States. Keep in mind the World Health Organization, WHO recommends a C-section rate of 15%. So, what should expectant parents do to combat this problem? My recommendation is to investigate the cesarean section rate of the hospital and obstetrician you were considering using. If that average is significantly higher than expected, you should ask why? In some cases the physician may handle high risk pregnancies and a high rate of C-section would be expected. In others, the physicians patients may prefer C-section, or a third possibility is that the physician has a very low threshold for performing this procedure. If the last possibility is true, perhaps you should be better off choosing a different doctor. Now once you choose the obstetrician, it will be important to discuss his or her indications for C-section. Under what conditions will the baby be delivered surgically? Finally, are there ways to discourage the PUSH model of medicine? Yes, as Toyota has focused on quality, government and private insurance companies are now experimenting with reimbursement models that reward quality rather than the quantity of care. Probably the most effective way to discourage unnecessary tests and treatments is to pay health systems a fixed amount for each of their patients they care for. This has been called a capitated model of care. This approach encourages care givers to order only the tests and treatments that will improve the health outcomes of their patients. There is one danger however, a capitated care system could encourage the denial of care. And this would save money, however, there are performance and outcome measures that will be able to detect this behavior. Toyota has taught us a number of important lessons about healthcare. The importance of steady work flow and effective value streams, applying the 80/20 rule, and slice out and dice the complex cases, reducing waste by continue asking, what is the value to my patient? Establishing clear job assignments to eliminate all ambiguity. Creating stable and effective customer-supplier relationships. Continually improving. Pull and don't push products. Caregivers need to provide their patients with the care they really need to improve their care. We should all embrace these lessons. Thank you.
