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The cost of healthcare remains a central theme no matter where you go in our nation, and rightly so. The annual U.S. healthcare expenditure tops nearly $3 trillion, representing approximately 18 percent of the gross domestic product. That equals about $1 out of every $5 spent.
If we trimmed the cost of healthcare by one-third--which is the amount attributed to waste and inefficiency--imagine how much money we could invest in public education, business development and infrastructure in our communities.
Higher cost is not a proxy for higher quality. The United States is below average for life expectancy and infant mortality. The World Health Organization ranks our country 37th out of 191 national health systems when evaluating investment in medical care and the correlation to improved health, reduced health disparities and protection from impoverishment due to medical expenses.
If the excessively high costs of healthcare in the United States are not buying us quality, then why are costs so high?
First, the system has a lot of waste in terms of time, unnecessary tests and procedures, and inefficient workflow. The way most institutions deliver care isn't efficient. Additionally, there's an alarming lack of transparency around quality and cost. This makes being a smart healthcare shopper extremely challenging.
Moreover, the conversation about cost is incomplete unless we address the elephant in the room. I am referring to the way some providers charge extraordinary prices for procedures simply because they can. A recent report by the Centers for Medicare & Medicaid Services disclosed dramatic differences in what hospitals in the same markets charge for the same medical procedures. Even in the same city, providers located only a few blocks from each other often charge wildly differing amounts for identical procedures. This is outrageous.
Islands of excellence do exist in healthcare and there is much to be proud of. Yet, for the most part, there is too much variability and inconsistent quality. By 2030, healthcare will consume another $10,000 of the average family's annual budget at the current rate of cost increases.
An Institute of Medicine discussion paper published in July, for which I had the privilege of being a co-author, advises a structured, evidence-based, systems approach to managing care delivery would be transformative. It would address performance gaps, mitigate inevitable human error, eliminate waste and variability, reduce cost, and encourage a culture of continuous improvement.
Based on our experience at Virginia Mason where we began applying Toyota Production System-inspired principles more than a decade ago, we know a disciplined management methodology results in higher quality, improved safety, greater efficiency and lower cost. With the Virginia Mason Production System, we have attacked costs while raising standards for quality and safety. Today, most medical procedures at Virginia Mason are 20 percent to 60 percent more affordable than they are at other Seattle-area hospitals.
As a nation we spend hundreds of billions of dollars developing new drugs, procedures and medical devices. The Institute of Medicine report points out we've spent next to nothing deploying a systematic method to determine the most efficient and cost-effective way to deliver all the care people need and only the care they need, at the right time, in the right place, by the right people and in the right way. It's time we do so.
Gary S. Kaplan, M.D., FACP, FACMPE, FACPE, is chairman and CEO of Virginia Mason Health System in Seattle. He also is a practicing internal medicine physician at Virginia Mason and current board chair of the Institute for Healthcare Improvement.
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