Perspectives

Getting Full Value from Our Health Care System

Americans spend nearly $2 trillion a year on health care, but that’s about $1 trillion more than what Americans should be spending for what they’re getting in return.

That’s the bold assertion of Paul O’Neill, former U.S. Secretary of the Treasury under President George W. Bush; former chief executive officer of the Alcoa aluminum manufacturing company; and currently a chairman of the Value Capture Policy Institute, an organization that seeks to improve the value of health care. With just a few simple, small changes in the way the U.S. health system operates, Americans could “simultaneously see a huge improvement in health care outcomes and reduce the cost of health care to society by about 50 percent,” O’Neill argued during a provocative discussion at the RAND Corporation.

AP PHOTO/STEVE RUARK   Peter Pronovost, a physician at the Johns Hopkins Medical Center’s intensive care unit (ICU) in Baltimore, Md., developed a simple, one-page “daily goals form,” a step-by-step daily care plan for each ICU patient. Nurses and residents who used the form increased their understanding of their duties and cut patient ICU stays in half.

Aiming for Perfection

How can the health care system reap this “value opportunity,” as O’Neill calls it? He explained that when he began as the chief executive officer of Alcoa in the late 1980s, the company already had an enviable safety record, ranking nationally in the top third of injury-free work environments across the public and private sectors. Safety at organizations like Alcoa is measured in terms of lost workdays from injuries, and Alcoa’s lost workday rate (the number of injuries per 100 employees) was 1.87 per year, or two-thirds lower than the national average.

But O’Neill argued at Alcoa that the goal should be zero lost workdays per year. Despite some resistance from the safety director, Alcoa dedicated itself to aiming for perfection. This entailed using an online system to keep track of safety-related incidents, analyzing the root causes of those incidents, and sharing the results of those analyses and proposed solutions across the organization. Alcoa also encouraged all its employees not only to report problems but also to suggest solutions. Today, Alcoa has an annual rate of just over zero lost workdays.

A System in Chaos

Applying the Alcoa experience of aiming for perfection to the health care industry is more challenging, O’Neill said, because the health care system is “in chaos.” As one example, he discussed the simple but widespread problem of incomprehensible handwritten prescriptions, which can cause deaths. But more commonly, illegible prescriptions lead to what O’Neill dubbed “unnecessary rework” — massive amounts of wasted time and the enormous costs entailed in chasing down the doctors and ensuring that the prescriptions are correctly understood.

DIANE BALDWIN   Former U.S. Secretary of the Treasury Paul O’Neill, center, elaborates on his suggestions for the U.S. health care system after a speech delivered at RAND earlier this year.

Another example of the chaos is “batch processing” of drugs for patients in hospitals. O’Neill described one hospital where drugs are filled every Monday, Wednesday, and Friday as a way to optimize the time of pharmacists. But not surprisingly, patient conditions change more rapidly than every other weekday. In fact, 40 percent of the hospital’s intravenous solutions that are filled on Friday come back on Monday because of changes in patient conditions, and the returned intravenous solutions are simply dumped down the drain. Moreover, for other medications that come back and that are not contaminated, the hospital employs a full-time person on Monday just to restock the shelves.

Simple Changes — Big Results

Despite the chaos, O’Neill believes that it is possible to improve the situation, citing his experience consulting for three intensive care units (ICUs) in Pittsburgh. In the base year, the three ICUs saw 1,759 patients. Of those patients, 37 ended up with infections contracted from the central intravenous lines that had been used to administer medications, and 19 of those patients died from those infections.

Addressing the problem did not require massive new innovations; it required only standardizing how the central intravenous lines were administered — something as simple as having a clear, commonly accepted protocol and a prepackaged kit. The next year, O’Neill said, the ICUs treated more patients than previously, but there were only six infections (compared with 37) and one death (compared with 19). Of the six infections, four of them came from a breakdown in following the protocol.

Unfortunately, “growing” such best practices in health care settings is daunting. As O’Neill pointed out, the three Pittsburgh ICUs were under the direct control of one manager. In another five ICUs in the same Pittsburgh hospital, which were under the control of different managers, “it took a year for them to even entertain the idea of standardized practices to deal with central line infections — and they were just down the hallway.”

Incomprehensible handwritten prescriptions can cause deaths. But more commonly, they lead to “unnecessary rework” — massive amounts of wasted time and the enormous costs entailed in chasing down the doctors and ensuring that the prescriptions are correctly understood.

A Prescription for Change

Improving conditions in health care settings requires two key elements, according to O’Neill. First, it requires leadership — as in the case of the ICU manager — to set the vision and the goal of zero errors. But this kind of leadership must come from the chief executive officer to break down barriers between departments. Leaders must also impose accountability for everything that can go wrong in their institutions, because that accountability frees up employees to commit themselves to achieving the vision.

The other key ingredient is transparency. Transparency entails having data systems that post in cyberspace — for everyone to see — the safety problems that occur, the identified root causes of those problems, and the changes that were made — all in real time. Transparency also involves making data available on how well a health care system is performing. O’Neill cited a small health care system in Kentucky that “bravely” posts data on its Web site — color-coded in red, yellow, and green — on the quality of care the system delivers for 78 health care conditions in comparison to the average quality of care delivered in the United States for those conditions.

Because such data are so hard to come by, O’Neill said that it is hard to either prove or disprove his assertion that the nation can reap a 50-percent savings by improving health care in the simple ways he suggests. But he argued that there is a need to look in a deep and complete way at all the opportunities for cost savings in health and medical care. Doing so can help identify the size of the opportunity and jump-start change.