Patrick Hagan: Waste Not, Want Not: The Key to Reducing Costs

By Patrick Hagan
Thursday, October 8, 2009; 3:04 PM

Our health-care problems will not be solved until we address the reality that, from the perspective of the patient, only 5 percent of what we do actually provides value. The other 95 percent? Waste. While this figure may seem absurdly high, waste includes everything in health care that does not directly address a patient's health. Some waste is necessary: registering patients, keeping records, moving a patient. However, most is unnecessary: errors, waiting time, unneeded complexity and avoidable complications.

Here at Seattle Children's Hospital, we were burdened by a costly, inefficient health-care model, and we had to look outside the health-care sector to find a way to provide patients better access, better care and better service at lower cost. We found it, of all places, in the automotive industry; the hospital adapted the principles of the Toyota Production System into a program called Continuous Performance Improvement (CPI). Improving overall quality is the goal -- reducing waste is the means.

From the beginning, variation in care processes was the greatest source of waste. By standardizing and error-proofing, the quality of care was improved while costs were lowered. Patient time on ventilators is a direct example. Through improvements in process, patient days on ventilators have been safely reduced by 26 percent. This, in turn, has decreased the risk of infection and many uncomfortable side effects while freeing up specialists to focus on additional patients. The same principles, when applied to ordering medical supplies, saved $2.5 million in the first year alone. And, by deploying visual boards on patient care units, bottlenecks in the hospital discharge process have been decreased, getting patients home faster and opening beds for other sick children.

This transformational approach to patient care is a blueprint for fixing the nation's health-care system. The Department of Health and Human Services estimates that health-care-associated infections cost an estimated $28 to $33 billion each year. Seattle Children's has reduced cardiac surgical site infections and hospital-acquired blood stream infection rates by 50 percent in just three years. These results came from standardizing the way dressings are changed, central lines are managed and medication is administered. Simple, straightforward and very hard work.

In an environment where medical costs are skyrocketing, Seattle Children's has reduced direct per-patient costs by 3.7 percent. Multiplied nationally, a similarly relative modest shift could have reduced the total cost of hospital stays nationally by more than $12.7 billion in 2007 alone.

While applying these principles on a national level may seem overwhelming, it is far more promising than many of the proposals debated this summer. We need to turn our attention to reducing waste in our heath-care system.

Patrick Hagan is president and chief operating officer of Seattle Children's Hospital.

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