Treating Patients Like Customers.

Just-in-time inventory control for patient-centered care

Managing change in health care is a complex, poorly studied process that's even more poorly understood. We do not have a clear model to visualize as we contemplate just what it is we are changing. Explore how modern hospitals are "warehousing" patients like excess inventory. and examine the changes needed to escape this morass. A strong physician/hospital alliance is the key to establishing more efficient, patient-centered care.

STEP BACK AND EXAMINE how the health care system evolved compared to American business and industry.

IN THIS ARTICLE...

In the last three decades, American industry was reformed by three basic principles driven by the marketplace of incentivized entrepreneurs.

1. U.S. business invested in highly trained human beings. The educational institutions in America are the envy of the world, fueled by the technology and information revolution.

2. U.S. business invested in high technology processes. Starting with Henry Ford and powered by a huge advantage over the rest of the world's industry that was destroyed in two World Wars, American industry continued to reinvent itself by research and development.

3. American industry organized itself around informatics and just-in-time inventory control. This could only happen in a fiercely competitive entrepreneurial environment.

How does health care mesh with these three developments?

Certainly, health care invested in high tech human beings. Our doctors are well trained, innovative and at the cutting edge of many medical advances.

Health care also invested in high technology equipment. Our research-driven processes in oncology cured multiple cancerous processes. Our universities spawned wide varieties of research protocols that penetrated virtually every community hospital in America that has an oncologist or any other number of highly trained subspecialists.

But health care has not invested in informatics or just-in-time inventory control. To find out why, we must first look at how doctors traditionally practice medicine.

Daily rounds

When patients become acutely ill, they go to hospitals and are admitted. The hospital is where acute medical care happens.

Care, broadly defined, consists of both diagnosis and therapy. Each of these arms of health care has high technology sequestered in the hospital-X-ray diagnostic equipment, ICUs with special monitors and drugs, operating rooms with microscopes, and sterile environments.

Private physicians in their own practices traditionally make daily rounds in this repository of high technology. Patients are sequestered in hospitals for the convenience of the doctor. They can be seen all at once in a common site.

* Contact between patient and doctor occurs once a day.

* Decisions are made once a day.

* Doctors write orders for patient care and those orders are carried out once a day.

* The doctor comes back 24 hours later to see what happened.

* Once in a while, the doctor gets paged for something inconvenient. But most of the time, everyone in the hospital focuses on the same model-the once-a-day decision making process.

Patients feel they are getting value because they are in the hospital where they are being "watched." In fact, ill bodies do take time to heal, so once-a-day isn't a bad thing.

Centralized scheduling sorts it all out on the premise that patients can wait. The doctor comes back each day and makes another decision.

This model of care is not challenged, in part, because of the high social status paid to physicians. If the doctor says it must be right, who is the consumer to challenge?

"You're the doctor," is the phrase patients utter when confronted with the need to be confined longer in a hospital bed. As long as uninvolved third parties are willing to pay the freight, there is no impetus to change.

The doctor's in charge

With that combination of forces, health care organized itself around the physician's own style of privilege and control. American health care is "doctor centric." The doctor is in the middle of the health care solar system.

With competing voluntary hospitals, private physicians can take their patients and revenue elsewhere. Making changes to physician privilege can mean financial ruin for aggressive hospital administrators.

If these health care processes were transplanted to traditional American business, bankruptcy would follow.

Can you imagine Harley Davidson competing with Kawasaki and Honda with workers who show up at the factory once a day for a single decision or action, such as putting the kickstand on a motorcycle, then waiting 24 hours before tightening the bolts?

Economic activity that is put on the shelf for an indeterminate period of time is considered inventory. Clearly, motorcycle workers would love a job where they came to work an hour a day, screwed in one bolt, and then went home where they could conduct their private bicycle business on the side.

This would be especially enticing if someone else paid for the partially assembled motorcycle to sit on the shelf.

Patient inventory

Take the analogy to health care, and patients sitting in a hospital are part of the inventory. Although we'd never think of human beings as inventory, that is precisely the stark reality of American health care. It is only by looking at this absurdity that we can see the changes that need to be made.

In economic processes, something not moving in time is stationary or static, and it becomes inventory. Hospitals may be holy shrines to healing, but they may also be warehouses of excess inventory.

The health care process is highly individualized. Each doctor and patient pair explores a path of individualized care. The art of medicine is highly eccentric to the whims of each physician, preventing the opportunity for standardized processes.

Physicians have their own artistic styles. That is expensive. The American hospital, in an environment of cost-plus, is an institution rewarded for inefficient processes by physicians who generate revenue by individualized and unsupervised procedures.

Instead of most of the value coming from the dynamic processes of health care, modern hospitals' value-added features come from static process. In American industry, this is called the warehouse business.

Hospitals find that much of their revenue base is dependent on the warehouse business, including subspecialists and their high revenue procedures.

How pervasive is this "inventory and warehouse effect?"

The best comparison is to review the use of bed days per thousand covered lives per year. With this measure, there are cities where the health care sector is using 350-bed days per 1,000 covered lives per year.

At the same time, innovative systems in some parts of the country have markedly lower rates with some managed care plans at 80 commercial bed days per 1,000 covered lives per year.

* It is cruel to shine a light on the modern hospital's dependence on the warehouse business. Hospitals didn't want to end up this way. It is doctors practicing in a reimbursement environment of cost-plus who made them that way.

Making rounds once a day is convenient to the doctor and has no penalty as long as a party who has no control over either the doctor or the hospital pays the bill.

Cutting hospital days is not the only way to save health care dollars. Reducing the number of unsupervised, high-cost physician procedures performed for questionable reasons has an equal potential for cost savings.

To downsize the warehouse business sounds catastrophic to hospital administrators who depend on revenue from bed days.

An alternative method of reimbursement is payment for the health of a population. But it's still in its early stages. Hospitals are not being reimbursed for outcomes unless they are part of integrated systems that capture a capitated market.

The false promise of capitation is revealed when populations move, change plans annually or demand new technology not offered by last year's actuaries.

No profit, no capital, no trust

With market forces demanding change--such as sophisticated consumers who want MRIs for their back pain and third-generation proton pump inhibitors for their overeating--insurance providers and hospitals are struggling to reorganize the compensation system for health care.

One way out is for hospital systems to embrace capitation and try to capture the margin of arbitrage. A more successful route may be rapid expansion into systems that dominate a niche market, a geographical area, or a specific industry, and then refuse to bend on price.

In regions where capitation has not taken hold, hospitals are caught in an increasingly tight squeeze. Fee-for-service doctors are not ready to make the leap of faith to capitation, particularly if their livelihood depends on high-end procedures.

Insurance providers are no longer interested or willing to offer capitation. They want the arbitrage just as eagerly as the hospitals do.

Ratcheting down prices makes for shrinking margins and increasingly unstable alliances between hospitals and their voluntary medical staffs. We are left with a hospital industry that has:

* No margin for profit.

* No excess capital for expansion.

* No trust that a stable enough regulatory environment will allow new capital expansion.

And so we have hospitals filled to capacity in every city, caring for patients in a slow and inefficient fashion. Creative change will only happen when both hospitals and medical staffs share a driving vision to a common goal. That common oal has to be defined simply and clearly.

* Doctors must redefine their roles. Instead of having health care designed around their schedule, doctors need to participate in defining a system that works efficiently for the patient.

* The patient needs to be in the center. Payment must become aligned with outcomes of patients' health. Doctors and hospitals need to be paid when the patient gets better. It's called patient-centered care.

* Furthermore, the hospital needs to be in the same line of business as the doctor.

Patient-centered care

The three arms of health care must work together: high technology (hospital), highly trained professionals (doctors) and just-in-time inventory control (patient-centered care/informatics).

Hospitals need to awaken from their slumber and recognize that the warehouse business will not exist in the near future.

Doctors are the precious assets in health care because they are the ones who choose when to use and how to apply the hospital's technology. Doctors cannot rely on being paid for procedures, but on deciding when the procedure is needed to maintain optimal health.

The question that remains: Who will provide the inventory control?

Now, with the fat gone from the system, will managed care continue to be tolerated?

Managed care plans try to drive the process by imposing rules from the outside on hospitals and doctors. Their success is largely a measure of the enormous margins of excess in the health system and the opportunities for profit made by carving out that excess.

Managed care plans are tolerated to the extent that they have not impacted the primary twins of health care: high technology people (doctors) and equipment (hospitals).

MCOs/HMOs will be replaced if they do not become integral to the system. Doctors and hospitals working together to provide their own just-in-time inventory control will provide a formidable challenge to HMOs. The field of health care informatics will become the battleground for the control of modern health care.

Informatics will encompass a larger meaning--the design and implementation of patient care pathways that keep patient care moving during hospitalizations.

* Clinical sites will be integrated so that patients can present to multiple sites for care and be managed without duplication of effort or delay.

* Informatics will keep track of outliers and their high costs so that multiple expensive procedures can be circumvented with alternative strategies.

* Best practice methods will become available on touch screens for doctors to review and consider at the time of patient care.

* Subspecialists will be available for consultation over hundreds of miles by telemedicine.

* Paperless charts will allow computers to compare medications and cut down on errors.

* Patients will access information from Web sites and nurse phone lines.

Physician/hospital alliances

To make this a reality, hospitals need to make alliances with physicians in increasingly tight circles of interdependence. Physicians are the ones making decisions about what services and technologies are used. Physicians decide which patient is on the shelf and which one is in the queue--inventory control.

Hospitals provide the technology, the infrastructure and the management expertise. Physicians need to be empowered to act as though they were spending their own money. For that sort of interdependence to exist, physicians must be empowered to act as though the hospital's needs are their own.

Gone are the days when the hospital with a voluntary medical staff can make decisions for doctors and hope they stay. They will not They will form their own independent alliances outside the hospital and gradually strip it of all its profit.

The net effect of this internecine struggle is that parties outside the core of health care, the HMO/MCO, the company with the informatics and the computer, will define the destiny of both physicians and hospitals.

PacificCare calls the shots

PacifiCare(R) Health Systems

An example is the artful realignment of incentives by PacificCare. The organization doesn't buy hospitals and simply rents the facilities it needs. PacificCare:

* Uses computers and information systems to control excess inventory (hospital bed days) and excess procedures.

* Rewards physicians with ownership in the company.

* Measures patient satisfaction.

* Puts patients at the center of care.

Physicians align their loyalties with the source of information rather than the source of equipment and technology.

Close your eyes and imagine how "inventory control" might work if you were ill. Imagine patient-centered care. How would you like to be cared for if you had a bad stomach ache?

Imagine getting sick on a Friday afternoon, You call a nurse information line. The nurse indicates you should be seen today. You are directed to an urgent care clinic in your neighborhood.

A physician examines you and draws a blood count. You have an elevated white count and right lower quadrant tenderness. You may have appendicitis. It is 5 p.m. You are not vomiting and have no fever.

A surgeon is contacted and thinks more information is needed. You are directed to the closest hospital where the emergency department staff already knows you are coming and what your white blood cell count is. They welcome you and indicate that the X-ray suite is ready to do a CT scan of your abdomen.

The surgeon is told that the CT is in progress and arrives to examine you as you return to the ED. You are more tender.

A surgical team operates on you at 9 p.m. Why wait? Or how about going home? A nurse accompanies you to install a pain control IV pump instead of waiting in the hospital.

It's all about inventory control--the right care, the right place, at the right time.

* Are doctors thinking of being responsible for the resources they spend, asking their hospitals to charge their admitted patients by the hour, not by the day?

Hospital reform and care paths

Think creatively about inventory control.

* How about doctors and hospitals together reviewing their inpatient care management and deciding not to charge for time delays over two hours after any drug is ordered, a consult requested, an X-ray ordered or a physical therapist called?

* How about doctors and hospitals refining their care paths to ensure that patients do not have to wait for an ultrasound or for a CT scan just because a tech was not in the house?

This is the hospital and doctor team taking accountability for the "industrial process" of patient care and its efficiency.

It is time to reform hospitals and how they deliver care.

* Emergency rooms should stop being triage sites and become integrated clinical decision units (CDU) in which rapid sequences of clinical decisions are made.

* Observation beds off the CDU become active units where physicians are present 24 hours a day making sequential decisions whenever science allows the next decision to be made, not when morning rounds roll around.

* Hospitalists at the CDU, either permanent or rotating, review the need for admission, supply extra resources or ideas for care and keep the pace of care moving. Hospitalists continue the industrial assembly line of medical care driven by science and timely convenience for the patient.

* Human beings are alive, healing and changing 24 hours a day. Hospitalists can be there to ensure that every opportunity to act is seized whenever the time is right.

* Case managers see every patient, exploring clinical status as well as reviewing the timetable of care. Case managers keep the assembly line moving.

* Patient centered care never sleeps.

* Utilization review stops reviewing indications for admission and starts reviewing need for care, becoming a patient ombudsperson for effecting needed care.

* The health care organization reaches outside the hospital. Care pathways and chronic disease management extends into the home, providing scales for congestive heart failure patients to weigh themselves, glucose measurement devices so that diabetics can monitor themselves, breathing machines and peak flow meters so that asthma patients can stay clear.

Doctors must start imagining themselves as patients, and have health processes done as expeditiously and conveniently for their patients as for themselves. Few patients argue about being in the hospital for a shorter period of time.

Doctors make terrible patients. This is partially because they know how to circumvent the system. They do not tolerate wasteful inefficiency well when they find themselves in a system not designed to weed out that inefficiency.

Hospitals that participate in making this transformation will only succeed if they have a clear vision of how they need to change.

They need to change into institutions with a core business based around patient-centered care, not doctor-centered warehousing. And they need to do this with great sensitivity to their medical staffs and their patients.

Medical staffs need to be their partners. Their current staffs need to be weaned from proceduredriven care.

Ask patients what they want. They will tell you that being treated quickly, politely and effectively is just fine.

And they will be grateful. Justin-time.

John E. Whitcomb, MD, FACEP, is the medical director of emergency services at St. Luke's Medical Center in Milwaukee Wisconsin.

Mehrdad Shafa, MD, FAAP, MMM, is associated medical director of quality management at Blue Care Network in Southfield, MI.