Bad medicine

Thursday, September 28, 2006
THE GENERAL AND THE BEAST
Bad medicine
A sloppy, inefficient medical system costs lives and billions of dollars
Ron French   / The Detroit News





MORAINE, OHIO -- Sam Shalaby is a car guy. He used to run a Delphi components plant in Dayton, and his language is still sprinkled with manufacturing terms 10 years after becoming the muscle behind GM's health care efforts. He speaks of colonoscopies in terms of price per unit and extols the virtues of "brand management" for medical centers.

For a company man accustomed to having products recalled for minor design flaws, the error-prone American health care system is baffling. On an average day, General Motors Corp. estimates that one person it insures dies because of medical errors, and 40 are sickened by prescription drug mistakes.

The automaker loses about $4 million a day because of medical errors and inefficiencies.

GM data reveal massive differences in quality and price of medical care across regions of the country, and even between hospitals in the same city. What's worse, hospitals sometimes make more money when they make mistakes because they profit from longer recovery times.

"If we ran an auto plant like they run hospitals, we'd be out of business," said Shalaby, director of community health initiatives. "The medical system is so obsolete, no one understands how to make it work."

While others in the GM health care war room plot strategy, Shalaby is on the front lines brow-beating doctors to lower rates and cajoling hospital administrators to implement assembly line techniques.

It's not an easy sell. Some meetings with hospital administrators have nearly degenerated to fistfights.

The efficiency models pioneered by Henry Ford and honed to a science in today's auto assembly plants are foreign to America's disjointed medical system.

GM is legendary for its tight control of purchasing, often dictating the price it will pay suppliers for parts. Yet GM pays an average of $10,662 for the treatment of bacterial pneumonia in Metro Detroit and $26,327 for the same treatment in Kansas City.

For a urinalysis, GM pays as little as $10 and as much as $70. Mammograms range from $90 to $400, with no difference in the quality of the test, said Dr. Joel Bender, GM's medical director.

"It's the most disorganized profession I know of," Bender said.

Cost differences are only the beginning of the problem. Treatment for identical medical conditions varies wildly between hospitals and between doctors in the same hospital. For example, some hospitals typically send a heart attack patient to surgery, other facilities provide catheterization, and still others offer blood thinners.

Standards are lacking

The lack of standards for care leads to deaths and longer recovery times, Shalaby said. "We build cars to specs," he said. "Hospitals should treat patients to specs."

Medical errors and inefficiencies account for an estimated 30 percent of health care costs, according to the World Health Organization. An estimated 96,000 Americans die each year from medical errors -- double the number who die in auto accidents.

"If we have a manufacturing error in a facility, we broadcast it across all our facilities so it doesn't occur again," said GM CEO Rick Wagoner. "You keep raising the bar for standard of performance by learning from what you did wrong. (But) you talk to people in the medical profession, and they'll tell you their first instinct is not to share that they had a problem, because it's an invitation to legal liability."

At least 1.5 million Americans are sickened each year by adverse drug reactions because of errors in prescribing drugs. A study by the Institute of Medicine found that, on average, patients are given the wrong medicine or dosage once every day they are in a hospital. Many of those errors would be caught if hospitals used an electronic system to match the proper drugs with the proper patients. But the technology used to scan the price of a jar of peanut butter is only slowly making its way into hospitals.

Henry Ford Health System was a pioneer in applying electronic record-keeping to the treatment of patients. But CEO Nancy Schlichting is keenly aware of the financial pressures that have kept many hospitals from implementing systems.

"Hospitals have only so much capital to invest," she said. "If it's between improving facilities, medical technology and EMR (electronic medical records), EMR often loses. You immediately get a revenue stream from a new CT scanner. With EMR, it may take years."

There is general consensus in the health care industry that modern information technology saves lives. But other investments such as robotic surgery equipment saves lives, too, while not decreasing revenue.

"In every other sector, when IT is introduced (and services improve), people pay more," said Mark McClellan, director of the Centers for Medicare and Medicaid Services. "But in health care, you're paid more if there are more complications and you provide more services. If payments drop when you provide better care, it's difficult to convince providers to invest in IT."

There are few ways for a patient to judge the quality or cost of care. "If you want to buy a car, you can go on the Internet, and you can check out the Consumer Reports rating, the J.D. Power rating, the relative stopping distance, the relative resale value, you know all these things," Wagoner said.

"It amazes me that you could be going into a surgery tomorrow and genuinely want to know about the place you're going, how many times they've done this surgery, how successful they've been, and more than likely, you won't be able to find that information. This is Business 101."

It's quantity over quality

But GM is learning that Business 101 doesn't apply to the through-the-looking-glass economics of the U.S. health care system.

If GM sells a car that's a lemon, the automaker loses money, either by having to pay for costly repairs or by customers looking elsewhere for their next vehicle. But when a hospital makes errors that keep a patient in bed longer, the hospital is paid more.

"The incentives are all incorrect," said Dr. Paul Farr, president of the Michigan State Medical Society and a gastroenterologist in Grand Rapids. "We do a wonderful job taking care of a heart attack at $50,000 per (episode), but we don't do a good job helping patients control blood pressure and quit smoking for $500 a year to prevent that heart attack.

"Doctors are very committed and want to do the best they can for their patients," Farr said. "But they also want to stay in business. If they spend an extra hour with a patient explaining why it's important to control high blood pressure, they're driving their own kids into the poor house because they're not compensated for that time. The result is we end up with heart attacks."

Farr and others in the state medical society, which represents about 14,000 doctors, are frustrated with a system that provides little financial incentive to prevent illnesses or to work vigorously to keep patients with chronic ailments from deteriorating.

"I've heard (hospital) administrators say quietly, 'Why do we want fewer diabetics? That's how we stay in business,' " said Dee Eddington, director of the Health Management Research Center at the University of Michigan. "Hospitals are the only places that get paid double for their mistakes."

Many hospitals still keep records on paper, and those with computerized records don't share that information with other medical facilities, wreaking havoc when patients move across the country or become ill far from home. That's a particular problem for senior citizens, who often see multiple doctors for various illnesses. Often those doctors have little idea what drugs have been prescribed by other physicians because there is no coordination between offices.

Shuffling all that paper takes a lot of hands. The number of health care administrators has grown 27-fold since 1970; the number of doctors has grown three-fold in that time.

The typical doctor in private practice had 2.2 employees in 1980. Today, the number is 5.6.

"And those employees aren't delivering health care," said Dr. John MacKeigan, a colorectal surgeon in Grand Rapids. "We're just nibbling around the edges and not transforming the system. And we have to transform the system to change the cost structure."

GM has success stories

When GM data showed that cardiac patients died at a higher rate in Flint than the national average, the company pushed to standardize the use of beta blockers in area hospitals. Survival rates rose and hospital readmissions fell, lowering GM's medical tab and saving lives.

When a Dayton, Ohio, hospital system threatened to raise rates 45 percent over three years, GM declared war. That increase would have cost GM an extra $5 million a year at that one hospital. GM paid for a full-page ad in the Dayton newspaper castigating the medical center for price gouging and, along with its insurance carrier in Dayton, dropped the facility from its approved health providers.

Eventually, the hospital backed down.

GM has dropped insurance companies it believed were not aggressively cutting costs and through its insurance carriers removed doctors whose prices were out of line from its approved list of care providers.

"In the past we would just hand them a check," Shalaby said. "Now we are in their face."

Shalaby takes hospital administrators on tours of GM assembly plants to teach them manufacturing delivery systems. He's led GM efficiency teams into more than 300 hospitals around the country.

When Mount Clemens Regional Medical Center redesigned its emergency room, a team of GM experts who design assembly plants looked at the blueprints and suggested moving radiology into the ER.

"It took about 20 minutes to transport patients to radiology to get an X-ray or CT scan, and 20 minutes to get back," said Robert Milewski, president and CEO of the hospital. "The more time, the more manpower. Time is money."

If Milewski sounds like a factory manager, there's good reason. "There's a lot of pressure on us from the Big Three to be cost-effective," Milewski said. "Many things we were doing were just not cost-effective."

But those efforts have failed to spread through the medical industry as GM had hoped.

"Even when we make improvements, it often doesn't spread throughout all departments of the same hospital, let alone to other hospitals," said Woody Williams, executive director of Health Care Initiatives for GM. "I don't think there is the incentive to be efficient. There's not the mind-set."

Many at GM recognize that mind-set from a few decades ago at their own company.

"When you had a new model year, the question was, 'what's the price increase?' " said Jim Cameron, labor relations director for GM Canada. "We just passed along the health care costs."

As GM lost market share to foreign competitors that didn't have the same health care burden, pressure increased to cut costs. The automaker cut its bloated work force and forced suppliers to lower prices. It instituted just-in-time delivery to cut costs and built state-of-the-art assembly plants.

"When we operated in nations with tariff barriers to free trade, the way we looked at efficiency was different from how we look at it today," Wagoner said.

But the American medical industry has no Toyota to force it to become more efficient. Even as large as it is, GM can exert only so much pressure.

GM's efforts to reduce errors and increase efficiency in the health care system have barely slowed the rise in hospital bills. In 2005, hospital bills jumped 9 percent nationally; at GM, it was 8 percent.

That's a lot of work to save 1 percent. But it's not just about the money for Shalaby, who preaches efficiency with the fervor of a tent revivalist. "This should have been done years ago," Shalaby said. "For God's sake, let's move."

You can reach Ron French at (313) 222-2175 or rfrench@detnews.com.








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