The Productivity Imperative for Healthcare

Recently CMS released the numbers for where our healthcare spend will be of GDP in 2027. Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year for 2018-27 and reach nearly $6.0 trillion by 2027. The pundits declare this to be unsustainable.

In the past month the focus on the unemployment rate was the headline determinant of the inflation rate triggers.

When I considered all this and the fact that labor costs are the number one expense within the Healthcare Spend, I was struck by the thought of all the inefficiency I’ve witnessed over the past 20 years in healthcare – both on the Provider and Payer side of healthcare.

Then McKinsey released a study in February on “The productivity imperative for healthcare delivery in the United States.” The authors cite multiple examples of how production efficiency impacts the healthcare spend, but also how the healthcare expenditures can be reduced by $1.2 trillion over the next ten years if healthcare delivery moves to a productivity-driven growth model. Simply by being more efficient with healthcare labor resources, we can cut over 2% off our Gross Domestic Product spend as a nation!

Coincidentally, McKinsey wrote an article in 2010 commenting that, “The best companies will learn how to maximize returns from people who think for a living.” For a decade, the need to optimize productivity of thinking-class, skilled workers in healthcare has existed.

There are thousands of articles about the effect of EMR’s on a doctor’s efficiency and the role of regulations causing inefficient requirements on healthcare businesses. Consider as an example that every school and summer camp now require the same information and sign off forms as your doctors do. You can feel the impact of inefficient downstream effects of regulations. Technology is definitely a part of the equation to address productivity.

It’s Not Just Technology; We Still Need Clinicians

I’ve seen software and technology drive results on productivity across multiple sectors of healthcare, but today I am writing about how I heard the following comment for twenty years in Board Meetings and Conference Pulpits: “We want every clinician to practice at the top of his/her license.”  How many times have you heard this?

What is really being said is that we, the healthcare leaders of our organizations, don’t want to spend high dollars for low dollar work being performed by our clinicians. We want more from our clinical resources while also only paying for their highest value and return on the work they do. With the convergence of technology at an unprecedented scale in my lifetime and the demonstrable impact of process experts (really seen in all business sectors) through six sigma and other lean processes, there is more reason to expect productivity gains than ever before. The one rate limiting factor on all this productivity improvement is the shortage of the labor to perform the actual work and produce the care.

If you’re not directing the work every clinician does and removing the non-core or non-high-value work from them and moving to a lower cost resource (maybe not lower skilled), then you’re not living up to the healthcare creed of allowing our clinicians to practice at the top of their license.

We are privileged to see opportunities where Providers, Payers, Managed Care companies, Life Science companies, and even Pharma companies have executed productivity successfully. I’m always shocked at how few companies have heard of those success stories and how they’re not learning from each other. Over the next year, I hope to share several examples of where we’ve seen these successes in The Productivity Imperative for Healthcare. Although some examples may seem simple, just remember how few actually put these efforts into practice.

Let’s all take part in delivering on the McKinsey study’s opportunity to reduce our country’s healthcare care costs by $1.2 trillion! How much of that number will your organization take ownership of?

Bo Bartholomew
Chief Revenue Officer