Paul Borawski asks us to “raise our voices
for quality” in November, and eleven other months. The implication is that such actions
would make various processes “better.”
What does that mean for healthcare?
The healthcare gurus talk about quality as if it is some
mysterious aspect that transcends price or adherence to standards—something we
must have and so we cannot talk about price, for example, without fear of
losing quality. In most
industries, the definition of quality is determined by the customer, and price
is usually an important consideration.
Adherence to standards is also important, but that is assumed,
particularly in healthcare or other highly regulated industries. States grant licenses to providers and
to institutions (hospitals, surgery centers, etc.) Medicare grants authority to institutions to perform and
charge for certain procedures. Patients,
in general, trust those regulatory mechanisms to ensure a certain standard of
care. Price is not an issue.
The issue of trust was also mentioned in a subsequent ASQ
piece from Coca-Cola. Part of
their definition of quality is a product consumers can trust. Dependable, consistent. This is what made Holiday Inns
successful, and in HC, we depend on regulatory agencies to ensure trust.
Those regulatory agencies (e.g. Medicare) typically delegate
their authority to proxy organizations, like the Joint Commission or DNVHealthcare. Does it work? Well, partly. The accreditation organizations ensure that healthcare
organizations comply with their standards, including a consistent standard of
care. But again, price is not a
factor. Also, individual providers
are not involved in the accreditation process. The state medical boards that regulate providers only take
action in cases of grievous or flagrant abuse of ethical standards. Doing a poor job is allowed, and price
is not an issue.
The biggest problem with US healthcare today is that it
costs too much. Quality is good,
but the price is too high. In any
other industry, price would be part of the definition of quality for goods and
services. For some
things—commodities—price is the defining characteristic. For example things like paper clips or
gasoline are purchased by price.
It’s really tough to sell a “better” paper clip. Oil companies struggle to convince us
that their gasoline is somehow better, but most people don’t really believe it. Customers vote with their feet or
pocketbooks, and they buy the cheapest product that meets their needs. Except for healthcare.
Prices in healthcare are fixed by Medicare and other
payers. Patients don’t have a lot
of skin in the price game and don’t usually have much choice about where they
get healthcare. Most healthcare in
the US is provided in a monopolistic environment—strong local hospitals have a
monopoly on healthcare services in their region. The price may not be exactly secret, but it is also not
public. I know exactly how much
I’m paying for gasoline when I pull up to the pump, but not when I enter the
hospital.
Why would a hospital (or physician) want to lower their
prices? Why would you want to
charge less than you could be paid?
They wouldn’t. And
don’t. Patients don’t know or care
how much they’re paying and wouldn’t opt for a lower cost alternative if they
had a choice. There are exceptions
to this rule, of course. Those
without insurance come to mind, but they are a dwindling group. Those with high deductible insurance
also have skin in the price game, but they are also a small group. The other area where price matters is elective procedures,
such as plastic surgery. Insurance
doesn’t pay, so patients do shop by price.
For the vast majority of healthcare services, however, price
is not an issue, and this is a major reason for the high cost of healthcare in
the US. We could fix that by price
competition. If we define quality
as meaning price, then quality would improve as prices come down.
