June 28, 2011

From waste to value-conscious innovation: Can Group Health show the way?

Audiences at Group Health’s annual Birnbaum Lecture often remember speakers for the challenging questions they raise. Take this year. On May 11, Canadian economist Robert G. Evans, PhD, praised Group Health for our idea-driven success. But then he asked: “If Group Health has a better mousetrap, why isn’t the world beating a path to your door?” And “Why is the whole U.S. health care system not dominated by organizations like Group Health?”  When an audience member asked how to educate American voters about solutions to the health-cost crisis, he joked: “We (Canadians) have just elected a government that’s going to wipe out our Medicare system. Why are you asking me?”

Irony aside, Dr. Evans urged us to look carefully at so-called “waste” in the U.S. health care system. “Nothing is ever wasted,” he said. Every dollar “always goes somewhere, which is what makes it so difficult to bend the (cost) curve.” In other words, one person’s waste is another person’s income.

Dr. Evans blamed fee-for-service insurance plans for raising costs through high administrative expenses and limiting access to coverage and care. By contrast, integrated health plans like Group Health combine insurance with care delivery, creating a strong incentive to find the “sweet spot” between low premiums and high value.

But fee-for-service insurance is not the only cost driver. Stanford University’s Victor Fuchs, PhD, and Arnold Milstein, MD, MPH, catalog culprits in their recent New England Journal of Medicine commentary, “The $640 Billion Question—Why Does Cost-Effective Care Diffuse So Slowly?” They also cite: large employers that keep offering the same old health coverage; legislators who take campaign contributions from industry stakeholders; hospital administrators who protect the purchasers that fund them; specialists defending their income; physicians guarding their autonomy; academic health centers that tolerate cost inefficiency as the price of training residents; and manufacturers driving demand by marketing their drugs and devices as better than inexpensive equivalents.

It’s a conundrum: The strength of the U.S. economy requires controlling health care spending. But proposed changes threaten many peoples’ livelihoods, so strong economic and political forces combine to maintain the status quo.

Still, Fuchs and Milstein argue, payment reform is the only answer. They call upon physicians—health care’s most trusted stakeholders—to lead the charge.  (For insight on care providers’ role, see the article “High-Value, Cost-Conscious Health Care: Concepts for Clinicians to Evaluate the Benefits, Harms, and Cost of Medical Interventions” by Stanford’s Douglas K. Owens, MD, MS, and colleagues in the February 1, 2011 Annals of Internal Medicine.) 

Health services researchers can also play an important role by exploring what Fuchs called “value-based innovations” in an August 19, 2010 New England Journal of Medicine perspective. Such innovations reduce costs while maintaining quality of care. He wrote:  “Current demographic, social, and economic forces will create new priorities for future biomedical innovations: more emphasis on improving quality of life and less on extending life, and more attention to value-enhancing innovations instead of pursuit of any medical advance regardless of its cost relative to its benefit.”

If you think this sounds simple, you're mistaken. Even with all the advantages of an integrated system, Group Health has participated in our country’s “more is better” style of health care—an approach that, according to the Institute of Medicine, yields more than $700 billion in excess costs nationwide. Removing overuse, misuse, and waste from the system will require a far more serious effort than most people acknowledge. Why? Because it will ultimately threaten the income of many people and entrenched interests—a great obstacle to changing the status quo.

To be part of the transformative solutions needed, we can’t leave the translation of our scientific knowledge to chance. We can and must keep designing, testing, and disseminating the kinds of “better mousetraps” that Evans acknowledged and American health care needs. By doing so, we will prove that that value-conscious innovations are not only possible—they can improve health and health care nationwide.

Media contact

For more on Kaiser Permanente Washington Health Research Institute news, please contact:

Amelia Apfel


(425) 507-5455
After-hours media line: (206) 287-2055

page-twitter-icon.png @KPWaResearch