By Russ Mitchell, Kaiser Health News
A hundred managers at Scripps Health jam shoulder-to-shoulder into a break room in San Diego. CEO Chris Van Gorder goes at them like a football coach down by 3 at halftime.
"What are we trying to do in our health care system?"
"Reduce costs!"
"Why?"
"Health care is too expensive."
"The solution is going to come from Washington D.C., right?"
"Ha ha ha ha."
"Sacramento then, right?"
"Ha."
"The solution," says Van Gorder, pumping an index figure toward his team, "is going to come from right here."
Van Gorder, an ex-cop turned hospital executive, rescued troubled Scripps from near insolvency a dozen years ago as its new CEO. Now, he's put Scripps in the middle of a cultural transformation aimed at saving hundreds of millions of dollars a year by -- get this -- coaxing physicians and managers at Scripps to work together, and standardizing care across every hospital in the system.
Just this week, we've seen how lack of standardization leads to a nearly-inexplicable price range of $11,000 to $125,000 for a standard hip replacement across the country.
Price variation among hospitals within the same system is even harder to explain. At Scripps, there was a cost difference of $6,000 between two Scripps hospitals performing the same cardiac procedures, using the same protocol, even with the same surgeon.
And that's standard: Most health care systems still manage each hospital or clinic as its own silo -- each with different management, operations and clinical procedures.
Van Gorder, 60, tells his staff that major change is inevitable. Political leaders, employers and patients themselves are fed up with health care costs. Given federal budget deficits and the calls for entitlement reform, Medicare margins will continue to be under pressure. Politicians fearing a backlash from cutting benefits to consumers will take aim at hospitals and other providers. The Advisory Board Company predicts the typical hospital will see its margins collapse by as much as 20 percent over the next 10 years as reimbursements drop.
"Hospitals that can't find a way to deliver their product less expensively and with better quality are going to go out of business," Van Gorder says. "It's as simple as that."
The $6,000 Cost Difference
Consider the $6,000 cost difference for the cardiac valve and coronary artery bypass graft procedures. No one paid attention to it, because there was no incentive to do so. When a cross-system team dissected hospital-to-hospital variations in 2010, they found that the Scripps Memorial Hospital in La Jolla required that nitric oxide be administered to the patient, ostensibly to boost oxygen intake in the blood.
Fourteen miles away, at Mercy Hospital in downtown San Diego, such patients received no nitric oxide. A look at the data showed the outcomes were the same. Today, a doctor at any hospital in the Scripps system can still order up nitric oxide, but it’s no longer required. Savings: $400,000 per year.
Some of the other savings that netted $150 million in the first year:
A Story With Twists And Turns
Van Gorder's campaign has not been without challenges. Historically, doctors have felt threatened by changes imposed from outside the profession, which they fear will undermine their autonomy and income. "You can’t force feed doctors," says Brent Eastman, recently retired chief of medicine at Scripps, now president-elect of the American College of Surgeons.
Sensitive to this culture, Van Gorder created what he called a Physician Leadership Cabinet "to share the responsibility of running this company together." The board includes the medical staff and physician members elected by their peers because "We don't want 'yes people' sitting on the group." The key to cooperation, says Van Gorder, is transparency -- sharing all information.
Early on he was tested. The doctors demanded $4 million to pay for on-call doctors for the emergency rooms. Van Gorder said he couldn’t afford it, and laid out the numbers. The doctors cut the demand in half.
Van Gorder trusts that sharing financial information, especially on costs, along with data on treatment and outcomes, will usually lead doctors to the best-outcome-at-lowest-cost decisions.
So far, that strategy has inspired buy-in. "Probably only once every hundred years will there be a generation that can truly change the way health care is delivered," says Eastman, the physician. "We are that generation."