Uncontrolled, but Controllable, Variabilities Hold Greatest Potential for Managing Health Costs and Quality Improvement
For immediate release: March 22, 2000
Boston, MA--New methods for optimizing cost effectiveness in managed care are proposed by researchers from the Harvard School of Public Health and Massachusetts General Hospital.
Since the wide acceptance of managed care in the early 1990s, a conflict has existed between managed care companies and health care providers. Both claim the same two priorities: ensuring quality health care while minimizing cost. However, companies are seen as placing an emphasis on cost-containment at the expense of quality health care, while providers are thought to insist on autonomous health care decision-making without regard to cost.
According to the authors of "Cost and Quality Under Managed Care: Irreconcilable Differences?," published in the March issue of the American Journal of Managed Care, the answers lie in the application of a novel management methodology to reduce inefficiency.
The authors apply tools from operations management to health care and find that there are variabilities in two categories that must be identified and controlled. One set, termed "natural" variabilities, include numbers of patients, types of diseases, and level of professionals services needed. The other set of variabilities are "artificial," and hold great potential for savings without risk of reducing quality of care and potentially improving quality.
Eugene Litvak, lecturer in the Department of Health Policy and Management at HSPH, uses the example of a hospital operating room. An operating room is an expensive, but necessary, resource for a hospital. Ideally, it would be in use 24 hours a day. However there must be flexibility for emergency patients. Using variability analysis, Litvak and Long discovered that, as expected, a large source of variability was from emergencies. However, they found an approximately equal source of variability from scheduled elective surgery. "In some operating rooms, we are as likely to predict when someone will break their leg as when a surgeon will do a scheduled surgery," said Litvak.
"What we found is that operating rooms are poorly scheduled and frequently unused," said Litvak. "The expensive inefficiency of operating rooms is as much a result of the artificial variability of scheduling as from natural variabilities of patient emergencies. If a hospital would schedule elective surgeries in a more rational manner, then the operating rooms could be used more efficiently--cheaper--without compromising--and possibly even improving--quality."
Cost-saving opportunities such as inefficiently used operating rooms abound in the health care system. Litvak and Long call for the application of variability-based methodology "to distinguish effect cost-control interventions in health care from those that would only waste money or even damage the health care system."
Michael Long is an assistant professor of anesthesiology and deputy director of operating room services at Massachusetts General Hospital.
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