Lean healthcare: Matching promise with reality
By: John Doyle, DrPH, MPH | July 06, 2016
This is the third in a series on trends impacting the biopharma industry.
Lean thinking, in which healthcare staffers minimize waste so that all work adds value and serves patients’ needs, is increasingly being employed by health systems, hospitals, physician practices, and government departments, including the Centers for Medicare and Medicaid Services (CMS). These efforts are catalyzing improvements in healthcare operational efficiency.
Last year, CMS reported that contract modification cycle time had been cut by more than 50%, yielding a 95% reduction in post implementation IT change requests in quality programs, and saving significant staff time. Similarly, over five years, Intel’s pilot Healthcare Marketplace Collaborative in Portland, Oregon used new clinical processes for treating and screening patients, reducing direct costs of treating three conditions by 24-49%.
Yet not all of CMS’s Lean initiatives have moved the needle to the extent anticipated. For instance, a study of 1.3 million Medicare beneficiaries found that 25-42% received low-value services, but these treatments accounted for just 0.6-2.7% of overall spending. Medicare's Pioneer ACOs recorded a 1.9% drop in ‘low-value’ services their first year, leading to a 4.5% drop in spending on such services.
Cost, quality and outcomes metrics are all integral to this Lean process management. Contracts hinging on these metrics are quickly becoming more popular and robust. In January 2015, several major U.S. health systems and insurers set up the Health Care Transformation Task Force aimed at shifting 75% of their business to contracts with incentives for quality and lower-cost healthcare by January 2020.
Writing in the New England Journal of Medicine, Robert C. Young, M.D., argues that the momentum behind the growing attention to Lean thinking by physician organizations is due in large part to the Choosing Wisely campaign. This initiative was launched by the ABIM Foundation in 2012 to drive conversations between providers and patients about evidence-based recommendations, and to encourage medical specialty societies to generate lists defining when tests and procedures may be appropriate. The American Society of Clinical Oncology has already published two such lists.
The jury appears to be out on Lean health care, with a Health Policy paper concluding that ‘even though Lean results appear to be promising, findings so far do not allow [us] to draw a final word on its positive impacts or challenges when introduced in the healthcare sector.’
What does this mean for biopharma?
Some pharma companies have started to transform their business model from a transactional to an integrated, outcomes-based approach. For example, Novartis CEO Joe Jimenez notes, “in the future, companies like Novartis are going to be paid on patient outcomes as opposed to selling the pill.” There is a complementary push for increased operational efficiency based on the systems view governing the market.
Signals from regulators, such as progressing adaptive clinical trial design, as well as payers fostering coverage with evidence development, are precipitating new linkages inside pharma. If a payer requires a pay-for-performance contract based on real-world outcomes, then brand strategy, managed markets, HEOR, and other functional teams must work in concert.
Measuring and translating value is necessitating a shift in commercial strategy from promotion of product features to differentiation of value based on market-validated benefit. Many firms are now focusing on the patient as the nexus of research and commercial activity.
Partnering with providers to optimize the benefit-risk profile of their agents will link biopharma to the Lean healthcare train as it leaves the station. Ultimately, the health care system will reward companies for value and ‘goodness of fit’ in the system. Value is modulated by stakeholder demands for favorable cost-benefit along the patient’s journey. Macro-economic pressure and pricing scrutiny will only sharpen this already intense focus on efficiency and effectiveness. By integrating clinical and commercial functions to ensure biopharma assets are value-priced and supported with the appropriate customer service, biopharma companies can improve the return on their innovation.