
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, August 14, 1994                   TAG: 9408160053
SECTION: CURRENT                    PAGE: NRV-2   EDITION: NEW RIVER VALLEY 
SOURCE: By GARRY COLEMAN
DATELINE:                                 LENGTH: Medium

RE-ENGINEERING THE HEALTH-CARE SYSTEM IN AMERICA

It seems we can't turn on the television or pick up a newspaper without being confronted with the latest proposal for health care reform. An almost equally prevalent phenomenon in business literature has been the idea of "re-engineering" organizations. Perhaps what we need is the re-engineering of our health care system.

Michael Hammer, author of the current bestseller "Re-Engineering the Corporation," defines "re-engineering" as the radical redesign of business processes to improve performance. Corporate America is being forced to re-engineer by international competition and increasingly sophisticated consumers. Re-engineering upsets the status quo and can be painful; however, organizations are achieving dramatic improvements in performance.

Is the U.S. health care system in need of re-engineering? Congress should look at the health care system at the national level. Viewing the system simplistically it consists of: A) the customers, B) the providers (doctors, nurses, pharmacists, hospitals); and C) the suppliers (drug & equipment companies, insurance companies, and state & federal government).

If we examined the processes linking these players, two things seem obvious: 1) processes should provide efficient and effective health care to customers; and 2) some processes provide much more value than others. A mandatory step in re-engineering is to identify the processes that add little or no value and then either eliminate or redesign them.

A quick review identifies processes that might be eliminated. What do the suppliers provide that benefits the customer? The drug and equipment companies provide products used in health care delivery. The insurance companies and state and federal governments provide money and information, which enable health care providers to deliver services to customers.

Where does this money come from? The insurance companies and governments have no money of their own. They get it from us. Everyone with private health insurance (and in many cases, their employers) pays the insurance companies. Every taxpayer funds the state and federal governments.

We're simply asking these suppliers to pool our money and more equally distribute the cost of our individual health care. The information these suppliers provide is part of their management processes, used to ensure the money is being spent as intended.

The question is how much are these two suppliers and their bureaucracies costing us for this service? Don't forget to include the cost of the corresponding bureaucracies the health care providers have created to deal with the insurance companies and state and federal government. Is the value added worth the cost?

Many companies providing health care coverage have answered this question by becoming self-insured. This doesn't eliminate the insurance company, but changes its role to that of paying the bills with the company's money as opposed to searching for ways to avoid paying for services and thus keeping the money. Based on my own experience, there is a lot of energy [money] spent correcting errors to pay charges that were initially denied. Such rework adds no value.

Government health-care programs are also prime candidates for processes that add no value to our health care. To contain costs, the government has created a situation where the providers shift costs they cannot recover through Medicare to customers covered by other plans, such as private insurance. So in an effort to save the taxpayer a dollar, we're shifting more than a dollar (don't forget transaction costs) to that group of taxpayers with private insurance. Many of us would argue that we are not getting our money's worth.

These are but two brief examples of where re-engineering could prove beneficial. Every part of the health care system has potential for improvement, including the customer. If we support the idea of employer mandates, then we should also support employee mandates. Everyone should be held at least partially accountable for the cost of their own health care, even if it is only 5 percent or 10 percent; otherwise, they have little incentive to improve the system.

Higher taxes and cuts in government services are a result of increased costs in government health care programs, but this cause and effect relationship isn't clear to everyone. The ideal of universal coverage can become reality, but we must accept the fact that, at the national level, we're self-insured. The nation's health care is primarily financed by those who pay taxes and those who pay health insurance premiums. This won't change. Before we increase coverage, shouldn't we take a hard look at what we're getting for our money?

Garry Coleman is a resident of Blacksburg and a Cunningham Fellow in Industrial and Systems Engineering at Virginia Tech.

by CNB