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BLOG POST: Fight inefficiency effectively

Sweden has a laudable health care system. Care is universally available, per capita spending tops the European table and overall public health indicators suggest the nation gets good results for its investment. All that said… costs are rising without a corresponding increase in activities.  In other words, the Swedish health care system, while overall pretty good, has an “efficiency” problem.

Efficiency is one of the most commonly used terms in global health care.  Whether your country is rich or poor, you are concerned about efficiency.  This is especially the case in ageing societies where demand is growing, making maintaining quality and access a significant challenge.

Sweden’s challenge will be especially acute. Since almost all costs are publicly funded you can’t hide rising costs or spread them across multiple payers (which is what is done in the United States.) Sweden has no choice but to address its efficiency challenge head on.

Lost in all the discussion on efficiency is the fact that it can be defined in multiple ways. The most commonly used definition is what I call “through-put efficiency”. This statistic measures the amount of output you get for any given level of input.  For example, how many knee replacement surgeries (units of care) do you get for 5 million SKR?  The goal is to maximize the number of units provided. This requires an industrial science approach where you apply Lean principles to ensure that each process is “efficient” and errors/complications are minimized.

While through-put efficiency is important, I would argue that there is a second measure of efficiency that is even more important in health care.  I call this second measure “quality of life efficiency” which goes deeper then units of service and looks at the manner and quality of care provided to patients.

The goal in quality of life efficiency is to keep people as healthy as possible and keep them out of the hospital and other high cost settings to the maximum degree possible. This measure is about quality of life because a more efficient system generates its efficiency by actually improving quality of life. Patients are healthier. They are receiving the right care, in the right place at the right time. When that happens consistently the overall health system is more efficient.

In New York we took on both forms of efficiency in our nearly decade long effort to improve outcomes and lower costs in our government-funded health care program, Medicaid. Back in 2011, New York’s $60 billion health and social care program which serves over 6 million people today suffered from both forms of inefficiency.  Spending per unit of service was high compared to other US states and in some cases had grown substantially in recent years.  Also, New York ranked last in the nation in keeping people out of the hospital that didn’t need to be there.  Both types of efficiency had to be addressed and addressed quickly because the government was facing its worst budget crisis in state history because of the Great Recession.

New York started with through-put efficiency and reformed policies and programs where perverse incentives rewarded cost growth and penalized efficiency.  One program in particular, in-home social care services for the elderly and disabled, had seen costs double over the previous five years while the number of people served didn’t change. The cause was a funding system that reimbursed providers for cost with no link to patient needs. This system was replaced with an acuity-based financing system which helped lower spending per person with no measurable reduction in quality or patient satisfaction.

New York also addressed quality of life efficiency by organizing providers into integrated systems of care and held those systems directly responsible for increasing this type of efficiency.  The government used positive payment incentives to reward systems that reduced avoidable hospital use and increased primary care utilization and other cost-effective forms of care.  Innovative strategies were introduced in the face of these incentives including buying air conditioners for patients with advanced lung disease and substituting crisis intervention teams for ambulances for patients having a mild to moderate psychiatric events. This comprehensive effort is on path to reduce avoidable hospital use – a key measure of quality of life efficiency – by 25% over five years.

New York has shown that you can effectively fight inefficiency in whatever form it takes without diminishing the quality of care provided. The problems solved and lessons learned from the New York experience are similar to those you are focused on in Sweden. It’s important not to focus entirely on through-put efficiency but rather to focus much of your effort on quality of life efficiency — which is really what matters most to patients.

Blog originally posted on healthpolicy.se

Jason Helgerson