In a Senate hearing Thursday, the head of Virginia Mason Health System called for more transparency in healthcare pricing and said if public healthcare programs change their payment systems, the private sector will follow.
Exec urges transparency in healthcare pricing
“I think Medicare and our state governments who have similar economic challenges have an opportunity to—in a substantive way—modify payment, and we will see the private sector move as well,” Dr. Gary Kaplan, chairman and CEO of the Seattle-based system, told members of the Senate Health, Education, Labor and Pensions Committee in a hearing about improving quality and lowering costs. “But I think there is an even bigger issue, and that has to do with transparency,” he added. “We don't have transparency in this country in healthcare. No other industry, as I see it, actually has the kind of veil or camouflage between the buyer and seller of services that healthcare has today.”
Kaplan talked about the “cultural transformation” at Virginia Mason, which developed a new strategic plan 10 years ago. Shortly after, the health system began examining the management methodologies of companies such as Boeing Co., which adapted the Toyota Production System and eventually shortened the lead time to make a 737 airplane to 10 days from 22. Virginia Mason similarly adapted this model to develop the Virginia Mason Production System, which has helped the health system save $11 million in planned capital investment by using space more efficiently; reduce inventory costs by $2 million through reductions in supply chain expenses; and reduce its professional liability insurance by 56% from 2004 to 2010.
“We know that to reach the full potential, these types of strategies require re-aligning payment so that reimbursement is determined by value, not volume,” Kaplan said. “We support approaches such as bundled payment, shared risk, capitated payment and other pay-for-value programs,” he said, adding that with the passage of the Patient Protection and Affordable Care Act, providers can turn their attention to a healthcare financing system that rewards quality, not quantity.
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