Perspectives Blog

McKinsey’s 2019 Healthcare research report highlights how much “low hanging fruit” there is in the healthcare delivery system in the U.S. The report emphasizes why and how hospital operators should focus efforts on improving the team’s productivity rather than making large-scale financial investments in cutting-edge technologies or new operating models.

The economics of the U.S. healthcare system are complex. U.S. hospitals only earn 1-3% profit. When you compare them to the rest of the world, U.S. hospitals have considerable over-capacity in certain areas, especially total in-patient beds and imaging services. And of course, they require an army of billing experts and the information systems to authorize (and argue for, and appeal, and re-appeal) procedures.

As a quick excerpt, here are a few operational improvements which could bring considerable savings and better satisfaction from patients, caregivers, and hospital/system workers:

• Many healthcare providers and systems don’t currently fully utilize clinical staff or physicians. They should consider revisiting preference rules that limit the types of patients clinicians will see at certain times.
• Provider systems could encourage all clinical staff members to maximize the amount of time they spend on the highest-complexity activities commensurate with their training and experience. The report calls this working at the “top of an individual’s license.” Fieldwork analysis shows that 36% of activities performed by nurses could be done by other staff, freeing up nurses to do their best work instead of busy work.
• A costly challenge is coordinating patient care across facilities and system boundaries — Adding more automatic reminder systems should reduce the number of patients who fail to show up for appointments.
• Developing a standard set of reporting requirements and incentives offered through alternative payment models will help reduce costs.  As a first step, they could aggregate claims processing and adjudication and further automate their billing insurance and reporting (BIR) processes. McKinsey estimates that if payers were to collaborate to develop a clearinghouse for billing and insurance data (similar to the financial services industry), overall administrative spending could be reduced by up to 30%.
• Over the longer-term, provider systems should consider renovations and changing the idea that the hospital bed is the center of all care. They can rethink service distribution based on modern care pathways. For example, provider systems would benefit from delivering some patient services in the community or at home.

I'm just a little afraid the authors, and McKinsey in general, work on the financially and economic details, but that might gloss over the human dimensions of this equation. Individuals and teams that work in hospitals exhibit complex behaviors and some of the problems will require rethinking organizational dynamics and designing better.

The healthcare delivery system in the U.S. provides some of the best care available worldwide, though it’s pretty clear that the return on health spending is not always positive — the U.S. lags many developed countries in health outcomes, longevity, and quality of life achieved. Optimizing the operations and finding the right levers can be a boon for us all  

For all the details, here’s the McKinsey Report.

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