Where is the Leadership in Controlling Healthcare Costs? Utah!

Posted by on Sep 25, 2015

vivienlee

Key Lesson:  Sometimes leadership requires asking simple — yet radical — questions to which there may be no easy answers.

It’s been a tough week for anyone trying to understand the economics of healthcare in America. Martin Shkreli, a hedge fund manager turned pharma entrepreneur, bought the rights to the critical drug Daraprim, and then promptly raised the cost from $18 to $750 per pill. That seemingly unreasonable price hike upset a lot of people, but also offered a rare glimpse into the irrationality of drug prices — and the irrationality of healthcare prices in general.

According to Arthur Caplan, a medical ethicist at New York University, Mr. Shkreli is just the latest example of the tough-to-crack code behind the cost of healthcare, telling the Washington Post:  “The whole healthcare system is not transparent. It’s not even close. It’s the most obtuse, dense, incomprehensible pricing structure ever created by humanity.”

Enter Dr. Vivien Lee, CEO of University of Utah Health Care, who serves as the anti-Shkreli in the current debate over health care costs. Several years ago, Dr. Lee sought to answer a very simple question:  What do the goods and services that her hospital provides actually cost? A key mechanism for finding the answer is a powerful computer program that collects and analyzes vast amounts of data. Thanks to that program, the hospital now knows, for example, the cost per minute for a patient in the emergency room or the operating room. Doctors are also able to see their costs per day when ordering things like lab tests — and how those costs add up over time. Using that information, the hospital has been able to reduce expenses, refine practices, and deliver more effective care. In a recent New York Times article, economist and Harvard Business School professor, Michael Porter, described the Utah system’s accomplishments as “epic progress.” The intractable problem is now fixable, according to Porter. “I have no doubt we can solve it. We know exactly what we have to do,” he says.

Dr. Vivien Lee is our Grounded Leader of the Week for asking the right questions, and for introducing some much-needed rationality to the discussion of health care costs in America.