Talking Points: Gary Kaplan

Virginia Mason CEO Gary Kaplan borrowed from the auto industry to implement a system of constant improvement in order to boost the quality of health care while also cutting its costs. This implementation of continuous improvement, originally started at Toyota, got Kaplan an invitation to the White House to share his experiences with President Obamas health-care reform team.

On his early years: I learned the value of customer service working for my fathers hardware store. At age 14, I worked for a doctor and thats when I set my sights on becoming a primary care physician.

On high health-care costs: Our countrys health-care costs are dramatically higher for a given outcome than other industrial societies. The biggest driver of cost is waste, whether it is in administration, insurance or excessive regulation. There are hundreds of insurance plans, so that you end up with more billing clerks than hospital beds. We need a single claim form.

On standardizing health-care practices: If 10 surgeons do things 10 different ways and there is no value added in those variations, you have a defect-prone system. By getting surgeons doing gall bladder removal to agree on a common set of tools, for example, we removed several hundred dollars per procedure. There are tens of thousands of opportunities like that.

On quality care: Many people say if you reduce health-care cost, you reduce quality. Nothing could be further from the truth. Lowering cost by eliminating waste leads to better quality care. We [at Virginia Mason] are in the 10th percentile in terms of low cost and we are working to drive it lower. … When we reduce the cost of care as we did for back pain, the insurance company does better, the employer does better and the patient does better. In most cases, people can go back to work after a couple of days of physical therapy. We reduced the use of unnecessary MRIs.

On reforming how health care is paid for: We have a payment system that rewards quantity not quality. The biggest driver of inpatient admissions is hospital bed availability. The biggest driver of hysterectomies is the number of gynecological surgeons there are. This is not to say physicians arent ethical. We have misaligned incentives that dramatically raise the cost of care. We need to transition to bundle payments where the government would, for example, pay for one year of care for a person with diabetes. Today, if you dont admit them in the hospital, you dont get the money.

On the costs of health care reform: I believe there is more than enough money in the system today. Our experience is that the [hospital] industry can cut 30 percent to 50 percent. We’ve made 500 separate process improvements and every one of them unearths improvements on that scale. I’m very pleased that President Obama has put health care to the top of the list. It’s fundamental to our economy. It’s fundamental to our labor force.