Dr. Gary S. Kaplan: Determined Steps to Transformation

Gary S. Kaplan, M.D., has served in his current role as CEO of Virginia Mason Medical Center since 2000. Under his leadership, Virginia Mason has received significant national and international recognition, including being recognized as one of two hospitals in the United States to earn the title of Top Hospital of the Decade by the The Leapfrog Group rating organization. In addition, Virginia Mason is a national leader in deploying the Toyota Production System to health care. Dr. Kaplan is also a clinical professor at the University of Washington.

In 2007, Dr. Kaplan was designated a fellow in the American College of Physician Executives. In 2009 and 2010, he was named the 16th most influential U.S. physician leader in health care by Modern Healthcare magazine. In 2009, Dr. Kaplan received the John M. Eisenberg Award from the National Quality Forum and The Joint Commission for Individual Achievement at the national level for his outstanding work and commitment to patient safety and quality. Additionally, he was recognized by the Medical Group Management Association (MGMA) and the American College of Medical Practice Executives as the recipient of the Harry J. Harwick Lifetime Achievement Award recognizing outstanding national contributions to health care administration, delivery, and education while advancing the field of medical-practice management.

He currently serves on the boards of the Institute for Healthcare Improvement, the American Medical Group Association Foundation, Medical Group Management Association Services , the Washington Healthcare Forum, The Seattle Foundation, the Special Olympics, and the Greater Seattle Chamber of Commerce. He is current chair of the National Patient Safety Foundation Board.

Dr. Kaplan received his medical degree from the University of Michigan and is board-certified in internal medicine.

This Conversation took place on November 8, 2010, in Gary Kaplan’s office at Virginia Mason Medical Center. Participants included Gary Kaplan; Alisha Mark, Virginia Mason Medical Center media relations manager; Mark Neuenschwander (see bio with his essay in this issue); and Al Erisman.

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Ethix: You have responsibilities both as CEO and as a physician. How does it work to combine these roles?

Dr. Gary S. Kaplan: This is a tradition at Virginia Mason. I am the seventh CEO in our 90-year history, and all seven of us have been practicing clinicians. I am an internal medicine physician, and have been at Virginia Mason for 32 years, 11 as CEO.

I don’t spend nearly as much time in my internal medicine practice as I used to. My patients know that they have to identify with one of my colleagues, because there is a good chance I won’t be available when they are sick. I have offered them the opportunity to transfer and there are a few who have. So I enjoy seeing these fine people and their families who I have taken care for 25 to 28 years. It is a rewarding part of what I do and it is very grounding. It helps me to stay very connected as a leader.

Much of what we do as leaders in health care is sponsor change. Change is hard, as you know, and it is particularly hard for professionals in our industry. So being a practicing clinician helps. We just went through an electronic health-record upgrade enhancement last week, and I am able to say I know it is a little clunky and there is a learning curve. I am doing it just like everyone else. That is just an example, but it gives me credibility.

Big Issues for Health Care

What are the biggest health care issues facing America today?

Quality, safety, cost, coverage, and access.

Health care is close to a $3 trillion dollar industry that is over 17 percent of GDP. Many estimates are that somewhere between 30–50 percent of it represents waste.The health care delivery system today would never have been designed as it is. In many ways it is a non-system of care that is full of waste. I define waste by non-value-added work activity and variation that has no value. I am talking about the hospital, the clinic, the laboratory, health plans, the government bureaucracy around health care, the employer purchasing of health care, and the ways patients access health care. When you have waste, you have excessive costs. Health care is close to a $3 trillion dollar industry that is over 17 percent of GDP. Many estimates are that somewhere between 30 – 50 percent of it represents waste.

When you have too much waste, you have excessive cost and you have defect prone situations. You do lots of things that don’t need to be done, or you have processes that are done in 10 different ways instead of in one way. This sets up defects both from the upstream supplier of a process and the downstream recipient of the process. It sets up the opportunity for error, mistake, and defect. Quality is nowhere near as good as it should be in part because of lack of adherence to evidence-based medicine [Editor’s note: See this BMJ extract on evidence-based medicine.]. So yes, there is a lot wrong with our system.

We end up having a system that is almost twice as expensive as the next so-called Western country, which includes Western Europe, and our health status as a country is not even in the top 10 on most health statistics. For certain forms of cancer or where you need complicated treatment or a complicated interventional procedure, there is probably nowhere better than the U.S. health care system, assuming you are insured and have access to care.

Access is a huge problem in this country. The fact that we have close to 50 million Americans now with no insurance is embarrassing, a disaster for our economy, a huge problem.

The payment system is designed in a way that the more we do, the more we make, which just drives up cost. I have talked about the cost problem. The Medicare Trust Fund is not sustainable at the current cost and spending trajectory. Medicaid is going broke as we speak, with state and federal budgets in a mess. Employers, large and small, are increasingly noncompetitive in the global economy, in part, because of the health care expenditures of their companies to cover their workforce. The payment system is designed in a way that the more we do the more we make, which just drives up cost.

We have a system that needs to be reformed, and is on the way to being reformed, assuming that the good things in reform are allowed to continue to develop over the next several years.

The reform falls into three buckets: insurance reform, payment reform, and delivery-system reform.

For insurance reform, you can’t exclude people for preexisting conditions and kids stay on their family policy until they are 26. That is all going to improve access. Small businesses can purchase through exchanges, which pools purchasing power. All of this is critical if we are going to have any kind of a market-driven system in the future. That is why the current rhetoric from the Republican Party makes no sense to me. The ideas in this law were first introduced by Bob Dole in 1996 and are all about preserving a transparent, market-driven, competitive system. If that fails or if it is blocked through the courts, we will likely have a single-payer Canadian style system within five to 10 years in my opinion.

We need to redesign payment so that instead of paying for volume we are paying for value like any other industry. In other industries you have interviewed, companies compete based on the value of the products and services they deliver. Whether it is a hotel or a flat screen TV or an automobile, you compete based on product quality, safety, and price. There is no transparency in health care, no market, and no competition based on value. So we need to move from paying for volume to paying for value. There is lots of opportunity here, and we have been doing some work on this.

Delivery-system reform is about organizing the processes of care to be much more integrated. Electronic health records are part of the solution here. “One team” at Virginia Mason has been part of our culture since 1920. Group Health has some aspects of this as well.

We have almost 500 doctors now who are employees of the health system. We have one chart, one electronic health record, one integrated team. We don’t create incentives where people are trying to further their own personal economics at the expense of somebody else’s personal economics. We focus on the patient.

However, addressing the waste issue, we are the furthest along of anybody in the world in applying the Toyota Production Management System to health care. Obviously, there are many differences between a manufacturing business and a hospital, so we need to look at each idea that Toyota has implemented, and bring it into the health care setting in an appropriate way. We have been at it for almost 10 years. A book by Charlie Kenney, Transforming Health Care: Virginia Mason’s Medical Center’s Pursuit of the Perfect Patient Experience (see review in this issue), describes in detail what we are doing. Now people are coming from around the country and around the world to study and learn from us through our institute.

Learning From Toyota

How did you get the idea that a hospital could learn from Toyota?

We first heard about what Toyota was doing from Boeing. When I became CEO in the year 2000, we were coming off some challenging economic times. We, the board, and our public community leaders said we needed a new strategic planning process. We now have a strategic plan that is still operational 10 years later, and it has deeply penetrated the entire organization.

When we were developing it, the first thing the board asked us was, “Who is your customer?” Like everybody in health care, we said it was the patient. The board said, “Wait a minute. If it is really the patient, why do things look the way they do?” When we did a deep dive on our processes we realized the systems were really designed around the doctors, the nurses, and the managers.

Think of the waiting room. It is a very expensive space that is built into our design and into our flow so that patients can hurry up and be on time and then wait for us. There are chairs and magazines there, and waiting is part of accessing health care, you just expect it. What happens on weekends in hospitals. Not a lot. That is like designing things around us, not around the patients.

As part of this plan, we got really clear about the patient as customer. It sounds like a no brainer, but we are challenged today, everyday, about what it means that the patient is at the center. We started looking around the country. I went to the Mayo Clinic, Massachusetts General, to Michigan where I went to medical school, Johns Hopkins University Hospital, and Stanford. Nobody in health care had any kind of management system. It was just little of this and little of that.

Then we looked outside our industry to Boeing and came to appreciate what they had been doing for seven years. They put in place the moving line, using lean manufacturing principles, taking the time for 737 production from 20 some days to 11 days. We started work with John Black, who ran some of this work at Boeing. We did a few workshops and then decided if we were really going to be serious about this we needed to take the team to Japan. So in June of 2002, we said, “If you want to be a senior executive at Virginia Mason, you have to come with us to Japan.”

The Seattle Times ran an article the week before we went, and one of our staff members was quoted as saying he thought we had lost our mind doing this. Many had that view at that time. The article ran on the front page and described physicians leaving and other things that were supposedly going on here, concluding that we were on the wrong track.

We went to Japan for two weeks, all the department chairs, myself, all of the vice presidents, 32 of us. We worked on the factory floor at Hitachi Air Conditioning, building air conditioners and using the tools we had been studying and learning. We spent time at Toyota, and a lot of time with our team in deep conversation, digesting what we had learned, and we came home transformed. We came home and said this is our management system.

You will find hospitals all over the country today that are saying, “We do lean.” I still use that word occasionally, but I hate it. You have to go beyond one piece of the solution. We set the Virginia Mason Production System as our management system. It is how we are going to run the whole place.

The internal objections were strong and widespread. The first people in here were finance, saying, “We are finance, we don’t do that.” Wrong. Then it was IT. “We program computers and do web design. That’s not for us.” The critical care team said, “It is fine for primary care, but we take in really sick people, so this doesn’t apply to us.” But we stayed with it, taking front-line staff, physicians, leaders, managers, to work in the factories at Hitachi and Mitsubishi, learning how others do this. We have our own curriculum here and we teach through our institute now, which we formed two years ago. So the last eight years has been about deep deployment of the Virginia Mason Production System, which became our management mantra. The results speak for themselves.

I jokingly say that my career preservation strategy is to always take my board members to Japan. But it is really about alignment, being clear where we are going. During your first term as a board member, you have to accompany the VM team to Japan.

Patient Impact

Can you give me a couple of examples of how a patient would see a difference in the hospital since you have done this?

Sure. Health care is a difficult area of work in the minds of lot of people. At least till the recent market crash, it saddened me that many physicians were retiring in their 50s. The average age of inpatient nurses is about 48.

As we studied the value stream in the hospital, we saw that our nurses were spending somewhere between 35– 40 percent of their time at the bedside, which means they were spending 60– 65 percent of their time looking for things, attending meetings, and going up and down the halls. The nurses formed a Rapid Process Improvement Workshop, one of more than 600 that we have done. These are four-and-a-half-day events where the team closest to the work redesigns the work and then implements within the next few days. If it is not perfect, which is usually the case, then you do it again and again focusing on continuous improvement.

We actually measure time with patients in order to expand the time with the patient.They redesigned the work by changing geographic location of things and by changing their routes, how teams were assigned, lot of things. As a result, they are spending 90 percent of their time at the bedside. The patient will see that.

We also created the call-light metric. We tell the patient, “If you need anything just push the call-light.” But we would hear over and over again, when they pushed it, nobody came. They pushed it again, and nobody came. Finally a husband had to pull the IV out of wall to get the thing to stop beeping. By redesigning work flow, the call-light waiting went down to zero because the nurses and the patient care technician now basically work right outside the patient’s room or in the room. They do their handoffs in the room.

Are you using bar coding to assure the right medication for the right patient at the bedside?

We are putting in medication management on the inpatient side through bar-coding, we are converting right now. We look at bar-coding as a way to mistake-proof processes. But if you just put bar codes in without redesigning your workflow, it may or may not get you what you want. The same thing is true with electronic health records. We needed to redesign our work flow in order to automate, and to get defects down to zero or really close to zero.

Don’t you have a cancer-care initiative as well?

The cancer institute was the first facility where we used 3P (production, preparation, process), and the design was profiled on the front page of The Washington Post in 2005. Basically they told the story through the eyes of a patient named Ted Gachowski, who allowed us to use his name and talk about it publicly. He used to come in for a day or longer and had to walk about a mile to give his blood, to get his chemo, to get radiation, and to visit his doctor’s office. We redesigned the cancer institute with him in mind.

Now all services are brought to the patient. Basically, the patient comes in to one location and the services come to him. Walking distance is reduced, defects are reduced, the patient experience is tremendously enhanced. All of the patient rooms are around the periphery with the windows. You know initially some of the doctors complained, “You are giving me an office on the inside without a window?” We did. It is about the patients. The patients are here for six hours of chemotherapy and they are going to be in a room with a window.

Examples are there throughout the medical center facilities we have designed using these methods: the sports medicine clinic, our pediatrics clinic, and our Kirkland clinic. In the Kirkland clinic, we have no waiting rooms. Remember, waiting rooms represent waste. We want to serve the patient and allow that to be a good experience.

Cost vs. Quality

One hospital system I looked at several years ago measured everything with the goal of reducing costs. So the doctor had to see many more patients per day, always reducing the time spent with each patient, in the name of efficiency.

We actually measure time with patients in order to expand the time with the patient. It is all about taking the day of visit from the time that the patient enters the door of the building to the time the patient leaves, reducing it and maintaining or expanding the actual face time with the doctor. This is not about going faster, it is about increasing value-added time and eliminating non-value added time. Basically you eliminate all the things doctors do that have no value, and you create more time with the patients, more time for academic pursuits, teaching, research, and more time with family.

What happens when you have these great ideas, but they get misinterpreted by people down below so that they go off in a strange direction? How do you find those things?

I find them very frustrating.

But, do they happen here?

Of course, they happen. We have 5,000 people, and when you have 5,000 people you get a lot of variation. I think the biggest challenge in so called “lean conversion” is the time it takes to get it done. They say it takes 20 years to transform a company, to transform a culture. My goal is to not take 20. We have already been at it for a while, building on the good things in the culture, but we do not hesitate to lead the kind of changes that are necessary in the culture. We know that in middle management, there is a tremendous amount of variation. So we look for it, we measure it, and correlate with leadership. We do this so we can give our managers, the frontline work unit managers, the tools they need to be effective leaders.

At the end of the day it is about accountability, alignment, and execution. You can’t communicate enough. Repetition is a big part of executive work on the “genba,” meaning shop floor. We, including myself, have to be out, we talk to staff, we talk to managers, we deploy throughout the institution, not just our own departments. We have town halls, staff forums, our Intranet, we have a whole internal communication strategy. At the end of the day it is about accountability, alignment, and execution.

Those are things that have been nonexistent in health care. We didn’t go to medical school to be part of an organization.

Is this changing in medical schools?

Not nearly enough. It is part of our residents’ training and our residents say it is an attraction for our residency programs. We are looking for residents from around the country to come here because they know they are going to get prepared, not just clinically but also in health care systems and in the Virginia Major Production System. We have lots of testimonials from our residents over the last couple of years who have said they are much better prepared than other recent graduates because of what we were doing. It takes a team attitude to do this.

About 15 years ago the advertising agency we were working with at that time was helping us with messaging and developing a tagline. They interviewed our leaders, our doctors, and staff. They came back to us and said, “What is fundamental to you is ‘team.’ It is in your DNA.” So, it isn’t just a tag line, but it is who we are.

It used to be just a team of doctors that could come together quickly. Then it was doctors and nurses. Now the team is doctors, nurses, social workers, physical therapists, pharmacists, managers, patients, family members. That’s how we think about it today.

Checklists and Hospitalists

I would like to ask you about checklists. I read Atul Gawande’s book The Checklist Manifesto (see book review) and loved it. How does this concept fit in your system?

We have had checklists for a long time, even before the World Health Organization (WHO) and Atul Gawande did their work. Checklists are part of what the Virginia Mason Production System is about, mistake-proofing processes so you don’t forget things. It is about trying to create a higher-reliability organization. We have brought in safety engineers from Boeing to show us how pilots achieve their safety results. We are doing something now called STPRA — socio-technical probability risk assessment. Basically it is a technique that has been used for things like the Australian Railroad, trying to understand where the next significant event is of going to happen, and how to anticipate it, and do failure avoidance. So checklists are just part of all of that and part of our culture change.

We have a strong peer culture today. When a new doctor comes in, this culture says to the doctor, “You don’t work here if you don’t use this approach.” We have created a system where that accountability is much more prominent. We have what is called the PSA system, our patient safety alert system, which is one of the first things we did when we came back from Toyota in 2002. Toyota had developed the culture and practice where any person working on the line could stop the line if they saw a problem. And this is how we adapted their “stop the line” process. It is basically creating a culture where anyone can report even near misses or anything that we are worried about. The executives are willing to respond 24 hours a day, seven days a week. We want to reinforce and build on the culture. We have had 15,000–16,000 PSAs reported annually.

Our anesthesiologists just got back from a conference last month where they were taking the checklist concept of surgery to another level. How do you not just run through the checklist, but foster teamwork in the group?

I think Gawande suggested in his book that while getting the checklist right is important, the most important thing that comes from using such lists is the teamwork that is fostered.

Do you have hospitalists here at Virginia Mason?

Yes, we do. Some of them have been around 10 years. It is an important part of how we take care of patients in the hospital. I think it adds a lot of value. Having attending level full-time 24/7 doctor presence in the hospital is a good thing. Hospital medicine is a much more complicated skill set than it used to be. The complexities of hospital care are much greater. The technology and the variety of other things add to this. It is important to have people who are full time in the hospital as opposed to someone who is a great hospital doctor, making rounds and taking care of people, but going in and out.

In addition, they provide a lot of our teaching for our internal medicine residency program, which is a very large, robust, dynamic training program. The challenge is certainly continuity. Some patients expect to see their doctor in the old way on rounds, and what we work hard on is the handoffs and the communication, both while the patient is in the hospital, but also when the patient is discharged back into the ambulatory care setting.

Technology Disruption

You’ve talked about building a system that really makes the whole, all of the pieces come together.


But technology has a role of disrupting systems. You bring in a new technology and it calls for a new system to accommodate it. How do you deal with the change that comes from technology?

I think technology is both good and bad. Technology needs to add value. There are a lot of new technologies that are way out ahead of our ability in the profession to know how to use it properly, to know how to use it cost effectively, to understand what the evidence is, and whether it adds value. So, we are very focused on ensuring that we are evidence-based, evidence-driven, and we embrace technology.

We are one of the most wired places around. We were the first, and still the only adult hospital in this region, I believe, to have computerized provider order entry (CPOE). We have had it now for almost six years, and it is a big part of our system, adding value. The DaVinci robot we have had for 11 years. But since it is a disruptive innovation, we have needed to redesign work flows in order to use it effectively. Bar coding is a relatively new technology for health care, though it has been in grocery stores for decades. We have the Benaroya Research Institute across the street that’s part of the Virginia Mason Health System that is on the cutting edge of new immunologic biomarkers, and things of this sort.

When we embrace new technology, it is still with our eyes open, with plans for work flow, and understanding to how to map out the work flow and how the technology can provide an advantage for us. If it doesn’t, we may choose to be “fast followers”; you do not have to be on the bleeding edge. There is a great example of that in the proton-beam machines costing $250 million. It adds value in a rare kind of pediatric brain tumor, but that is all that has been shown so far. M.D. Anderson has one, Massachusetts General has one, and the Loma Linda has one. But it is $250 million for very little demonstrated added value. So we have decided to wait.

What about the area of automated diagnosis? We have been hearing this now since about 1980 or so.

We believe in clinical decision support, which can be very helpful. But at the end of the day those algorithms can take you only so far. We are a ways away from fully providing automated diagnosis. There is only evidence for about a third of what we do and that it is only delivered 55 percent of time.

We can go focus on all those great new technologies, or we can focus on doing what we know how to do and doing it well for our patients in a highly reliable fashion. That is where I am. We actively embrace technology here, but it must add value.

Moral Issues in Health Care

What are the big moral and ethical issues associated with health care from your perspective?

I will put the issues in three buckets. One is certainly end-of-life care. Every patient and their family should understand their choices when they are faced with terminal disease or end-of-life care. There are some physicians who are very unskilled and reluctant, and they pull out every stop, but that is not always the best solution. We spend a lot of money on end-of-life care. I am not advocating reducing care for those beyond a certain age, but we must be wise in thinking through that care.

What I do support — and it was in the health care reform law but got labeled “death panels” — is the obligation to talk with our patients about alternatives. I am making this up, but suppose you could provide fourth-line chemotherapy now and have a 5-7 percent chance of responding, which could give you three additional months. An alternative would be to focus on comfort and quality of life for the amount of time left for the patient. These kinds of choices are important ethical dilemmas that must involve patients and their loved ones.

Another different type of dilemma is how we can be wise toward utilization of precious community resources. How do we get patients quickly to the right venue, the right doctors, right care teams, for the right conditions, at the right time? How do we reduce unnecessary hospitalizations and how do we reduce unnecessary emergency department visits because it is very expensive care?

The patients should be seen by their primary-care team and not in the emergency rooms. One of our competitors is building four big free-standing emergency departments, within two or three miles of existing hospital-based emergency departments that are providing great care to the community. It is a cost-escalating strategy that is designed to compete for patients — a medical arms race when it comes to emergency departments.

The problem is, they are building monstrosities to take care of patients the old way, in the emergency room. I am not in favor of centralized big government running everything, but I am in favor of some sort of community-resource stewardship and planning that will help us lower costs, not drive them up. This is an important second issue.

And there are a variety of other issues.

You had also mentioned the access issue earlier.

We need to cover every American. It is embarrassment to me, when I go to other countries, to be identified with this disparity of care.Yes, the access issue where the system disenfranchises the poor. I am worried. I am not a communist or socialist by any means. I am a free-market guy. I want a market where we can compete because we compete very favorably. But we have the income disparities where the rich are so much richer and the poor so much poorer, relatively. The gap is so huge in this country and it is getting wider. Because of rising insurance costs, this leads to lack of access for the poorer part of the population. Now we have people who say there is no access problem. Anyone can go to emergency room. Yes, they can show up in the ninth month of pregnancy, feeling labor in the emergency room for the first visit. Or they can get prenatal care and deliver a healthy baby.

We need to cover every American. It is embarrassment to me, when I go to other countries, to be identified with this disparity of care.

But that is our strategy by default, to care for the uninsured in the emergency room.

But as I have pointed out many times in this discussion, there is no prenatal care, no chemotherapy, and no general preventive care there, so we are not really providing health care.

That’s right. Unfortunately, the emergency rooms that our competitor’s building are all designed specifically to be in highly insured commercial insurance neighborhoods. That is the strategy, which is very different from our strategy. Our strategy, partnering with good colleagues, is to focus on value. You can see how we are doing in this Leapfrog data. Leapfrog represents the large employers in the United States: Boeing, General Motors, General Electric, Motorola. They measure both quality of care and stewardship of resources on this chart. These are all the hospitals in the U.S. who have submitted data. We are probably the top Leapfrog hospital in terms of quality and cost in the United States [subsequently confirmed when Virginia Mason was awarded, along with University of Maryland Medical Center, Baltimore as the top hospitals of the decade, see News Notables.

We are very pleased with the results and will market this. But today, those making the choice of service don’t necessarily care that they get better value one place or another. The fact that it costs a lot more money to get the same hip replacement over there, than over here is not transparent to people paying the bills, patients, employers, or even the government.

The patient may really become relevant here because more and more employers are saying you are going to have a 30 percent co-pay, or you are going to go to these cost-effective narrow network hospitals if you opt for a 100 percent coverage. That is what we would like to see, a market where value actually drives business. Leapfrog has bite, but not as much historically as they are going to have.

Results from this Work

Your good performance data on the Leapfrog measures comes out of the Toyota production systems work you have been doing?

That is a big part of it, but not the only part. The Virginia Mason Production System is about designing great systems, but it is about surrounding great people with great systems.

One of the early concerns with standardized work in a great system is that you would just commoditize people. Could you plug in any doctor and get the same result? That is not even close to true. It is about having the best doctors, but surrounding them with the best systems. Similarly, you want to get great nurses and others, and surround them with the best system so that they can do their best work. It is not a conspiracy against their ability to do their best work. One of the reasons morale in the health care industry is so poor is that professionals perceive their skill is not valued. On the other side, putting very highly trained, very passionate, very committed people into a poor system and asking them to perform, simply doesn’t work either. So you need both the system and the highly talented people working in that system.

It is important that people understand that this is about creating time for their creativity and innovation through standardized work. When I first stood up in front of physicians in 2002 and talked about standard work, people asked, “What are you talking about? Do you mean standardized mediocrity?” Well in 2008, we had a professional staff meeting on the topic of standard work, and the conclusion from the doctors in the trenches was we need much more standard work. They realized waste you can take out of the processes through standard work, and it gives them the ability to use their skills much more effectively.

Malpractice insurance is another factor in the cost equation for health care. What do you believe should happen in this area?

I am very much in favorite of tort reform. I think a cap on noneconomic damages would be a good thing. But in study after study after study, those who pose it as the reason that health care costs too much, have been proven wrong. It only accounts for potentially 5 percent of the waste in health care. Defensive medicine is not the cost major factor. So, I want tort reform, but I do not suggest it is in any way a root cause of the problem. It is a small factor.

But even without tort reform, our professional liability costs have gone down something like 60 percent over the last five years because of our work. It is because of our safety records, because of our policies on apology and disclosure. These things came out following the death of Mary McClinton, who you may remember died of a preventable error here in November of 2004. We went public immediately with what happened and we were fried in the papers, both here and internationally. But we were already three years in this work and to go faster, you must be more focused, you must be relentless.

We have been named multiple times the safest hospital in Washington state. We are self insured up to a particular dollar figure. The professional liability carriers and our self-insured retention fund has to approve the amount of reserves we must carry for this liability. This number has dropped millions of dollars since our safety record has improved.

Could you say a bit more about your policy on apology?

Sure, we believe prompt and effective communication with our patients, and as appropriate their family members, is so important. We have a policy about communicating unanticipated outcomes that guides our physicians and staff, and we don’t just let it sit on the shelf. We do regular trainings with clinicians and work with a nationally known expert to help guide our efforts. We’ve also focused several grand rounds on this topic and believe it’s important to continue revisiting the topic to ensure our physicians are comfortable with our open, transparent approach to communicating with patients.

Health Care Worldwide

T.R. Reid, in his book The Healing of America, talks about the system in another way. He says you know when you look at the financial picture from the point of view of a doctor in Germany, for example, a doctor gets paid less but he doesn’t have the bill from medical education (medical education is free there) and doesn’t have the costs of malpractice insurance, and the whole system works out OK. But how do you transition from one system to another?

I thought it was a fascinating book, and there are lots of opportunities and lessons from other countries. But we have what we have here. We are on an evolutionary pathway from the current U.S. health care system, to something hopefully better. I believe the best days of medicine could be ahead of us in terms of waste-free processes, much better care, and a high-reliability organizational approach.

That system is more highly reliable, has a lot less waste, and it is going to be much more attractive for drawing the best and brightest people into health care. Frankly, we have been down for awhile compared to the financial services industry where you make big bucks. That said, it is important to know more about what other countries are doing. One thing that is clear is that, nobody is going to want to pay us more.

One of the things you are seeing these days is that a lot of private-practice doctors are running for cover. They want to be employed, and they want to negotiate fixed salaries for a period of time to try to help them with the transition. Cardiologists are going to make a lot less money than they used to because they are not doing as many procedures and surgery as they used to. You can use catheter based methods or eventually statins like Lipitor and Zocor. We are going to significantly reduce atherosclerotic disease, so physicians are going to have to get used to different income levels. But I don’t think it is going to happen rapidly. This puts organizations in a bit of a bind because reimbursements can go down faster than a lagging compensation marketplace.

Cost Drivers

Did you read Atul Gawande’s “Cost Conundrum” in The New York Times? He talks about the profit motive having an impact on health care.

Absolutely. It is sad but true. I am proud of the profession. I am proud of American medicine. I am a product of it. But we need to change its incentive structures so that we are not incentivized to do more. Some of my medical association colleagues would disagree, but physician ownership should be outlawed. I should not be able to own my own imaging company or my own ambulatory surgery center or my own hospital. In Gawande’s article, when he went down to McAllen, Texas, what was the single biggest factor in their high costs? It was that the physicians owned their practices, and the more they did the more money they made. Now, we need to have incentives to work hard, but deriving personal profit from facility cost, imaging cost, and other technical components of our fee structure in the industry is outrageous. I admit I am outspoken about this.

But these things are not going to be outlawed.

In part they are. Physician ownership of hospitals after December 2010 has been eliminated, and so there are a number of groups trying to get in under the wire.

Here is the problem. I may be looking at your knee to decide how to fix it, and I know your last MRI was a couple of years ago. It is easy to say, “Let’s get another MRI just to see where we are. We can set that up down the hall here, and we will do it later on this afternoon since we have an opening. And by the way, I have looked at your MRI, it shows a little bit of deterioration. I can take that cartilage out a week from Tuesday down this hallway.” In a for profit clinic, the person who makes the decisions to send the patient down each of those two hallways gets all the profit. By contrast, here it is governed by the board and the public since we are owned by the community.

I think most decisions by physicians are highly ethical, most want to do the right thing, but so much of our decision making is about shades of gray.

Measuring Outcomes

We talked briefly about health care outcomes in the U.S. not being as great as the level of expenditure for health care might suggest.

Some are, some aren’t.

The public health metrics are nowhere near where they should be relative to other countries. When you get into the highly technical specialized stuff, we are pretty good at it. But we have also very high false-positive rates. Diagnostic imaging is a huge, huge opportunity for cost reduction.

Preventive care is vital as well. We did some work with Starbucks that made the front page of the Wall Street Journal in 2007, as an example. Howard Schultz, their CEO, is a forward-thinking guy. Every barista is entitled to health care. That’s a big way to retain staff. He is very concerned about their health care, though he is also concerned about expenditures. So we put together a marketplace collaborative with Starbucks and Aetna, who was their carrier at that time. We looked at the value stream for low back pain. It turns out that the top cost item for baristas is back pain, because they are bending, twisting, and turning in their work. It turned out that 50 percent or so of the patients with back pain for more than 10 days were getting MRIs. We found that 6 percent of the people needed an MRI.

The traditional way of taking care of patients with back pain was to have them in a queue for a variety of things including seeing their neurologist, orthopedist, or whoever they go to for back pain. The primary care doctors were woefully under skilled in assessment here, and this led to waste. So we eliminated all the unnecessary MRIs, we mistake-proofed all of the tools, and today baristas are seen the same day they call in with back pain, in our spine clinic. Fully 90 percent of them are back to work in 48 hours or less, 78 percent or so don’t get even a prescription. They are immediately triaged to physical therapy.

The old way, most get an MRI and everybody gets this and everybody gets that and it is just a waste. If you go to the emergency room with a migraine headache, you will get a CAT scan, just about anywhere. Millions of dollars are spent on unnecessary CAT scans, unnecessary MRIs. There are certain questions that tell you whether you have got a serious neurologic problem.

But all of that can be changed by studying the value stream, by understanding the evidence, by creating systems of care. So when I talked about quality, I talked about errors, defects, public health metrics, application of evidence-based medicine. Overuse, underuse and misuse are all defects in our system of care. Not every woman who should get a mammogram gets one. Not every patient that should have a colonoscopy gets one. Not everybody who should have a flu shot gets one. These steps of prevention are good for health and good for costs. So there is a lot of opportunity.

The New Health Care Laws

Tell me your view on the health care legislation. This was a controversial bill and caused a lot of concern in our election.

There was a lot of rhetoric during the last election. There is a danger to over-interpret the mandate as the voters voting against health care reform, because it turns out that almost every poll was split 50-50 regarding the health care legislation. People who are in favor want to expand it.

But there are people in Congress who say it is a mandate against health care reform and are going to try to repeal it because the American people have spoken. All of that stuff is wrong. The law is complicated. I think there are some things that aren’t perfect in it, and there are some things that don’t go nearly far enough, but it is a very good start. I believe that the insurance reform is going to make insurance more affordable. There is a path to accessing coverage for the uninsured. An important thing in the bill was the $10 billion over 10 years committed to the Center for Medicare and Medicaid innovation, which is about pilot studies showing what is possible: bundled payments, new ways of paying for value, testing these across the country. We will be one of the pilot sites.

It is a market-driven system. It is predicated on transparency, telling the truth about quality and costs. Is this government takeover of health care? That is not even close.

Why, in the political rhetoric, has this not been treated as a moral issue as opposed to an individual issue or cost issue.

I think it is the mood of the public. I think the Democrats were timid. Instead of coming out and trying to explain it in a very coherent way, the Democrats tried to distance themselves from it. Whoever ran the communications strategy did a poor job. The mood of the American public is that we are overtaxed, and none of the candidates attempted to refute that. The marginal tax rate at the top levels of income under President Reagan was 50 percent.

This is the first piece of major social legislation ever passed in this country with not a single vote of the minority party, not a single vote. So whether it is social security or the CCC or the WPA or Medicare, or the Civil Rights Laws, not all the Democrats voted one way or all the Republicans voted one way. The leadership from both parties are responsible for this.

Personal Motivation

What motivates you personally? You are obviously passionate about your work, and you have given your life to it.

The best days of medicine could be ahead of us in terms of waste-free processes, much better care, and a high-reliability organizational approach. I want to make a difference. I love this organization. We are so well positioned: size, philosophy, culture, strategic plan, management system. I think we have a chance to really make a huge difference and demonstrate what is possible for policy makers, for community leaders, for businesses, and most importantly for our patients and for patients beyond Virginia Mason. So what gets me up in the morning, the reason I stay here and do not take other job offers, is because we are on the cusp of transforming health care and/or showing what is possible. That is a noble pursuit. There are some other things that motivate me as well. I like Seattle. I have a grandchild with another one coming, and I want them to have a better health-care system. We are in a good position to help, and that is what gets me up in the morning.

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