No guarantees...except death and the business cycle

September 14, 2009
By: Tim Heston

The cover of Newsweek could be journalism school fodder for ways to stand out on the newsstand: "The Case for Killing Granny." That headline tugs at the soul, drilling down to the heart of the health care debate. The lion's share of health care costs in this country occurs during the final months and years of life, as doctors work valiantly to prevent our inevitable demise."

I have to be honest. Seeing the headline at a newsstand this morning made me take another direction with this blog. My first thought was to describe how the health care industry could learn a thing or two from lean and other improvement methodologies rooted in manufacturing. Doctors are paid by procedure, not results. The more tests they do, the more money they make. In manufacturing, it's the opposite. Fabricators strive to simplify. Simplifying parts, producing on demand, and making life easier for customers likely will garner more work in the long run ... right?

The shop I visited today proved the story isn't that simple, for health care and metal fabrication. This shop, which we'll profile in an upcoming print edition of The FABRICATOR, ran three shifts last year, and its owner took pride in the shop's 98-percent-plus on-time delivery rate. Since November, business has dropped by between 30 and 40 percent. The company maintains its on-time delivery rates, and the shop floor—complete with an enterprise resource planning (ERP) system that shows exactly where jobs are on the floor—is as efficient as ever. But business is still tough.

Although the fabricator laid off workers earlier this year, it's hiring again, but not machine technicians. Instead, the owner is expanding his sales force, following up leads, knocking on doors, and formalizing a sales process to drum up new business. Efficient manufacturing alone doesn't make money without sufficient orders; and like in any industry, salespeople drive those orders. Word of mouth only goes so far in this economy. We're likely on an economic upswing, but we're not out of the woods yet.

Juxtapose this with the health care debate, top of mind for many small business owners. The thinking goes that if we take needless or duplicative tests, put in place long-overdue tort reform so doctors stop practicing defensive medicine, and reform the insurance system, in the long run we'll do more with less. Thinking "lean," health care providers should eliminate waste by digitizing health records, encouraging doctor collaboration, and so on. But these solutions don't tackle the real conundrum: New, expensive treatments allow doctors to keep people alive longer.

"Until Americans learn to contemplate death as more than a scientific challenge to be overcome, our health-care system will remain unfixable," according to the current Newsweek cover story.

That makes sense. It's rational. Thing is, when it comes to health care, I haven't always been rational. Instead, my family and I have clung to far-flung possibilities—and it's worked. Just ask my Mom, whose small-oat-cell carcinoma, packed tightly into the size of an orange, sat stubbornly in the upper right quadrant of her lung. The doctor told me and Dad, in so many words, that things didn't look good. But because of chemotherapy and some amazingly expensive anti-nausea medication, my mother's still with us today. She's a statistical anomaly and we thank God every day for it.

Legislators in Washington will find it hard to predict expenses like this. And business owners will find it difficult to plan for the kind of downturn we just experienced. One solace is that, like life, recessions end eventually, and the business I visited today is proof that smart companies have a good chance of emerging from this downturn stronger than ever. More orders are coming in the door, and the company is building up a broad customer base.

Still, life has few guarantees, except death and the business cycle. These days, with economic and health care debates center stage, we're coming to terms with both.

Tim Heston

Tim Heston

Senior Editor
FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-381-1314