The Cheesecake Factory and Health Care Innovation
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It’s time to come back to health care improvement and the Cheesecake Factory. I thought very highly of Atul Gawande’s recent New Yorker story on lessons that can be learned from the Cheesecake Factory, but there are a few, including the Wall Street Journal editorial page, who aren’t as impressed.
Greg Scandlen at the National Center for Policy Analysis goes after Gawande for advocating for greater centralization of health care when that wasn’t in the New Yorker piece. He misses the point of the story. Regardless of whatever Gawande’s thoughts are on revamping America’s health care system, developing standards and more-effective procedures should play an important role in improving health care quality and reducing costs.
In the case of the Cheesecake Factory, it’s about analyzing all the components that go into a meal and making the process—from the purchase of ingredients to its preparation—as efficient as possible. With health care, Gawande’s example of knee replacements illustrates the possible cost and quality benefits from a close examination of medical procedures.
We’re seeing something along those same innovative lines with the rise of retail clinics. These facilities, often located inside grocery stores or pharmacies, have multiplied in number from about 300 in 2007 to 1,200 in 2010 according to Health Affairs. These clinics that offer simple preventative and acute care have become popular because, like the Cheesecake Factory, they’re customer-focused. The Health Affairs report states:
The rapid growth of retail clinics makes it clear that they are meeting patients’ needs. We believe that the chief drivers are convenience, after-hours accessibility, and cost-effectiveness.
Both Scandlen and fellow NCPA health care expert John Goodman are more concerned with third-party payments. Goodman imagines what the Cheesecake Factory would be like if it were run more like a hospital that derives its revenue from third-party payments:
To begin with, we can dispense with the intricate and costly systems that achieve near perfect timing and quality control. So what if the hot meal doesn’t arrive at the table when it’s hot. Or if the ice cream arrives after it’s melted. Or if the two side dishes don’t arrive at the same time as the entree. Customers may be unhappy. But remember, food is now free at the point of consumption. We have patrons lined up outside, waiting to get in. The quality of the dining experience can decline quite a lot and not hurt the restaurant’s bottom line one whit.
Yes, this is an important concern. A misaligned health care plan creates a situation where payments are made based upon the amount of care delivered and not the quality. This waste of resources means we end up paying more for health care while not ending up healthier.
At the micro level, I think there are important lessons to be learned from Gawande’s health care story, but the Wall Street Journal, Scandlen and Goodman are justified in their concerns for creating the proper environment with the right incentives to let customer-centric innovations take place.