Charlie Munger is vice president of Berkshire Hathaway and Warren Buffet’s right-hand man. His wisdom and insight are built on years of observation of the marketplace, looking for good business organizations that are undervalued and investing in them. In a speech to the business school at USC on the subject of picking good investments, he makes some observations that fit hand-in-glove with the events we are seeing in healthcare today.
Observation #1: Big is good
“Doing something complicated in more and more volume enables human beings who are trying to improve and are motivated by the incentives of capitalism, to do it more and more efficiently”
His example of “big is good” is Wal-Mart. The same observation can apply to our healthcare systems. A key word in the comparison is “complexity." Our healthcare systems have reached a point of complexity such that older, simpler systems of delivery can no longer work. Small, independent practices can no longer shoulder the financial and maintenance burdens of new technologies, electronic medical records, and complex reimbursement systems. They are rapidly joining larger practice groups and established hospital systems, or closing their doors.
Observation #2: Bureaucracy is bad
“With bureaucracy comes territory, which is grounded in human nature.”
We are territorial creatures. We are loyal to those closest to us and suspicious of “others." It is human nature. This is especially true in our hospital systems, which were built on the foundation of providing care in emergent and life-threatening situations. Patient care services, especially specialty services, can be competitive for limited funds available, thus creating silos within the organization in a “winner gets all” environment. To consistently respond to such emergent and life-threatening situations, redundant systems and services are the result. Redundancy creates complexity, which reinforces the barriers between departments and silos.
Mr. Munger’s success over the years has been his ability to find companies that have successfully managed this tension, companies that have been able to handle large volumes and minimize the bureaucracy that comes with territorialism.
As healthcare design architects who work for several healthcare organizations, we are in the position to observe this same tension firsthand. From this perspective, it is clear why Lean management concepts are so rapidly taking hold across the healthcare landscape. Lean management concepts were born in the large, complex, and highly competitive industry of automobile manufacturing. The Toyota Production System is rapidly being translated into many healthcare systems resulting in positive outcomes.
Conclusion: Big is here to stay and bureaucracy is still bad. So our work is cut out for us. We have tools that were generally unknown 10 years ago, tools that offer hope that we can build better.