Rolls-Royce and health care reform

October 5, 2009
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Rolls-Royce, the British jet engine maker, hasn’t taken a public position on health care reform, and its officials are adamant they don’t want to start now.

But let’s drag them into it, anyway, because Rolls-Royce’s business model might interest the crowd advocating for reform via market forces.

One of the many ongoing criticisms of the system is that there’s little financial incentive to focus on health. Money from the government and other sources flows to doctors and hospital administrators who order tests and prescribe drugs, not those who make people healthy as economically as possible.

Detractors go on to point out that providers are paid regardless of results. The cardiologist gets a check whether or not the bypass surgery works—let alone whether the family physician could have headed off the problem by coaxing the patient into healthy habits.

What can reformers learn from an engine company (which happens to keep a huge outpost in Indianapolis)? Maybe quite a bit.

Rolls-Royce is signing more and more military and airline maintenance contracts that put the onus on Rolls-Royce to keep the engines “on-wing” instead of in the repair shop.

The customer pays a flat fee for every hour the engine flies. If the engine conks out, Rolls-Royce, not the customer, absorbs the pain.

“I make profit by keeping that engine running and not having to replace parts,” says Kevin McCarty, the vice president who oversees customer support for the company’s North American defense contracts. “I’m the one who’s going to pay the bill if the engine comes off-wing.”

So it’s incumbent on Rolls-Royce to build a fantastic engine and maintain it carefully in the field. It’s also imperative to cut costs, because that’s the only way to improve the bottom line. And Rolls-Royce is motivated to perform beyond expectations in order to persuade the customer to sign another contract.

Would a similar incentive structure—compensating doctors, hospitals and others in the system for health, not repairs—go a long way toward fixing health care?

If doctors and other providers were assured a lucrative livelihood for keeping healthy people healthy and making sick people well, it would be to their advantage to figure out how to do it as effectively and as cheaply as possible. Suddenly it’s to a doctor’s advantage to answer patient e-mails because they might get healthier. An old-fashioned X-ray might do the job and cost less than a full-blown CT scan.

Providers would have every incentive to get involved from the earliest stages of diabetes and other chronic diseases, and to persuade patients to eat healthy foods and exercise.

As with the other reform proposals floating around Congress, the devil would be in the details. Paying for health care gets trickier when treating the elderly; the system certainly would need good referees (imagine if rapacious Wall Street types got their mitts on it). Another is, doctors have less influence over patients than Rolls-Royce does its customers, so results wouldn’t come easily. Yet another is how “health” would be defined.

Nevertheless, it’s one approach. What are your thoughts? Would it improve health care?

  • There are two key points you have left out in your logic. That is the fact that the engine does not have free will to do as it likes with itself. It has been built to exact specifications, with a defined period at which time parts must be replaced. There are also tolerances within which it will be operated. People, on the other hand, are not anywhere nearly so standardized. They are also perfectly free to get themselves into a lot of trouble after "repair," whether by accident, genetic predisposition, or continuing the same behavior that got them into trouble in the first place, etc. Unlike Rolls Royce the results do not depend on the doctors alone doing their best. To leave the patient's role out of determining their health and recovery is naive.

    Public health/occupational medicine physician & pilot
    Author of Healthcare Solved - Real Answers, No Politics
  • Rolls should be an example for health care reform
    The point of Power by the Hour contracts in aviation engine sustainment is - aligning motivation and intent - creating a win win. The fundamental problem with the current health care scheme is that it is in the best interest of the payer - insurance companies - to deny service - and - for physicians and hospitals to overservice as a defense to litigation.

    Insurance companies take money from businesses and individuals in order to create a profit for their shareholders - that is the purpose of a publically traded company. Therefore, until private insurance companies are taken out of the system or converted to assuance companies - where the payers are also the shareholders - like credit unions and USAA - the system can never be fixed / leaned / streamlined ...

    The best health care I've ever received was from the US Government - 12 years of Navy Medicine.

    Now you'd think I'm some liberal democrat - far from it - I've only voted for two democrats in my whole life (Sam Nunn and Zell Miller). I'm a life member of the Republican party - and I'm a small business owner who has to pay for a flawed system based perpetuated by laissez faire capitalist zealots. Capitalism is good - laissez faire capitalism - like all excesses - is bad.

    By the way - the argument that a single payer system or government run health care would result in "rationing" is a red herring. We have rationing of health care today - its called capitalism or free market system. Go pull out any Economics 101 text or Investipedia or Wikipedia ... the definition of Capitalism is, "A socio-economic system whereby scarce goods and services are RATIONED by pricing mechanisms within free markets." We ration health care today by pricing it out of the reach of a certain percentage of the population - according to their employment, income or "existing conditions".

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