Rolls-Royce and health care reform

  • Comments
  • Print

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?

Please enable JavaScript to view this content.

Editor's note: IBJ is now using a new comment system. Your Disqus account will no longer work on the IBJ site. Instead, you can leave a comment on stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Past comments are not currently showing up on stories, but they will be added in the coming weeks. Please note our updated comment policy that will govern how comments are moderated.