Cheesecake Factory, Lexus, Ritz-Carlton

Tuesday, August 21, 2012

What does “The Cheesecake Factory” restaurant chain have to teach hospitals?

According to Atul Gawande, writing in the current New Yorker, quite a lot. If you’re not familiar with Cheesecake Factory (I am only by reputation; I’ve never set foot in one and couldn’t possibly tell you where the nearest one to my Upper West Side home is, but I know it’s not walkable), here are the pertinent facts:

  • 160 restaurants
  • Over 300 menu items, plus over 100 beverages:
    • “There’s wine and wasabi-crusted ahi tuna, but there’s also buffalo wings and Bud Light. [Also] pot stickers, mini crab cakes, teriyaki chicken, Hawaiian pizza, pasta carbonara, beet salad with goat cheese, white-bean hummus and warm flatbread, and miso salmon.
  • Serving more than 80-million people per year.

You might assume, as did our correspondent Dr. Gawande, that it was all pre-made in bulk, shipped in from sweatshop factory kitchens in Mexico, flash-frozen or bagged, but quite to the contrary: “Everything’s pretty much made from scratch.” Dr. Gawande had gone to that particular Cheesecake Factory dinner with his daughters, and reports:

I’d come from the hospital that day. In medicine, too, we are trying to deliver a range of services to millions of people at a reasonable cost and with a consistent level of quality. Unlike the Cheesecake Factory, we haven’t figured out how. Our costs are soaring, the service is typically mediocre, and the quality is unreliable. Every clinician has his or her own way of doing things, and the rates of failure and complication (not to mention the costs) for a given service routinely vary by a factor of two or three, even within the same hospital.

It’s easy to mock places like the Cheesecake Factory—restaurants that have brought chain production to complicated sit-down meals. But the “casual dining sector,” as it is known, plays a central role in the ecosystem of eating, providing three-course, fork-and-knife restaurant meals that most people across the country couldn’t previously find or afford. The ideas start out in élite, upscale restaurants in major cities. You could think of them as research restaurants, akin to research hospitals. Some of their enthusiasms—miso salmon, Chianti-braised short ribs, flourless chocolate espresso cake—spread to other high-end restaurants. Then the casual-dining chains reëngineer them for affordable delivery to millions. Does health care need something like this?

It’s also worth noting how widespread this model is in the restaurant industry. The Darden company, which uses the same techniques, trades under the much more familiar names of Olive Garden, LongHorn Steakhouse, Red Lobster, and the upscale Capital Grille, with over 2,000 restaurants in the US alone and over 180,000 employees.

Now of course we all resist this approach when it comes to us, as do doctors: “Medicine, though, had held out against this trend,” writes Gawande. Let me suggest a few other similarities between law and medicine, borrowing from Gawande. He starts by talking about what the entry of private equity into the healthcare industry has meant, and uses the for-profit Steward Health Care System as an example (emphasis mine):

Steward was launched in late 2010, when Cerberus—the multibillion-dollar private-investment firm—bought a group of six failing Catholic hospitals in the Boston area for nine hundred million dollars. Many people were shocked that the Catholic Church would allow a corporate takeover of its charity hospitals. But the hospitals, some of which were more than a century old, had been losing money and patients, and Cerberus is one of those firms which specialize in turning around distressed businesses.

Cerberus has owned controlling stakes in Chrysler and GMAC Financing and currently has stakes in Albertsons grocery stories, one of Austria’s largest retail bank chains, and the Freedom Group, which it built into one of the biggest gun-and-ammunition manufacturers in the world. When it looked at the Catholic hospitals, it saw another opportunity to create profit through size and efficiency. In the past year, Steward bought four more Massachusetts hospitals and made an offer to buy six financially troubled hospitals in south Florida. It’s trying to create what some have called the Southwest Airlines of health care—a network of high-quality hospitals that would appeal to a more cost-conscious public.

Steward’s aggressive growth has made local doctors like me nervous. But many health systems, for-profit and not-for-profit, share its goal: large-scale, production-line medicine. The way medical care is organized is changing—because the way we pay for it is changing.

Historically, doctors have been paid for services, not results. In the eighteenth century B.C., Hammurabi’s code instructed that a surgeon be paid ten shekels of silver every time he performed a procedure for a patrician—opening an abscess or treating a cataract with his bronze lancet. It also instructed that if the patient should die or lose an eye, the surgeon’s hands be cut off. Apparently, the Mesopotamian surgeons’ lobby got this results clause dropped. Since then, we’ve generally been paid for what we do, whatever happens. The consequence is the system we have, with plenty of individual transactions—procedures, tests, specialist consultations—and uncertain attention to how the patient ultimately fares.

The theory the country is about to test is that chains will make us better and more efficient. The question is how. To most of us who work in health care, throwing a bunch of administrators and accountants into the mix seems unlikely to help. Good medicine can’t be reduced to a recipe.

Then again neither can good food: every dish involves attention to detail and individual adjustments that require human judgment. Yet, some chains manage to achieve good, consistent results thousands of times a day across the entire country. I decided to get inside one and find out how they did it.

Gawande proceeds to spend some time with a fellow named Dave Luz, who manages eight Cheesecake Factories in and around Boston. Apologies for the length of the excerpt, but the color Gawande provides is invaluble.

A computer program known as Net Chef showed Luz that for this one restaurant food costs accounted for 28.73 per cent of expenses the previous week. It also showed exactly how many chicken breasts were ordered that week ($1,614 worth), the volume sold, the volume on hand, and how much of last week’s order had been wasted (three dollars’ worth). Chain production requires control, and they’d figured out how to achieve it on a mass scale. [$3 on $1,614 is 2/10ths of 1%-Bruce.]

As a doctor, I found such control alien—possibly from a hostile planet. We don’t have patient forecasting in my office, push-button waste monitoring, or such stringent, hour-by-hour oversight of the work we do, and we don’t want to. I asked Luz if he had ever thought about the contrast when he went to see a doctor. We were standing amid the bustle of the kitchen, and the look on his face shifted before he answered.

“I have,” he said. His mother was seventy-eight. She had early Alzheimer’s disease, and required a caretaker at home. Getting her adequate medical care was, he said, a constant battle.

Recently, she’d had a fall, apparently after fainting, and was taken to a local emergency room. The doctors ordered a series of tests and scans, and kept her overnight. They never figured out what the problem was. Luz understood that sometimes explanations prove elusive. But the clinicians didn’t seem to be following any coördinated plan of action. The emergency doctor told the family one plan, the admitting internist described another, and the consulting specialist a third. Thousands of dollars had been spent on tests, but nobody ever told Luz the results.

A nurse came at ten the next morning and said that his mother was being discharged. But his mother’s nurse was on break, and the discharge paperwork with her instructions and prescriptions hadn’t been done. So they waited. Then the next person they needed was at lunch. It was as if the clinicians were the customers, and the patients’ job was to serve them. “We didn’t get to go until 6 P.M., with a tired, disabled lady and a long drive home.” Even then she still had to be changed out of her hospital gown and dressed. Luz pressed the call button to ask for help. No answer. He went out to the ward desk.

The aide was on break, the secretary said. “Don’t you dress her yourself at home?” He explained that he didn’t, and made a fuss.

An aide was sent. She was short with him and rough in changing his mother’s clothes. “She was manhandling her,” Luz said. “I felt like, ‘Stop. I’m not one to complain. I respect what you do enormously. But if there were a video camera in here, you’d be on the evening news.’ I sent her out. I had to do everything myself. I’m stuffing my mom’s boob in her bra. It was unbelievable.”

His mother was given instructions to check with her doctor for the results of cultures taken during her stay, for a possible urinary-tract infection. But when Luz tried to follow up, he couldn’t get through to her doctor for days. “Doctors are busy,” he said. “I get it. But come on.” An office assistant finally told him that the results wouldn’t be ready for another week and that she was to see a neurologist. No explanations. No chance to ask questions.

The neurologist, after giving her a two-minute exam, suggested tests that had already been done and wrote a prescription that he admitted was of doubtful benefit. Luz’s family seemed to encounter this kind of disorganization, imprecision, and waste wherever his mother went for help.

“It is unbelievable to me that they would not manage this better,” Luz said. I asked him what he would do if he were the manager of a neurology unit or a cardiology clinic. “I don’t know anything about medicine,” he said. But when I pressed he thought for a moment, and said, “This is pretty obvious. I’m sure you already do it. But I’d study what the best people are doing, figure out how to standardize it, and then bring it to everyone to execute.

This is not at all the normal way of doing things in medicine.

Now let’s try to map this patient (client) experience into Law Land. Here are the analogies:

  • We don’t have client demand forecasting. No, you can’t forecast the implosion of Lehman Bros. or the abortive AT&T/T-Mobile merger plans, but if you don’t think you can forecast the overall load of employment discrimination cases, or (say) patent prosecutions for a major client , you’re not trying.
  • We (generally) have no coordinated plan of action for handling an engagement, or certainly not one we communicate to the client. Instead, we run the risk of that every lawyer is an autonomous self-guided missile pursuing the angle most condign to their comfort zone and idiosyncratic view of the case.
  • We don’t communicate to the client one integrated, synthesized view; this is another we of re-stating the last point. (Could that be because we don’t have one ourselves?)
  • We don’t communicate among ourselves.

Enough: you get the point.

Gawande demonstrates that the thought experiment of applying what Cheesecake Factory processes could do for medicine is not all that unrealistic, with the example of a here-today high-tech centralized (but remote) patient monitoring facility that lets skilled nurses watch over tremendous numbers of patients in real time at a level of focus and detail that on-site staff, pushed and pulled by the crisis of the moment, can never do consistently.  Back in January of this year the renowned Silicon Valley VC Vinod Khosla wrote Do We Need Docctors or Algorithms? which begins tongue-in-cheek but rather quickly gets into a deadly serious discussion of what the combined power of Big Data, genomics and proteonomics, and the next generation of autonomous health-monitoring iPhone apps could do to revolutionize the 90% of medicine that doesn’t require the resources of the Mayo or Cleveland clinics.

Now, there are consequences to this systemization, as Gawande acknowledges.

To begin with, we will have to adapt to a system where our own preferences count for less and client service (as defined by the competitive marketplace) counts for more.  Don’t think “client service” means slavishly following the client’s wishes, however misguided: To the contrary.  “Client service,” properly understood, consists in rendering the most incisive strategic and legal advice within your power, explaining the consequences of various alternative courses of action as best you can foresee, and helping the client make a highly informed decision.  What the focus “client service” adds to the equation is trying to see it all from the client’s perspective.

Second, the “business process optimization” model that Cheesecake Factory and Darden follow, while it indisputably increases the capabilities and competencies of people on the line delivering products and services, also tends to absorb the surplus value they create upstream for the benefit of the owners. “The frontline worker, whether he is making cars, solar panels, or wasabi-crusted ahi tuna, now generates unprecedented value but receives little of the wealth he is creating.”

Gawande concludes thus:

The critical question is how soon that sort of quality and cost control will be available to patients everywhere across the country. We’ve let health-care systems provide us with the equivalent of greasy-spoon fare at four-star prices, and the results have been ruinous. The Cheesecake Factory model represents our best prospect for change. Some will see danger in this. Many will see hope. And that’s probably the way it should be.

Let me go one step further.

Have you ever:

  • Shopped for or bought a Toyota Lexus, Honda Acura, BMW, Audi, or Mercedes?
  • Patronized Starbucks, Panera Bread, Le Pain Quotidien; or stayed at a W, Four Seasons, or Ritz-Carlton?
  • Appreciated the customization and ease of navigability of Amazon?

If so, you’ve come to appreciate the powerful client service delivered by firms that profoundly understand and put into practice techniques such as continuous improvement, business process optimization, standardization, relentless training and performance monitoring, and how much customers appreciate getting it right the first time, every time, without fail.

Now imagine if they all operated like law firms.

What are the odds you’d become intensely loyal?

And more importantly, what are the odds you’d shift allegiance to a competitor who did operate the way these firms actualy do? And become intensely loyal to that firm?

 

Related Articles

Trackbacks For This Post

  1. [...] Read the entire article here: Cheesecake Factory, Lexus, Ritz Carlton. [...]

One Comment


Leave a Reply

Bear