Harvard’s Porter: “The Fix is In for Healthcare” Outlines a Path Forward to Better Outcomes and Lower Costs at 23rd Health Leader’s Summit
Special to the Catholic Business Journal by Thomas M. Loarie
Harvard Business School Professor Michael Porter outlined a fundamentally new strategy for healthcare systems around the world struggling with rising costs and uneven quality. Maximizing value for the patient – the best outcome at the lowest cost – is at the core of this new approach. Porter made his comments at last week’s 23rd annual Health Forum and American Hospital Association Leadership Summit in San Francisco.
“Healthcare is one of the great intractable problems in the world today. Despite well-intentioned healthcare leaders and policymakers who have tried numerous incremental fixes – attacking fraud, reducing errors, enforcing practice guidelines, making patients better “consumers,” implementing electronic records – nothing has caused the fundamental shift needed,” said Porter.
Porter’s strategy to transform healthcare to a high-value delivery system builds on six key interdependent tactics:
- Organize around patients’ medical conditions rather than medical specialties by creating integrated practice units (IPUs) based on conditions. IPU’s will serve distinct segments.
- Measure costs and outcomes for each patient. Healthcare providers do not know their costs and only know what they charge. Healthcare has been a “fact free zone” vulnerable to egos and politics.
- Develop bundled prices for the full care cycle. Fee-for-service has paid for the lack of value. Capitation has decoupled payment from what needs to be done. What is needed is a single payment for treating a condition for the full cycle of care. Population health is flawed as the payment system must be risk-adjusted due to complexity, be contingent on the outcome and be fair.
- Integrate care across separate facilities. Most multi-site organizations are not true delivery systems but rather, a loose confederation of stand-alone units that duplicate services. Organizations must define the scope of services for each site, concentrating volume in fewer locations, choosing the right location for each service line and integrating care for patients across locations.
- Expand geographic reach. If value is to be substantially increased on a large scale, superior providers for particular medical conditions need to serve far more patients and extend their reach through the strategic expansion of excellent IPUs. Buying full-service hospitals or practices in new geographic areas is rarely the answer. Geographic expansion should focus on improving value, not just increasing volume.
- Build an enabling IT platform that is centered on patients, uses common data definitions, encompasses all types of patient data, is accessible to all parties involved in care, includes templates and expert systems for each medical condition, and has a system architecture that makes it easy to extract information.
The initial focus, Porter noted, has to be the creation of the IPU. IPUs need to be certified to assure that they have a minimum volume for certain conditions to be treated, a dedicated team, a team leader, can provide all the services required for longitudinal care and collect and audit the key data required.
Healthcare has been fragmented so we can expect resistance. “Everyone likes their little group, and the power of being a specialist. Hospital accountants will say they are identifying costs and will defend the existing system.”
Porter pointed to the success of the Mayo Clinic, Virginia Mason Medical Center, Germany’s Schoen Clinic, and others who are moving forward with the “value agenda”. “Schoen has reduced its overall costs by 25% and has achieved a significant improvement in outcomes.”
Porter was particularly concerned with the metrics we use for treatments. The value equation that needs to be used is one that divides health outcomes that matter to patients divided by the cost to deliver these outcomes. In the case of prostate cancer, choosing the method should depend on what matters to the patient not the specialist. It should not be limited to survival but also include complications that impact life-style like erectile dysfunction and incontinence. Using the right metrics will allow choices to be made holistically against all competing treatments, leading to high patient satisfaction.
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Thomas M. Loarie is a seasoned and pioneering CEO in the medical device field and a senior columnist and editorial policy advisor for Catholic Business Journal. For a more robust bio click here. (http://catholicbusinessjournal.biz/content/thomas-m-loarie-0). He may be reached at TLoarie@CatholicBusinessJournal.biz