From the man who imprinted the definition of value on health care’s collective forehead comes a prescription for the rescue of global health: Business guru Michael E. Porter (with Thomas H. Lee)¹ shares “The Strategy That Will Fix Health Care” in the October issue of Harvard Business Review. The article builds on everything that Porter has written on health care in the past to provide a solution with sheer simplicity at its center: Maximize value for patients by achieving the best outcomes at the lowest cost. What is not simple is that it requires almost everything about the organization of, delivery of, and reimbursement for health care to change, effectively killing health care as we know it. As Porter and Lee point out in their 19-page manifesto, however, there are pockets, across the United States and beyond it—such as the Cleveland Clinic in Ohio and the Schön Klinik network (throughout Germany)—where the transformation is already underway. Before the process can begin, a health-care provider must embrace the goal of improving value for the patient—a departure, for hospitals focused on increasing volume and preserving margin. What the authors call the strategic agenda for the transformation of health care has six components. The first component is to organize physicians into integrated practice units (IPUs) based on the patient’s condition, rather than the physician’s specialty—to treat not just the disease, but the associated complications, conditions, and circumstances. Working as a team, physicians meet regularly to review data on their performance, continuously working to improve outcomes and minimize wasted time and resources. The authors contrast IPU solutions with fixes such as the use of care navigators, which they say are not working. Patients at the Spine Clinic at Virginia Mason (Seattle, Washington), for instance, can call a toll-free number and get a same-day appointment. They miss an average of 4.3 days (versus nine days) of work and need 4.4 physical-therapy visits (versus 8.8). Where does radiology fit into an IPU? Radiologists already are working with breast-care and stroke teams, but colocation is not enough. The team must take responsibility for the entire cycle of care for the condition; must conduct patient education and follow-up care; and must regularly engage in the measurement of outcomes, costs, and processes. Spine, transplant, trauma, and various cardiac-condition IPUs would also benefit from a radiologist team member. To solve the many mysteries in hospital patient admissions, a diagnostic IPU might include radiology, pathology, genetics, and biology. The second component is the regular measurement of outcomes and costs for every patient. Wherever in the world the authors see systematic measurement of health-care results, improvement is seen, yet the great majority (of both providers and insurers) fails to track outcomes and costs by medical condition. Outcomes measurement, where performed, is largely limited to mortality and safety, but in Porter and Lee’s system, outcomes must be measured by medical condition and must cover the full cycle of care. The authors express amazement that no one in health care seems to know what the care being delivered costs, let alone the cost of an entire cycle of care for a patient with a particular medical condition—a truth they attribute to department-based (rather than patient-based) accounting. “For a field in which high cost is an overarching problem, the absence of accurate cost information in health care is nothing short of astounding,”1 they write. Providers must measure costs at the medical-condition level to determine value, and the method recommended by the authors is time-driven, activity-based costing. The third component requires the abandonment of fee-for-service reimbursement and the adoption of bundled payments for (again) care cycles for a specified medical condition, adjusted for severity and including care guarantees and mandatory outcomes reporting. The authors dismiss global capitation because it fails to reward providers for improving outcomes. The fourth component calls for truly integrating care systems. While the consolidation of health care has created many multistate health systems, there are great opportunities to eliminate fragmentation and duplication of care—and to optimize the care that is delivered at each location. To do that, an organization has four choices to make: define the scope of service, concentrate volume in fewer locations, choose the right location for each service line, and integrate care for patients across locations. This is a massive strategic undertaking, fraught with political ramifications, and it might entail giving up or relocating service lines, the authors caution providers. To increase value further, the fifth component calls for expanding geographic reach (because providers with excellent outcomes for a particular condition need to expand their service areas through the strategic use of IPUs). The authors say that buying hospitals or practices in new geographic areas is rarely efficient. The two principal forms of geographic expansion include the hub-and-spoke model, in which an IPU is established and then surrounded by satellite facilities, and clinical affiliation, in which an IPU partners with community providers or local organizations (to use their facilities, rather than acquiring its own). The authors note that the University of Texas MD Anderson Cancer Center (Houston) has used both approaches: hub-and-spoke networks (which enable patients to receive chemotherapy, radiation treatment, and some surgeries in lower-cost settings) and clinical affiliations, such as its association with Banner Health (Phoenix, Arizona). The final component might be the most elusive of all. It’s an IT platform that enables caregivers to follow patients across sites; that uses common data definitions; that includes all patient data; that provides access to all caregivers; that employs templates and tools for each medical condition; and that is based on an architecture that makes it easy for users to extract the data needed to measure outcomes, track costs, and control for patients’ risk factors. The authors describe their value agenda as a journey, beginning with the adoption of a patients-first goal, and they suggest that most providers should begin with the creation of IPUs and the measurement of costs and outcomes. Above all, the authors recommend that providers not wait for regulatory change. “Providers that cling to today’s broken system will become dinosaurs,” they write. “Reputations that are based on perception, not actual outcomes, will fade. Maintaining current cost structures and prices in the face of greater transparency and falling reimbursement levels will be untenable.”¹ Porter and Lee insist that rewards await those organizations, both large and small, that can produce the fruit of the value agenda: excellence in outcomes at the lowest possible cost.
The Value Agenda: When the Prescription Kills the Patient