Review: The Strategy That Will Fix Healthcare

Two days ago, I was directed to a piece entitled "The Strategy That Will Fix Healthcare" from the October issue of Harvard Business Review by a reader of this blog who knew I had an interest how we can get our heads around the enormity of lowering costs in health care. The piece was written by Michael E. Porter and Thomas H. Lee. Mr. Porter is a Bishop Lawrence University Professor at Harvard University based at Harvard Business School. Dr. Thomas H. Lee is the chief medical officer at Press Ganey and the former network president of Partners HealthCare and has been a professor at Harvard Medical School and Harvard School of Public Health, as well as an associate editor of the New England Journal of Medicine in his former life. Needless to say, they are perfect fodder for the Harvard Business Review.

In their article, the authors speak of their "fundamentally new strategy" that, "at its core is maximizing value for patients: that is, achieving the best outcomes at the lowest cost."

Boy, who wouldn't want that?

In their piece, they then propose six steps to "fix" healthcare:

• 1: Organize into Integrated Practice Units (IPUs)
• 2: Measure Outcomes and Costs for Every Patient
• 3: Move to Bundled Payments for Care Cycles
• 4: Integrate Care Delivery Systems
• 5: Expand Geographic Reach
• 6: Build an Enabling Information Technology Platform

But where, exactly, are the author's going? Is their prescription really a "fundamentally new strategy?"

As nicely written as the article is, I don't think so.

To me, their "Integrated Practice Units" sound strikingly similar to the "Pit Crew model" previously promoted by others. Measuring Outcomes and Costs, while it sounds nice, is enormously difficult as "outcomes" that benefit business might not be "outcomes" that benefit patients and costs (both direct and indirect) are rarely, if ever, disclosed publicly.  "Integrated Care Delivery Systems" with their high through-puts sounds an awful lot like someone else's Cheesecake Factory analogy. And bundled payments are hardly "new," having already been implemented in some health care markets.   When put this way, the authors'  "new strategies" sound like a  rehash of plenty of Harvard "old school."

Here's A Real Idea to Ponder

If these authors were really about value to patients, they need to think like patients.  Here's an example:

Some time ago, I inquired from one of the major medical device companies if they would sell a defibrillator directly to a patient.  That's right: direct-to-consumer with no middle man.  They could name their price for he had the cash to buy it. That's because he is self-insured business owner. Being a business man, he wanted to purchase the device himself and then shop the implant between centers to get a deal in a way not too dissimilar from the way one man recently shopped his hernia repair.

But what I was told was surprising.

I was told they could not sell the defibrillator directly to a patient because "we cannot ship directly to patients due to regulatory requirements around product tracing abilities."

What the...?

Seriously? Our regulatory environment prevents such a deal? Where's patient "value" there? Why do medical device companies sell  "only to doctors and hospitals" and not to patients themselves? Where is the patient "value" opportunity there?

But to Porter and Lee, this form of "value" is ignored.  They're business guys.  In their pro-business environment, "value" is defined as lower overhead, lower expenses, and more volume.  And thanks to prices that are artificially held high by the government's (Medicare) payment rates, they can continue to mark-up prices to cover other expenses which may not be of value to the patient, like lobby facades. After all, they have large indirect costs to support. Insurers, too, must assure their cut for profits as they negotiate what they'll pay for device implants.  And still more layers of bureaucracy exists with complicated coding, billing and collection that also has limited "value" to patients, especially in the case of a patient who is willing to pay cash.

We should ask ourselves if these intermediaries are the reason we are where we are in the meltdown of health care costs.

I think this more transparent model (or a variation of it) will become more common in the years ahead as patients are forced to foot more of their medical care bill.  Certainly, it won't be for everyone.  But as we continue down this health care reform path, patients will turn a keen eye to health care out-of-pocket costs.   To assure value for themselves, patients will demand THEY pay for the device, THEY chose their provider  or treatment facility, THEY decide who receives funds for care delivery, and THEY have access to their medical and device data.

THAT is the novel health care cost model that's coming that will be disruptive, not an overly simplified six-step business school "fix."  Businesses involved in all aspects of health care that provide patient-care materials, be they drugs or devices, would be wise to be an early adopter of the patient-empowerment movement. 

After all, most patients (I believe) will eventually demand real medical value for themselves, not business.

-Wes