by Jordan Chapman
“Our job is to demand and expect (excellent healthcare).”—Michael E. Porter, Ph.D.
In the last 50 years, science has accelerated the art of healing in astounding ways, but when it comes to the delivery of healthcare services, the United States and many countries around the world have a serious problem.
This was the topic of discussion when Michael E. Porter, Ph.D., visited campus in late October to speak to Adelphi faculty and students as part of the Hagedorn Lecture Series, in conjunction with the Robert B. Willumstad School of Business 50th anniversary.
Porter, a leading authority on healthcare strategy, is widely recognized in government, corporate, nonprofit and academic circles across the globe for his insights on company strategy, the competitiveness of nations and regions, and strategic approaches to societal problems.
He has developed a new idea for healthcare delivery—based on working and existing models in other countries. It’s centered on value for the patient.
The Problem
The best way to understand value is to first understand how the current system doesn’t focus on patient need. Porter used a migraine patient as an example to illustrate the current U.S. healthcare structure:
If a patient experiencing chronic migraines makes an appointment to see his or her primary physician, they might wait a week to get in, they take a day off work to attend the appointment, fill out the paperwork upon arrival and hand over the co-payment to see a doctor. The doctor, though genuinely concerned, may not be able to solve the problem, so he or she recommends any number of outpatient neurologists. If the neurologist can’t figure out the problem, they might recommend psychological counseling, physical therapy or an imaging center to receive a head scan. Each step is a different appointment, another day taken off from work, more co-payments, more travel and more paperwork.
“Traditional organization of healthcare delivery is organized around specialties and discreet services,” Porter said, and the patient is the Ping-Pong ball bouncing around to the different services. “The patient goes through this odyssey. …Each [specialty] is a separate visit that needs an appointment. …Each visit is a separate administrative action. Organization is at the core of the problem,” but so is the system’s current fee-for-service payment structure.
“The current system, as you know, has been dominated by [this] approach,” he said, noting a clear mismatch between fee-for-service and value for the patient. “Fee-for-service is a horrible way to get paid if what you really care about is value. …You get paid more if you do a lousy job and the patient has to come back, because you can charge again. There’s no way to create value doing it this way—it’s impossible.”
What’s worse, Porter explained, because doctors are working for volume, it’s often the case that physicians aren’t experts in any one area, because they focus so heavily on treating everything.
“Primary care physicians see all kinds of different patients,” Porter said. “A typical primary care doctor might have 2,000 different patients with every single problem on the face of the earth. That physician just can’t know everything, and just can’t be evenly interested in every possible disease. …We put our clinicians and our patients through this process where who they see is often a function of their specialty, who’s on the schedule and who has got a slot, as opposed to expertise in the patient’s particular problem.”
The result is a lot of educated guessing, physicians doing their best, referrals to different doctors and minimal answers. Here enters the Ping-Pong ball: you.
The Solution
When moving to a high-value healthcare delivery system, Porter described six fundamental strategic transformations that have to happen in the following areas: organization, measured outcomes, bundled payments, integrated care, expansion of geographic reach and enabling IT platforms.
“Healthcare is unique,” Porter said. “Healthcare has been a fact-free zone. Nobody knows the outcomes. We know what the cost of the hospital is, we know what the cost of the system is, we know the cost of an office visit, but none of those are the relevant costs we need to understand in order to understand value.”
The relevant costs are the expenditures it takes to care for a patient with a given problem over the course of their disease.
“If we can look at the outcomes we achieve for that patient, and the total cost that we expended to achieve those outcomes, then we have the magic information that we need to know about value,” Porter said, careful to explain that cost of healthcare is different from the amount billed to the patient.
What does understanding the total cost of a condition mean in terms of value? “Bundled reimbursement is a single reimbursement for the whole process of care for a condition,” Porter said. An example of this was illustrated with the current structure for hip and knee replacement surgery. Porter said the bundled cost would fall under hip and knee pain, where joint replacement would just be one of the options for care under that condition. “Not a fee for each thing that happens to you, not a fee for each doctor that talks to you, but one fee for the whole process,” he said.
Integrated health centers would specialize in one condition—for example, migraines—and would bring doctors, clinicians, psychiatrists, physical therapists and surgeons who specialize in that condition under one roof. “Let’s get the talent we need to deal with [the problem] in a single unit,” Porter said, explaining that only then can doctors and clinicians truly communicate and collaborate to better serve the most important person—the patient.
The Results
“Outcomes [in Germany, after switching to this model] improved dramatically, literally overnight,” Porter said. “Patients who visited this [migraine] center, their comments were things like, ‘Finally, someone understands my problem.’” Even better, visits and answers all come within the first visit, because every doctor is available on-site.
Cost for the patients, in the short run, went up because patients were paying for the total bundled payments up front for a one-day diagnosis, instead of over a six-month time frame with multiple doctors and visits. “It took only eight months for [the German] model to start becoming—not only much better in terms of outcome—but much more efficient. Today, the run rate is 20- to 25-percent cost reduction,” Porter said. How? One-day visits equal less administrative work and fewer repeat visits and days off from work—less wasted time.
“There is growing and overwhelming evidence that these things work and the impact is big,” Porter said, noting that an equivalent reduction in healthcare costs in the United States, today, would result in a national budget surplus.
