Michael Porter: Disrupt Health Care to Save It
Emphasize outcomes to enhance value, says the Harvard management guru.
Michael Porter of Harvard Business School speaks during the opening keynote session of the Hospital of Tomorrow Conference in Washington, D.C., Oct. 6, 2014.Brett Ziegler/USN&WR
Michael Porter’s prescription for the ailing U.S. health care system is simple: Put patients at the heart of the health care system. Provide high quality care at lower cost across the spectrum of health care services, from the doctor’s office to the ICU and beyond.
Rather than organizing health care services to achieve revenue goals or achieve the aspirations of physicians, Porter said, hospitals and other health institutions must transform themselves to meet the needs of their patients.
“Organizations that are able to do this, and do this well, are going to succeed,” Porter, a professor at Harvard Business School, told attendees at the 2014 U.S News Hospital of Tomorrow summit. “Value for patients is the fundamental definition of success.”
Porter said his “value agenda” is designed to force hospitals and other health care institutions to compete for patients. Those that provide the highest value care – the best outcomes at the lowest cost – will outlast those that don’t. “You should all be experimenting with this,” he told an audience made up largely of health care executives.
A key first step is measurement and public reporting of outcomes that enable consumers to make informed choices. “Right now, health care is a fact-free world,” Porter said. “People don’t know costs or outcomes.”
Porter, described by The Economist as the dean of “living management gurus,” has devoted his career to teasing apart the economic underpinnings of success. In his early work, he focused on ways that businesses could achieve and sustain a competitive advantage. His former editor at the Harvard Business Review, Joan Magretta, writes in her book, “Understanding Michael Porter”: “Among academics, he is the most cited scholar in economics and business. At the same time, his ideas are the most widely used in practice by business and government leaders around the world. His frameworks have become the foundation of the strategy field.”
His 2006 book, “Redefining Health Care: Creating Value-Based Competition on Results,” written with Elizabeth Teisberg, launched Porter into the infinitely interesting and complex health care universe, prompting scores of collaborations with health care institutions worldwide.
“I became fixated, in health care, on the disconnect between financial success and success in treating patients,” he said in an interview. “This is the insight that unlocked a lot of this.”
The reorganization that Porter envisions extends beyond a hospital’s walls, to the full range of services necessary to achieve the best results.
Porter’s vision has six components:
- Organize into integrated practice units, shifting from care organized by specialty and service to one organized around patients’ needs in the home, clinics, outpatient centers and hospitals.
- Measure outcomes and costs for every patient.
- Move to bundled payments, covering the cycle of care for a medical condition, beginning before hospitalization and encompassing care needed afterward.
- Consolidate services provided to patients with a diagnosis in one place, so that a patient with a disease like diabetes or pulmonary disease can easily obtain needed care.
- Share the wealth of knowledge and expertise by expanding to satellite locations.
- Build an information technology system that allows hospitals to harvest information, measure outcomes, publish their results and share critical information with patients.
For many years, Porter said in an interview, hospitals were sheltered from the competitive pressures buffeting other industries, because their economic interests were aligned with the doctors who supplied them with a stream of patients. Rather than competing for patients, hospitals competed for physicians by creating new services, building new wings and buying new technology.
“We have an industry that has grown out of control in terms of employees and capacity. We have too many people, providing too many services, in too many places with too much cost.”
That model is no longer sustainable, Porter said. “We’re seeing the start of a revolution.”
He told attendees that this is not a medical science challenge. “The real challenge we face is managerial and organizational. It is how to get organizations full of brilliant, talented people to work in a different way, a way to drive value for patients.”
“Spot on,” said Jesse Cureton, chief consumer officer of Winston Salem, North Carolina-based Novant Health, a system of 15 hospitals and scores of medical practices across the Southeast. Cureton says he is so taken with Porter’s message that he journeyed to Harvard to attend one of his courses.
Porter said the transformation has begun, driven by federal health reform initiatives, cost-conscious payers, health plans and others. “The model is starting to break down. It’s breaking down not only because patients are going out and looking for the best value, but also because of insurance companies and employers with a lot of clout that are paying the bills,” he said in an interview.
Ultimately, this change will require an overhaul of the current system, including how delivery is organized, measured and reimbursed.
Porter acknowledged that there will be winners and losers, both at the hospital level and in the community. Cost and reimbursement pressures have already prompted even the most successful hospitals to begin trimming their workforce and cutting costs. “We’re going to see reductions, and that’s going to have an economic cost,” he said.
Tags: patients, Harvard University, hospitals, health care
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