Redefining Health Care: Creating Value-Based Competition on Results

Michael Porter, of value chain and competitive advantage fame, has taken on the US health care system. Your reviewer, who is speaking from inside the system, can guarantee that both his diagnosis and his proposed fix are bang on. In short, you bring the US healthcare system in line with other industries by making information about the outcomes of healthcare available to consumers, then letting them choose. How to get there from here takes up most of the book, and it is as brilliant and thoughtful as Porter fans have come to expect. Read this one.

"Redefining Health Care" begins with data detailing the failures of America's "health system" - the highest and most rapidly rising costs among modern nations, combined with millions of uninsured, high error rates, and an average 17 years for the results of clinical trials to become standard clinical practice. Thus, the puzzle: "Why is competition failing in health care?" Porter and Teisberg's answer is that it focuses far too much on cost-reduction, increasing negotiating power, providing broad-lines of service, and cost-shifting, and instead should focus on long-term value (results vs. costs) for patients. Key to accomplishing this is the collection of standardized patient outcome data (preferably risk-adjusted) that are used to identify providers needing improvement and sources from which that improvement can be gleaned, as well as in guiding patient decision-making. "Redefining Health Care" also asserts that its recommendations are not just theories, but also supported by a number of cited examples. This book provides a clear vision of how the U.S. can reduce health care costs while improving patient outcomes - without increased complexity. It should be read by legislators at both the state and national level, as well as by health care providers.

Those who have read Porter's previously published On Competition no doubt recall the excellent material on which he and Teisberg collaborated in Chapter 12, "Making Competition in Health Care Work," originally published in Harvard Business Review (July/August 1994). They collaborate again on this volume in which they examine health care issues in three broad areas: "The first is the cost of and access to health insurance. The second is standards for coverage, or the types of care that should be covered by insurance versus being the responsibility of the individual. The third is the structure of health care delivery itself." Porter and Teisberg explain why the only way to truly reform health care is to reform the nature of competition itself. More specifically, to transform health care by realigning competition with value for patients."How to do so is the central focus of this book." How to explain dysfunctional competition in health care? Porter and Teisberg suggest several which include "misaligned incentives and a series if understandable but unfortunate strategic, organizational, and regulatory choices by each participant in the system that feed on and exacerbate each other. All actors in the system share responsibility for the problem....The problem is that competition does not take place at the medical condition level, nor over the full care cycle. Competition is the current system is at the same time too broad, too narrow, and too local." This year in the United States alone, at least $2 trillion will be spent on health care, and costs will continue to escalate. While conducting their research, Porter and Teisberg concluded that there should be no presumption that good quality of health care is more costly. On the contrary, they learned that "better providers are usually more efficient. Good quality is less costly because of more accurate diagnoses, fewer treatment errors, lower complication rates, faster recovery, less invasive treatment, and the minimization of the need for treatment. More broadly, better health is less expensive than illness. Better providers can often earn higher margins at the same or lower prices...so quality improvement does not require ever-escalating costs." Porter and Teisberg have a convincing, indeed compelling argument in support of value-based competition on results in health care within a system which is "ripe for change"...and change for the better but not for the costlier if competition in health care is redefined and then conducted as Porter and Teisberg advocate. One of the most important benefits would be that the changes they propose would be self-reinforcing. "Changes by health plans and providers to compete on values will reinforce and magnify each other, and will spur innovation by suppliers. As consumers and employers adopt these principles, providers and health plans will be more motivated, and more able, to improve the value they deliver." For these and other reasons, it is imperative to rede

This book is a winner! Insightful and inspirational. For those of you who have been waiting for someone to set forth a treatise on how health care should work in a capitalist society, grounded in free market principles, this is it. Although some of the solutions propounded by the authors are underdeveloped, too simplistic, or easier-said-than-done("Discretionary services and nice-to-have mandates must be avoided to allow a basic affordable plan to be available in every state." Page 339), this well-researched and thorough work is thought provoking and should be mandatory reading for policymakers and those who work in the health care industry. Highly recommended.

Reading this book feels like being intellectually seduced. No matter what one originally believes about health care one finds oneself being persuaded by the author's data and logic and economic theory. A must-read for a concerned citizen who worries about the health care system of the USA. A monumental work that shows how to use reason and data to solve social problems.