2) Care is delivered by a dedicated, multidisciplinary team of clinicians who devote a significant portion of their time to the medical condition. (See the exhibit “Outcomes Measurement and Reporting Drive Improvement.”). These components include: Organizing into integrated practice units; Measuring outcomes and costs for every patient; Move to bundled payments for care cycles; Integrate care delivery across separate facilities replace fragmentation to full-service local providers. Around the world, every health care system is struggling with rising costs and uneven quality, despite the hard work of well-intentioned, well-trained clinicians. The current structure of health care delivery has been sustained for decades because it has rested on its own set of mutually reinforcing elements: organization by specialty with independent private-practice physicians; measurement of “quality” defined as process compliance; cost accounting driven not by costs but by charges; fee-for-service payments by specialty with rampant cross-subsidies; delivery systems with duplicative service lines and little integration; fragmentation of patient populations such that most providers do not have critical masses of patients with a given medical condition; siloed IT systems around medical specialties; and others. Outcomes should cover the full cycle of care for the condition, and track the patient’s health status after care is completed. If Tier 1 functional outcomes improve, costs invariably go down. As bundled payment models proliferate, the way in which care is delivered will be transformed. Reputations that are based on perception, not actual outcomes, will fade. More recently, the hospital applied the same approach to simple hypospadias repairs, a urological procedure. Without understanding the true costs of care for patient conditions, much less how costs are related to outcomes, health care organizations are flying blind in deciding how to improve processes and redesign care. The Strategy That Will Fix Health Care @inproceedings{Porter2013TheST, title={The Strategy That Will Fix Health Care}, author={M. E. Porter and T. H. Lee}, year={2013} } A recent study of the relationship between hospital volume and operative mortality for high-risk types of cancer surgery, for example, found that as hospital volumes rose, the chances of a patient’s dying as a result of the surgery fell by as much as 67%. The politics of redistributing care remain daunting, given most providers’ instinct to preserve the status quo and protect their turf. Management estimated the total cost reduction resulting from the shift at 30% to 40%. That includes referring physicians and patients themselves. Providers are rewarded for increasing volume, but that does not necessarily increase value. A simple “stress test” question to gauge the accessibility of the data in an IT system is: Can visiting nurses see physicians’ notes, and vice versa? Harvard Business Review (October): 50-67. With bundled prices in place, IPUs have stronger incentives to work as teams and to improve the value of care. We are going to have to be able to communicate exactly what we are giving patients, employers, and insurers for their money.” He’s right. Providers with significant experience in treating a given condition have better outcomes, and costs improve as well. With the tools to manage and reduce costs, providers will be able to maintain economic viability even as reimbursements plateau and eventually decline. They are interdependent and mutually reinforcing; as we will see, progress will be easiest and fastest if they are advanced together. Market forces are driving increasing numbers of hospital mergers and acquisitions, and the number of hospital beds has declined in the U.S. from 3 beds per 1,000 people in 1999 to 2.6 in 2010. Instead, most hospital cost-accounting systems are department-based, not patient-based, and designed for billing of transactions reimbursed under fee-for-service contracts. Health care leaders and policy makers have tried countless incremental fixes—attacking fraud, reducing errors, enforcing practice guidelines, making patients better “consumers,” implementing electronic medical records—but none have had much impact. These steps sent a strong message that UCL Partners was ready to concentrate volume to improve value. “Moving to a high-value health care delivery system has six components that are interdependent and mutually reinforcing,” state Porter and Lee. The complexity of meeting their heterogeneous needs has made value improvement very difficult in primary care—for example, heterogeneous needs make outcomes measurement next to impossible. Facing severe pressure to contain costs, payors are aggressively reducing reimbursements and finally moving away from fee-for-service and toward performance-based reimbursement. At the core of the value transformation is changing the way clinicians are organized to deliver care. Jeanne Pinder October 9, 2013 . It brings together clinical leaders from around the world to develop standard outcome sets, while also gathering and disseminating best practices in outcomes data collection, verification, and reporting. For each IPU, satellite facilities are established and staffed at least partly by clinicians and other personnel employed by the parent organization. A starting point for system integration is determining the overall scope of services a provider can effectively deliver—and reducing or eliminating service lines where they cannot realistically achieve high value. In 2006, Michael Porter and Elizabeth Teisberg introduced the value agenda in their book Redefining Health Care. The strategy for moving to a high-value health care delivery system comprises six interdependent components: organizing around patients’ medical conditions rather than physicians’ medical specialties, measuring costs and outcomes for each patient, developing bundled prices for the full care cycle, integrating care across separate facilities, expanding geographic reach, and building an enabling IT platform. Today, condition-based IPUs are proliferating rapidly across many areas of acute and chronic care, from organ transplantation to shoulder care to mental health conditions such as eating disorders. And when outcomes are measured comprehensively, results invariably improve. The challenge of becoming a value-based organization should not be underestimated, given the entrenched interests and practices of many decades. In health care, the days of business as usual are over. Neither of the dominant payment models in health care—global capitation and fee-for-service—directly rewards improving the value of care. The transformation to a high-value health care delivery system must come from within, with physicians and provider organizations taking the lead. Compared with regional averages, patients at Virginia Mason’s Spine Clinic miss fewer days of work (4.3 versus 9 per episode) and need fewer physical therapy visits (4.4 versus 8.8). They meet frequently, formally and informally, and review data on their own performance. Other organizations, such as the Cleveland Clinic and Germany’s Schön Klinik, have undertaken large-scale changes involving multiple components of the value agenda. The Strategy that Will Fix Health Care Professor Michael E. Porter and Dr. Thomas H. Lee September 24, 2013 This presentation draws on Porter, Michael E. and Thomas H. Lee. The strategic agenda for moving to a high-value health care delivery system has six components. Michael E. Porter; Thomas H. Lee The Strategy That Will Fix Health Care Providers must lead the way in making value the overarching goal @inproceedings{Porter2013TheST, title={The Strategy That Will Fix Health Care Providers must lead the way in making value the overarching goal}, author={M. E. Porter and T. H. Lee}, year={2013} } Wherever we see systematic measurement of results in health care—no matter what the country—we see those results improve. Provider organizations understand that, without a change in their model of doing business, they can only hope to be the last iceberg to melt. ICHOM develops minimum outcome sets by medical condition, drawing on international registries and provider best practices. The third component of system integration is delivering particular services at the locations at which value is highest. Organizations that fail to improve value, no matter how prestigious and powerful they seem today, are likely to encounter growing pressure. In case you missed it, in the fresh off the press October 2013 issue of Harvard Business Review, Michael E. Porter and Thomas H. Lee set off with a very grand statement, “The Strategy That Will Fix Health Care“. Few clinicians have any knowledge of what each component of care costs, much less how costs relate to the outcomes achieved. For the most part, the solutions have focused on the levers that particular stakeholders can push and have been designed to preserve existing roles. Organizing into IPUs makes proper measurement of outcomes and costs easier. These pressures are leading more independent hospitals to join health systems and more physicians to move out of private practice and become salaried employees of hospitals. (See the sidebar “Next Steps: Other Stakeholder Roles.”) Yet providers must take center stage. Health care delivery remains heavily local, and even academic medical centers primarily serve their immediate geographic areas. Rapid advances in medical knowledge constantly improve the state of the art, which means that providers are measured on compliance with guidelines that are often outdated. While health care organizations have never been against improving outcomes, their central focus has been on growing volumes and maintaining margins. Identify key … Better care has actually lowered costs, a point we will return to later. If they can improve the efficiency of providing excellent care, they will enter any contracting discussion from a position of strength. What we’re reading: “In health care, the days of business as usual are over. To date, incentives that encourage people to be better health care “consumers” have done little more than shift costs to patients. There are huge opportunities for improving value as providers integrate systems to eliminate the fragmentation and duplication of care and to optimize the types of care delivered in each location. Around the world, every health care system is struggling with rising costs and uneven quality despite the hard work of well-intentioned, well-trained clinicians. Over time, outcomes for standard cases at the Clinic’s affiliates have risen to approach its own outcomes. The payment approach best aligned with value is a bundled payment that covers the full care cycle for acute medical conditions, the overall care for chronic conditions for a defined period (usually a year), or primary and preventive care for a defined patient population (healthy children, for instance). Since then, through our research and the work of thousands of health care leaders and academic researchers around the world, the tools to implement the agenda have been developed, and their deployment by providers and other organizations is rapidly spreading. How We Can Help You | Who We Are Many of the leaders have seen their reputations—and market share—improve as a result. © 2020 SurgeonCheck LLC. 6) The unit has a single administrative and scheduling structure. Is this “The” strategy that will fix health care? Providers are improving their understanding of what outcomes to measure and how to collect, analyze, and report outcomes data. “The Strategy that Will Fix Health Care,” Harvard Business Review, October 2013; The Strategy That Will Fix Health Care. In health care, that requires a shift from today’s siloed organization by specialty department and discrete service to organizing around the patient’s medical condition. Summary by James R. Martin, Ph.D., CMA Professor Emeritus, University of South Florida But the days of charging higher fees for routine services in high-cost settings are quickly coming to an end. For example, although many institutions have “back pain centers,” few can tell you about their patients’ outcomes (such as their time to return to work) or the actual resources used in treating those patients over the full care cycle. Better measurement of outcomes and costs makes bundled payments easier to set and agree upon. The net result is a substantial increase in the number of patients an excellent IPU can serve. Providers that adopted bundle approaches early benefitted. In health care, the days of business as usual are over. In 2006, Michael Porter and Elizabeth Teisberg introduced the value agenda in their book Redefining Health Care. In 2011, 60% of all U.S. hospitals were part of such systems, up from 51% in 1999. Disappointment with their limited impact has created skepticism that value improvement in health care is possible and has led many to conclude that the only solution to our financial challenges in health care is to ration services and shift costs to patients or taxpayers. by Michael E. Porter and Thomas H. Lee. Although limiting the range of service lines offered has traditionally been an unnatural act in health care—where organizations strive to do everything for everyone—the move to a value-based delivery system will require those kinds of choices. The Cleveland Clinic is one such pioneer, first publishing its mortality data on cardiac surgery and subsequently mandating outcomes measurement across the entire organization. UCLA’s kidney transplant program, for example, has grown dramatically since pioneering a bundled price arrangement with Kaiser Permanente, in 1986, and offering the payment approach to all its payors shortly thereafter. Clinicians must prioritize patients’ needs and patient value over the desire to maintain their traditional autonomy and practice patterns. The result has been striking improvements in outcomes and efficiency, and growth in market share. Senior management estimates that 50% of comparable care currently still performed at the hub could move to satellite sites—a significant untapped value opportunity. Within each patient group, the appropriate clinical team, preventive services, and education can be put in place to improve value, and results become measureable. All Rights Reserved. Facing severe pressure to contain costs, payors are aggressively reducing reimbursements and finally moving away from fee-for-service and toward performance-based reimbursement. For example, patients with low back pain may receive an initial evaluation, and surgery if needed, from a centrally located spine IPU team but may continue physical therapy closer to home. Providers will adopt bundles as a tool to grow volume and improve value. The six components of the value agenda are distinct but mutually reinforcing. The preceding five components of the value agenda are powerfully enabled by a sixth: a supporting information technology platform. The inclusion of pharmacists on teams has resulted in fewer strokes, amputations, emergency department visits, and hospitalizations, and in better performance on other outcomes that matter to patients. Some acid-test questions to gauge board members’ and health system leaders’ appetite for transformation include: Are you ready to give up service lines to improve the value of care for patients? Providers are achieving savings of 25% or more by tapping opportunities such as better capacity utilization, more-standardized processes, better matching of personnel skills to tasks, locating care in the most cost-effective type of facility, and many others. Alternate funding sources must be sourced. In primary care, IPUs are multidisciplinary teams organized to serve groups of patients with similar primary and preventive care needs—for example, patients with complex chronic conditions such as diabetes, or disabled elderly patients. Numerous studies confirm that volume in a particular medical condition matters for value. That often means driving past the closest hospitals. Some organizations, such as the Cleveland Clinic and Germany’s Schön Klinik, have undertaken large-scale changes involving multiple components of the value agenda. The best method for understanding these costs is time-driven activity-based costing, TDABC. In measuring quality of care, providers tend to focus on only what they directly control or easily measured clinical indicators. In this paper, the focus is on the article The Strategy That Will Fix Health Care, published in Harvard Business Review on October 2013, written by Porter and Lee. For example, Vanderbilt has encouraged affiliates to grow noncomplex obstetrics services that once might have taken place at the academic medical center, while affiliates have joint ventured with Vanderbilt in providing care for some complex conditions in their territories. Wherever the services are performed, however, the IPU manages the full care cycle. These pressures are leading more independent hospitals to join health systems and more physicians to move out of private practice and become salaried employees of hospitals. In light of those cost differences, focusing the time of the most expensive staff members on work that utilizes their full skill set is hugely important. Relocating such services cut costs and freed up operating rooms and staff at the teaching hospital for more-complex procedures. But those results can be achieved only through a restructuring of work. Simply co-locating staff in the same building, or putting up a sign announcing a Center of Excellence or an Institute, will have little impact. Increasing profits is today misaligned with the interests of patients, because profits depend on increasing the volume of services, not delivering good results. Patients, health plans, employers, and suppliers can hasten the transformation—and all will benefit greatly from doing so. By its very nature, primary care is holistic, concerned with all the health circumstances and needs of a patient. To determine value, providers must measure costs at the medical condition level, tracking the expenses involved in treating the condition over the full cycle of care. Access to services, insurance, advice, prevention, public health, nutrition They also require services to address head-on the crucial role of lifestyle change and preventive care in outcomes and costs, and those services must be tailored to patients’ overall circumstances. If providers can improve patient outcomes, they can sustain or grow their market share. HEDIS (the Healthcare Effectiveness Data and Information Set) scores consist entirely of process measures as well as easy-to-measure clinical indicators that fall well short of actual outcomes. Outcomes are also starting to be incorporated in real time into the process of care, allowing providers to track progress as they interact with patients. But the opportunity to substantially enhance value in primary care is far broader. Consider how providers participating in Walmart’s program are changing the way they provide care. The transformation to value-based health care is well under way. Here, mandatory outcomes reporting has combined with bundles to reinforce team care, speed diffusion of innovation, and rapidly improve outcomes. The current structure of health care delivery has been sustained for decades because it has rested on its own set of mutually reinforcing elements: organization by specialty with independent private-practice physicians; measurement of “quality” defined as process compliance; cost accounting driven not by costs but by charges; fee-for-service payments by specialty with rampant cross-subsidies; delivery systems with duplicative service lines and little integration; fragmentation of patient populations such that most providers do not have critical masses of patients with a given medical condition; siloed IT systems around medical specialties; and others. The strategic agenda for moving to a high-value health care delivery system has six components. This model is becoming more common among leading cancer centers. No organization, however, has yet put in place the full value agenda across its entire practice. Yet every other stakeholder in the health care system has a role to play. After the CDC began publicly reporting those data, in 1997, improvements in the field were rapidly adopted, and success rates for all clinics, large and small, have steadily improved. For academic medical centers, which have more heavily resourced facilities and staff, this may mean minimizing routine service lines and creating partnerships or affiliations with lower-cost community providers in those fields. Similarly, health insurers that are slow to embrace and support the value agenda—by failing, for example, to favor high-value providers—will lose subscribers to those that do. That’s because IT is just a tool; automating broken service-delivery processes only gets you more-efficient broken processes. Expert systems help clinicians identify needed steps (for example, follow-up for an abnormal test) and possible risks (drug interactions that may be overlooked if data are simply recorded in free text, for example). Narrow goals such as improving access to care, containing costs, and boosting profits have been a distraction. We must move away from a supply-driven health care system organized around what physicians do and toward a patient-centered system organized around what patients need. We believe that concerns will fall away over time, as sophistication grows and the evidence mounts that embracing payments aligned with delivering value is in providers’ economic interest. The impact on value of IPUs is striking. The result has been striking improvements in outcomes and efficiency, and growth in market share. This requires understanding the resources used in a patient’s care, including personnel, equipment, and facilities; the capacity cost of supplying each resource; and the support costs associated with care, such as IT and administration. The outcomes that matter to patients for a particular medical condition fall into three tiers. (See the exhibit “The Value Agenda.”). In Germany, bundled payments for hospital inpatient care—combining all physician fees and other costs, unlike payment models in the U.S.—have helped keep the average payment for a hospitalization below $5,000 (compared with more than $19,000 in the U.S., even though hospital stays are, on average, 50% longer in Germany). Multisite health organizations accounted for 69% of total admissions in 2011. Among the features of the German system are care guarantees under which the hospital bears responsibility for the cost of rehospitalization related to the original care. (See the exhibit “The Value Agenda.”). Their boards and senior leadership teams must have the vision and the courage to commit to the value agenda, and the discipline to progress through the inevitable resistance and disruptions that will result. Providers remain nervous about bundled payments, citing concerns that patient heterogeneity might not be fully reflected in reimbursements, and that the lack of accurate cost data at the condition level could create financial exposure. Achieve best outcomes at the lowest cost. The “spine team” pairs a physical therapist with a physician who is board-certified in physical medicine and rehabilitation, and patients usually see both on their first visit. If complications occur whose effective management is beyond the ability of the satellite facility, the patient’s care is transferred to the hub. Access to poor care is not the objective, nor is reducing cost at the expense of quality. Those organizations—large and small, community and academic—that can master the value agenda will be rewarded with financial viability and the only kind of reputation that should matter in health care—excellence in outcomes and pride in the value they deliver. Tier 1 involves the health status achieved. 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