hccomp

Issue #44

Last Update March 2, 2006

National Health Care Competition by David Katz October 25, 2005 The 2005 Medical Innovation Summit was hosted by the Cleveland Clinic October 24-26, 2005. Michael Porter, Bishop William Lawrence University Professor of the Harvard Business School, delivered a keynote speech entitled "Redefining Health Care: Creating Value-Based Competition on Results", in which he explored the failure of competition to reduce health care costs and provide adequate care for the American public. A strong believer in competition as an agent for good, Mr. Porter discussed the reasons for competition's failure to achieve positive results in this area, and proposed a restructuring of areas in which competition takes place.

According to Mr. Porter, the problem is that health care competition is a zero-sum game concentrated on cost-shifting. Competition is about shifting costs from insurer to hospital to doctors to the patient or government; increasing bargaining power to more effectively shift costs; capturing patients to restrict choice; and reducing costs by restricting services. Paradoxically, the effect of this kind of competition is to actually increase costs and reduce quality and access to care.

Believing that competition can be an engine for economic good, Mr. Porter suggests that it be refocussed on value for patients, that is, the best outcome for patients for the money spent. The health care industry should compete in addressing the medical condition over the full cycle of care, that is, over results for the patient. Since available resources are not infinite, efficiencies must be created and choices made that, in effect, give the patient the biggest bang for the buck. Several significant changes are required for this to happen: information about patient outcomes must be made available to the patient to allow informed choice of provider; pricing must be structured to encompass the complete care cycle for a patient condition, rather than being fragmented into individual charges for each health care participant; innovations that increase value must be strongly rewarded; and competition must be regional and national, not just local.

Publication of patient outcome information is just beginning to become acceptable to doctors and hospitals. The Cleveland Clinic has begun a pilot program in this area; the Cystic Fibrosis Foundation has been collecting and making available such information about patient survival and other health measures for years. Since even competent doctors and facilities can have widely disparate results depending on experience approach, it is important for patients to have access to this information in order to make the intelligent choices that might spell the difference between life and death, or between a good and a poor quality of life. Those groups with the best results should be rewarded with the most patients.

Medical care is currently organized by specialty. Porter points out that anesthesiologists on their own provide no value; it is only as part of a team that their value is felt. Similarly, a pulmonary surgeon whose practice covers every kind of pulmonary surgery is likely to have poorer results than one operating as part of a team dealing in lung cancer. Reorganizing medicine into teams whose purpose is to deal with one or a number of related conditions is his preferred health care structure.

Similarly, having hospitals conform to a primarily local focus forces them to be all things to all people. Porter would prefer a smaller number of regional hospitals which, through specialization, are really good a dealing with a limited number of conditions. This has two benefits: it reduces costly duplication of facilities and it increases quality of care. In fact, he stated, the best way to lower costs is to improve quality, through prevention, ability to deal with underlying conditions and reduction in errors.