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Redefining Health Care: Lessons for ChinaProfessor Michael E. PorterHarvard Business Schoolwww.isc.hbs.eduBeijing, ChinaJuly 8, 2014This presentation draws on Porter, Michael E. and Thomas H. Lee. “The Strategy that Will Fix Health Care,” Harvard Business Review, October 2013;Porter, Michael E. with Thomas H. Lee and Erika A. Pabo. “Redesigning Primary Care: A Strategic Vision to Improve Value by Organizing AroundPatients’ Needs,” Health Affairs, March 2013; Porter, Michael E. and Robert Kaplan. “How to Solve the Cost Crisis in Health Care,” Harvard BusinessReview, September 2011; Porter, Michael E. “What is Value in Health Care” and supplementary papers, New England Journal of Medicine, December2010; Porter, Michael E. “A Strategy for Health Care Reform—Toward a Value-Based System,” New England Journal of Medicine, June 2009; Porter,Michael E. and Elizabeth Olmsted Teisberg. Redefining Health Care: Creating Value-Based Competition on Results. (2006) Additional informationabout these ideas, as well as case studies, can be found at the Institute for Strategy and Competitiveness Redefining Health Care website athttp://www.hbs.edu/rhc/index.html. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by anymeans — electronic, mechanical, photocopying, recording, or otherwise — without the permission of Michael E. Porter and Elizabeth O.Teisberg.2012.3.1 Book Launch Redefining German Health Care Porter Guth1Copyright Michael Porter 2011
Challenges Facing Chinese Health Care High out-of-pocket patient spending Vast technological and expertise disparities between urban andrural hospitals Inefficient care delivery Lack of data or transparency on patient outcomes or costs2012.3.1 Book Launch Redefining German Health Care Porter Guth2Copyright Michael Porter 2012
Solving the Health Care Problem The core issue in health care is the value of health caredeliveredValue Health outcomes that matter to patientsCosts of delivering the outcomes Delivering high and improving value is the fundamental purposeof health care Value is the only goal that can unite the interests of all systemparticipants Improving value is the only real solution versus further costshifting, restricting services, or dramatically reducing thecompensation of health care professionals2012.3.1 Book Launch Redefining German Health Care Porter Guth3Copyright Michael Porter 2012
Creating The Right Kind of Competition Patient choice and competition for patients are powerful forcesto encourage continuous improvement in value and restructuringof care However, today’s competition in health care is not aligned withvalueFinancial success ofsystem participantsPatientsuccess Creating positive-sum competition on value for patients isfundamental to health care reform in every country2012.3.1 Book Launch Redefining German Health Care Porter Guth4Copyright Michael Porter 2012
Principles of Value-Based Health Care DeliveryValue Health outcomes that matter to patientsCosts of delivering the outcomes Value is measured for the care of a patient’s medicalcondition over the full cycle of care– Outcomes are the full set of health results for a patient’scondition over the care cycle– Costs are the total costs of care for a patient’s conditionover the care cycle2012.3.1 Book Launch Redefining German Health Care Porter Guth5Copyright Michael Porter 2012
Creating a Value-Based Health Care Delivery SystemThe Strategic Agenda1. Organize Care into Integrated Practice Units (IPUs) aroundPatient Medical Conditions For primary and preventive care, organize to serve distinctpatient segments2. Measure Outcomes and Costs for Every Patient3. Move to Bundled Payments for Care Cycles4. Integrate Care Delivery Systems5. Expand Geographic Reach and Serve a Major Population6. Build an Enabling Information Technology Platform2012.02.29 UK Plenary Session6Copyright Michael Porter 2011
1. Organize Care Around Patient Medical ConditionsMigraine Care in GermanyExisting Model:Organize by Specialty andDiscrete utpatientNeurologistsPrimary CarePhysiciansInpatientTreatmentand DetoxUnitsOutpatientPsychologistsSource: Porter, Michael E., Clemens Guth, and Elisa Dannemiller, The West German Headache Center: Integrated Migraine Care, Harvard Business School Case 9-707-559, September 13, 20072012.3.1 Book Launch Redefining German Health Care Porter Guth7Copyright Michael Porter 2012
1. Organize Care Around Patient Medical ConditionsMigraine Care in GermanyExisting Model:Organize by Specialty andDiscrete ServiceImagingCentersNew Model:Organize into IntegratedPractice Units (IPUs)AffiliatedImaging istsPrimary entand DetoxUnitsWest GermanHeadache CenterNeurologistsPsychologistsPhysical Therapists“Day logistsNeurologistsSource: Porter, Michael E., Clemens Guth, and Elisa Dannemiller, The West German Headache Center: Integrated Migraine Care, Harvard Business School Case 9-707-559, September 13, 20072012.3.1 Book Launch Redefining German Health Care Porter Guth8Copyright Michael Porter 2012
What is a Medical Condition? A medical condition is an interrelated set of patient medicalcircumstances best addressed in an integrated way– Defined from the patient’s perspective– Involving multiple specialties and services– Including common co-occurring conditions and complicationsExamples: diabetes, breast cancer, knee osteoarthritis In primary / preventive care, the unit of value creation isdefined patient segments with similar preventive,diagnostic, and primary treatment needs (e.g. healthy adults,frail elderly) The medical condition / patient segment is the proper unit ofvalue creation and value measurement in health caredeliverySource: Porter, Michael E. with Thomas H. Lee and Erika A. Pabo. “Redesigning Primary Care: A Strategic Vision to Improve Value by Organizing Around Patients’ Needs,” Health Affairs, Mar, 20132011.09.03 Comprehensive Deck9Copyright Michael Porter 2011
The Care Delivery Value ChainAcute Knee-Osteoarthritis Requiring ReplacementINFORMINGANDENGAGING Importance ofexercise, weightreduction, propernutritionMEASURING Joint-specificsymptoms andfunction (e.g.,WOMAC scale) Meaning of diagnosis Prognosis (short- andlong-term outcomes) Drawbacks andbenefits of surgery Loss of cartilage Change in subchondralbone Joint-specificsymptoms and function Overall health (e.g., Overall healthSF-12 scale)ACCESSING PCP office Health club Physical therapyclinicMONITORING/PREVENTINGCAREDELIVERY Specialty office Imaging facilityDIAGNOSING Setting expectations Expectations for Importance ofrecoveryrehab adherence Importance ofnutrition, weight loss, Importance of rehab Longitudinal carevaccinations Post-surgery risk Home preparation Infections Specialty office Pre-op evaluationcenter Operating room Nursing facility Recovery room Rehab facility Orthopedic floor athospital or specialtysurgery center PT clinicPREPARING Prescribe antiinflammatorymedicines Review history andimaging Perform physical exam Recommend treatmentplan (surgery or otheroptions) Specialty office Primary care office Health club HomeRECOVERING/REHABBINGMONITORING/MANAGINGMONITOR Immediate return to OR for Consult regularly withpatientmanipulation, if necessary Monitor weight lossSURGICAL PREPSURGICAL PROCEDURE Perform cardiology,pulmonary evaluations Determine approach (e.g.,minimally invasive) Run blood labs Insert device Conduct pre-op physicalexam Cement joint Provide daily living support Revise joint, if necessary(showering, dressing)PAIN MANAGEMENT Track risk indicators(fever, swelling, other) Prescribe preemptivemultimodal pain medsPHYSICAL THERAPY Set weight losstargets2011.09.03 Comprehensive Deck Ability to return tonormal activitiesSURGICAL-Assess bone alterationsPREVENT Inpatient length of stay Joint-specific symptomsand function Weight gain or loss Missed work Overall health Administer anesthesia(general, epidural, orregional) Conduct PCP examCLINICAL EVALUATION Joint-specificsymptoms and functionANESTHESIA Perform and evaluate MRI Conduct homeassessmentand x-ray Recommendexercise regimenINTERVENINGOVERALL PREPIMAGING-Assess cartilage lossplan Baseline health Blood lossstatus Operative time Fitness for surgery Complications(e.g., ASA score)MONITOR Refer to specialists,if necessaryfactors Importance ofexercise,maintaininghealthy weightMEDICALMANAGE Monitor coagulation Prescribe prophylacticantibiotics when neededLIVING Set long-term exerciseplan Daily or twice daily PTsessions10Orthopedic SpecialistOther Provider EntitiesCopyright Michael Porter 2011
Integrating Across the Care CycleAn Orthopedic Surgeon Teaches A Course to Physical TherapistsAbout Treatment Post-Surgery2011.09.03 Comprehensive Deck11Copyright Michael Porter 2011
Attributes of an Integrated Practice Unit (IPU)1. Organized around a medical condition or set of closely relatedconditions (or around defined patient segments for primary care)2. Care is delivered by a dedicated, multidisciplinary team who devote asignificant portion of their time to the medical condition3. Providers see themselves as part of a common organizational unit4. The team takes responsibility for the full cycle of care for the condition Encompassing outpatient, inpatient, and rehabilitative care, as well assupporting services (such as nutrition, social work, and behavioral health)5. Patient education, engagement, and follow-up are integrated into care6. The unit has a single administrative and scheduling structure7. To a large extent, care is co-located in dedicated facilities8. A physician team captain or a clinical care manager (or both)oversees each patient’s care process9. The team measures outcomes, costs, and processes for each patientusing a common measurement platform10. The providers on the team meet formally and informally on a regularbasis to discuss patients, processes, and results11. Joint accountability is accepted for outcomes and costs2011.10.27 Introduction to Social Medicine Presentation12Copyright Michael Porter 2011
Volume in a Medical Condition Enables ValueThe Virtuous Circle of ValueImprovingReputationGreater PatientVolume in aMedicalConditionRapidly AccumulatingExperienceBetter Results,Adjusted for RiskFaster InnovationBetter Information/Clinical DataCosts of IT, Measurement, and ProcessImprovement Spreadover More PatientsMore FullyDedicated TeamsMore Tailored FacilitiesGreater Leverage inPurchasingRising ProcessEfficiencyWider Capabilities inthe Care Cycle,Including PatientEngagementBetter utilization ofcapacityRisingCapacity forSub-Specialization Volume and experience will have an even greater impact on value inan IPU structure than in the current system2012.3.1 Book Launch Redefining German Health Care Porter Guth13Copyright Michael Porter 2012
Role of Volume in Value CreationFragmentation of Hospital Services in SwedenDRGNumber ofadmittingprovidersKnee ProcedureDiabetes age 35Kidney failureMultiple sclerosis andcerebellar ataxia68808078Inflammatory boweldisease73Implantation of cardiacpacemaker51Splenectomy age 17Cleft lip & palate repairHeart transplant3776AverageAveragepercent of total admissions/nationalprovider/ 4383122 12 1Source: Compiled from The National Board of Health and Welfare Statistical Databases – DRG Statistics, Accessed April 2, 2009.2012.3.1 Book Launch Redefining German Health Care Porter Guth14Copyright Michael Porter 2012
2. Measure Outcomes and Costs for Every PatientThe Measurement LandscapePatientExperience/EngagementPatient elinesE.g. Staff certification,facilities standards2012.03.07 Value-Based Health Care Delivery(Health)OutcomesE.g. PSA,Gleason score,surgical marginStructure15Copyright Michael Porter 2011
The Outcome Measures HierarchyTier1Health StatusAchievedor RetainedTier2Process ofRecoveryTier3Sustainabilityof HealthSurvivalDegree of health/recovery Achieved clinical status Achieved functional statusTime to recovery and return to normal activitiesDisutility of the care or treatment process (e.g., diagnosticerrors and ineffective care, treatment-related discomfort,complications, or adverse effects, treatment errors and theirconsequences in terms of additional treatment)Sustainability of health/recovery and nature ofrecurrences Care-related pain/discomfort Complications Reintervention/readmission Long-term clinical status Long-term functional statusLong-term consequences of therapy (e.g., careinduced illnesses)Source: NEJM Dec 20102012.03.07 Value-Based Health Care Delivery16Copyright Michael Porter 2012
Measuring Multiple OutcomesProstate Cancer Care in GermanyAverage hospitalBest hospital94%5 year disease specific survival95%75.5%Severe erectile dysfunction after one year17.4%43.3%Incontinence after one year9.2%Source: ICHOM2011.09.03 Comprehensive Deck17Copyright Michael Porter 2011
Adult Kidney Transplant OutcomesU.S. Centers, 1987-19891009080Percent 1 YearGraft Survival7060Number of programs: 219Number of transplants: 19,588One year graft survival: 79.6%5016 greater than predicted survival (7%)20 worse than predicted survival (10%)400100200300400500600Number of Transplants2011.09.03 Comprehensive Deck18Copyright Michael Porter 2011
Adult Kidney Transplant OutcomesU.S. Center Results, 2008-20101009080Percent 1-yearGraft Survival708 greater than expected graft survival (3.4%)14 worse than expected graft survival (5.9%)60Number of programs included: 236Number of transplants: 38,5351-year graft survival: 93.55%508 greater than expected graft survival (3.4%)14 worse than expected graft survival (5.9%)400100200300400500600700800Number of Transplants2011.09.03 Comprehensive Deck19Copyright Michael Porter 2011
Measuring the Cost of Care Delivery: Principles Cost is the actual expense of patient care, not the charge billed orcollected Cost should be measured around the patient, not just the departmentor provider organization Cost should be aggregated over the full cycle of care for thepatient’s medical condition Cost depends on the actual use of resources involved in a patient’scare process (personnel, facilities, supplies) “Overhead” costs should be associated with the patient facingresources which drive their usageSource: Kaplan, Robert and Michael E. Porter, “The Big Idea: How to Solve the Cost Crisis in Health Care”, Harvard Business Review, September 1. 20112011.09.03 Comprehensive Deck20Copyright Michael Porter 2011
Mapping Resource UtilizationMD Anderson Cancer Center – New Patient VisitRegistration andVerificationIntakeReceptionist, Patient AccessSpecialist, InterpreterNurse,ReceptionistClinician VisitPlan of CareDiscussionPlan of CareSchedulingMD, mid-level provider,medical assistant, patientservice coordinator, RNRN/LVN, MD, mid-levelprovider, patient servicecoordinatorPatient ServiceCoordinatorDecision PointTime (minutes)2012.3.1 Book Launch Redefining German Health Care Porter Guth21Copyright Michael Porter 2012
Major Cost Reduction Opportunities in Health Care Reduce process variation that lowers efficiency and raises inventorywithout improving outcomes Eliminate low- or non-value added services or tests Sometimes driven by protocols or to justify billing Rationalize redundant administrative and scheduling units Improve utilization of expensive physicians, staff, clinical space, andfacilities by reducing duplication and service fragmentation Minimize use of physician and skilled staff time for less skilledactivities Reduce the provision of routine or uncomplicated services in highlyresourced facilities Reduce cycle times across the care cycle Optimize total care cycle cost versus minimizing cost of individualservice Increase cost awareness in clinical teams Many cost reduction opportunities will actually improve outcomes2011.10.27 Introduction to Social Medicine Presentation22Copyright Michael Porter 2011
3. Move to Bundled Payments for Care CyclesGlobalbudgetFee forserviceBundledreimbursementfor medicalconditionsGlobalcapitationBundled Price A single price covering the full care cycle for an acutemedical condition Time-based reimbursement for overall care of a chroniccondition Time-based reimbursement for primary/preventive care fora defined patient segment2011.10.27 Introduction to Social Medicine Presentation23Copyright Michael Porter 2011
Bundled Payment in PracticeHip and Knee Replacement in Stockholm, Sweden Components of OrthoChoice bundle-Pre-op evaluationLab testsAll RadiologySurgery & related admissionsProsthesisDrugsInpatient rehab, up to 6 days-All physician and staff fees and costs1 follow-up visit within 3 monthsResponsible for complications and anyadditional surgery to the joint within 2 yearsIf post-op deep infection requiringantibiotics occurs, guarantee extends to 5years Initially applied to all relatively healthy patients (i.e. ASA scores of 1 or 2)The same referral process from PCPs is utilized as the traditional systemMandatory reporting by providers to the joint registry plus supplementaryreporting Bundle applies to all qualifying patients. Provider participation is voluntary,but all providers opted in The Stockholm bundled price for a knee or hip replacement is aboutUS 8,0002011.10.27 Introduction to Social Medicine Presentation24Copyright Michael Porter 2011
4. Integrate Care Delivery SystemsChildren’s Hospital of Philadelphia Care NetworkGrand ViewHospitalSaint Peter’sUniversity Hospital(Cardiac Center)IndianValleyPENNSYLVANIAKing ofPrussiaPhoenixville HospitalExtonChester Co.CoatesvilleHospitalWest ChesterNorth HillsKennett SquareWest italCentral BucksBucks CountyPrincetonUniversityMedical Centerat PrincetonHigh PointFlourtownAbingtonHospitalNewtownHoly Redeemer HospitalSalem RoadPennsylvania HospitalUniversity CityMarket StreetCobbsCreek South PhiladelphiaDrexelHillMt. LaurelVoorheesNEW JERSEYThe Children’s Hospitalof Philadelphia DELAWAREHarborview/SmithvilleNetwork Hospitals:Atlantic CountyCHOP Newborn CareHarborview/Somers PointShore Memorial HospitalCHOP Pediatric CareCHOP Newborn & Pediatric CareWholly-Owned Outpatient Units:Pediatric & Adolescent Primary CarePediatric & Adolescent Specialty Care CenterPediatric & Adolescent Specialty Care Center & Surgery CenterPediatric & Adolescent Specialty Care Center & Home Care2011.10.27 Introduction to Social Medicine Presentation25Harborview/Cape May Co.Copyright Michael Porter 2011
Four Levels of Provider System Integration1.Define the overall scope of services where the providerorganization can achieve high value2.Concentrate volume by condition in fewer locations3.Choose the right location for each service based on medicalcondition, acuity level, resource intensity, cost level and needfor convenienceE.g., shift routine surgeries out of tertiary hospitals to smaller,more specialized facilities4. Integrate care across appropriate locations through IPUs2011.10.27 Introduction to Social Medicine Presentation26Copyright Michael Porter 2011
5. Expand Geographic ReachThe Cleveland Clinic Affiliate ProgramsRochester General Hospital, NYCardiac SurgeryChester County Hospital, PACardiac SurgeryCLEVELAND CLINICCentral DuPage Hospital, ILCardiac SurgerySt. Vincent Indianapolis, INKidney TransplantCharleston, WVKidney TransplantPikeville Medical Center, KYCardiac SurgeryCape Fear Valley Medical Center, NCCardiac SurgeryMcLeod Heart & Vascular Institute, SCCardiac SurgeryCleveland Clinic Florida Weston, FLCardiac Surgery2011.10.27 Introduction to Social Medicine Presentation27Copyright Michael Porter 2011
6. Build an Enabling Integrated IT PlatformUtilize information technology to enable restructuring of care deliveryand measuring results, rather than treating it as a solution itself Combine all types of data (e.g. notes, images) for each patient Common data definitions Data encompasses the full care cycle, including care by referring entities Allow access and communication among all involved parties, includingwith patients Templates for medical conditions to enhance the user interface “Structured” data vs. free text Architecture that allows easy extraction of outcome measures, processmeasures, and activity-based cost measures for each patient andmedical condition Interoperability standards enabling communication among differentprovider (and payor) organizations2011.10.27 Introduction to Social Medicine Presentation28Copyright Michael Porter 2011
A Mutually Reinforcing Strategic Agenda1Organize intoIntegratedPracticeUnits (IPUs)2MeasureOutcomesand Cost ForEvery ySystems62011.12.08 Comprehensive Deck3Move toBundledPayments forCare CyclesBuild an Integrated InformationTechnology Platform29Copyright Michael Porter and Elizabeth Teisberg 2011
Why We Have Been StuckThe Legacy System6 Siloed IT systems for functions, services, anddepartments2011.12.08 Comprehensive Deck30Copyright Michael Porter and Elizabeth Teisberg 2011
Getting Unstuck2011.12.08 Comprehensive Deck31Copyright Michael Porter and Elizabeth Teisberg 2011
Appendix2011.12.08 Comprehensive Deck32Copyright Michael Porter and Elizabeth Teisberg 2011
Moving to a High-Value Health Care System1. Make patient value the central goal of all reforms2. Move towards reorganizing care into Integrated Practice Unitsaround patient medical conditions Certification standards should require multidisciplinary teams,integrated scheduling, and coordinated case management Primary and preventive care should be tailored to serving distinctpatient segments3. Eliminate the separation between inpatient, outpatient, andrehabilitation care Integrate care across the care cycle, with more care shifting to theoutpatient setting Reduce cost-shifting between care settings by eliminating thedifferent models of reimbursement for inpatient and outpatient care Harness the power of IT to enable integrated care delivery2012.3.1 Book Launch Redefining German Health Care Porter Guth33Copyright Michael Porter 2012
Moving to a High-Value Health Care System4. Mandate a path to measurement and reporting of outcomes forevery patient condition Create a national body to oversee the development of outcomemeasures Mandate publication of risk-adjusted outcomes Until outcome data is widely available, expand minimum volumestandards5. Introduce new cost-accounting standards to measure costs at thelevel of patients and their medical conditions Establish a national body to develop common costing standardsthat provide accurate cost data across providers and allows costs tobe measured around the patient Pilot patient-level costing across care settings to inform bundledpayment design2012.3.1 Book Launch Redefining German Health Care Porter Guth34Copyright Michael Porter 2012
Moving to a High-Value Health Care System6. Shift reimbursement to bundled payments for the full care cycle Introduce a universal reimbursement catalog based on accuratepatient-level costing7. Encourage consolidation of providers and provider service lines Expand minimum volume standards to support excellent outcomesand efficient capacity utilization8. Develop a strategic plan by medical condition and primary caresegment to foster care integration, introduce outcome measures,pilot patient-level costing, and shift to bundled payments9. Engage clinicians in the value agenda and accept joint responsibility for itssuccess2012.3.1 Book Launch Redefining German Health Care Porter Guth35Copyright Michael Porter 2012
Creating a Value-Based Health Care Delivery System1. IntegratedPractice Units(IPUs)Implications for Payors Encourage and reward integrated practice unit models byproviders Encourage or mandate provider outcome reportingthrough registries by medical condition Create standards for meaningful provider costmeasurement and reporting Design new bundled reimbursement structures for carecycles instead of fees for discrete services Share information with providers to enable improvedoutcomes and cost measurement4. IntegrateAcross SeparateFacilities Assist in coordinating patient care across the care cycleand across medical conditions Direct care to appropriate facilities within provider systems5. ExpandExcellenceAcrossGeography Provide advice to patients (and referring physicians) inselecting excellent providers Create relationships to increase the volume of caredelivered by or affiliated with centers of excellence Assemble, analyze, manage members’ total medical records Require introduction of compatible medical records36Copyright Michael Porter 2012systems2. Measure Costand Outcomes3. Move toBundled Prices6. Enabling ITPlatform2012.3.1 Book Launch Redefining German Health Care Porter Guth
Creating a Value-Based Health Care Delivery SystemImplications for Government1. IntegratedPractice Units(IPUs) Reduce regulatory obstacles to care integration across thecare cycle Create a national framework of medical condition outcomeregistries and a path to universal measurement Tie reimbursement to outcome reporting Set accounting standards for meaningful cost reporting3. Move toBundled Prices Create a bundled pricing framework and rollout schedule4. IntegrateAcross SeparateFacilities Introduce minimum volume standards by medicalcondition5. ExpandExcellenceAcrossGeography Encourage rural providers and providers who fall belowminimum volume standards to affiliate with qualifyingcenters of excellence for more complex care6. Enabling ITPlatform Set standards for common data definitions,interoperability, and the ability to easily extract outcome,process, and costing measures for qualifying HIT systems2. Measure Costand Outcomes2012.3.1 Book Launch Redefining German Health Care Porter Guth37Copyright Michael Porter 2012
This presentation draws on Porter, Michael E. and Thomas H. Lee. "The Strategy that Will Fix Health Care," Harvard Business Review, October 2013; Porter, Michael E. with Thomas H. Lee and Erika A. Pabo. "Redesigning Primary Care: A Strategic Vision to Improve Value by Organizing Around Patients' Needs," Health Affairs, March 2013 .
