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Immersion Experience – Value-Based Health Care Delivery IXP

“No, No , No” exclaimed Michael Porter, chastising the Associate Director of a major medical center in Israel, “You have to raise your hand.” Such blatant breaches of HBS etiquette were relatively frequent over the course of the week long IXP, which drew a wide range of participants, many of whom were unfamiliar with the peculiarities of the typical HBS classroom.

The Value-Based Health Care Delivery IXP, co-led by Professor’s Porter, and Elizabeth Teisberg (formerly of HBS and currently a professor at the Darden School of Business at the University of Virginia), was a multi-disciplinary immersion program based on the framework presented in the book, Redifining Healthcare. The book, which diagnoses the problem of competition in the modern healthcare system, introduces a broad set of strategies which providers, payers, employers and the government can use to improve value. The immersion program was designed as an extension of the book, and involved case studies and subsequent discussions of companies and organizations who have implemented strategies that demonstrate the principles outlined by Porter and Teisberg.

Program participants came from all corners of the healthcare sector. In addition to 17 HBS MBA students with prior healthcare experience (10 of whom were MD MBA’s), there were students from Harvard School of Public Health, Kennedy School of Government, and Harvard Medical School. Participants also included many medical residents and practicing physicians, most of whom were affiliated with hospitals in the Boston area, including several heads of departments and several senior surgeons and administrators. Finally, there was also a significant international contingent, with participants flying in from Ireland, Israel, England, and Canada.

Prior to the start of the program, participants were required to read Porter and Teisberg’s book, which as noted above, outlined the broad ideas on which the course would focus. The core of Porter and Teisberg’s argument is that the structure of health care delivery in the United States (and the rest of the world for that matter) is broken, and that it is broken because the nature of competition in the industry is broken. In the Introduction to Redefining Health Care, the authors note that “In a normal market, competition drives relentless improvement in quality and cost. Rapid innovation leads to rapid diffusion of new technologies . Excellent competitors prosper and grow while weaker rivals are restructures or go out of business. Quality adjusted prices fall, value improves and the market expends to meet the needs of more consumers.” Clearly this is not the case in the current health care environment. The authors’ argue that the delivery of health care should focus on maximizing value, defined as health outcomes/total costs, and that this metric should then form the basis of competition in the industry. Providers that can maximize value, i.e. deliver more effective, higher quality care at lower quality adjusted prices should be rewarded with more patients. Providers that can’t keep deliver on these promises should either adapt and innovate, or go out of business. As program participants entered Hawes 102 on Monday, January 5th, most were questioning how this simple and logical premise could be implemented in the real world.

The course began, as most do, with an introduction provided by the Faculty, however, this introduction was different than most. Professor Teisberg recounted the story of a child, her child, who suffered from an undiagnosed disease for most of their early childhood. She talked about the difficulties she had navigating the system, even as an informed and educated consumer of healthcare, and the struggles she faced as the mother of a sick child. Her closing words “Surely we can do better” served as motivation and as a backdrop for the rest of the week. As the week progressed we examined a variety of different organizations and providers who had begun to compete based on delivering value. These included nationally recognized medical centers including MD Anderson Cancer Center in Texas, the Cleveland Clinic, the Joslin Diabetes Center in Boston, and the Dartmouth-Hitchcock Medical Center in New Hampshire. We studied several payer organizations including a major health plan in Germany, KKH, which was able to build market share in the ultra-competitive German insurance market by supporting specialized migraine care for patents, and Commonwealth Care Alliance, which was able to profitably serve poor elderly patients, most with several chronic diseases. In both cases, the organizations were able to demonstrate improved health outcomes at lower costs that conventional systems. We were also able to pick the brains of the individuals responsible for implementing the successful strategies, as the CEO’s and executives from each case attended class, and then discussed the case and answered questions for almost an hour and a half.

Over the course of the week, a number of key lessons began to emerge. 1) The need to shift physician compensation from a fee for service system to a salaried one; 2) The need to re-engineer the reimbursement system from one that provides discrete payments to individual providers, to disease specific capitated payments that cover the entire cycle of care – especially preventive and primary care; 3) The importance of changing the structure of delivery organizations from traditional academic departments to integrated practice units (IPU’s) which are designed to provide multi-disciplinary care across the entire cycle of a specific disease or condition; and finally 4) the importance of developing effective and replicable outcome measures which are accessible and transparent to consumers. However, more than remembering any one principle, I was left the course with a tremendous sense of opportunity and optimism. It is undeniable that in its current form, the healthcare system in this country faces some major challenges. Rising costs and unequal quality of care are simply inexcusable in a country that should and could do better. Porter and Teisberg have tackled the problem head-on and have presented a framework that, although incomplete and in no way perfect, provides a glimpse of a better way. Armed with examples of organizations who have successfully implemented many of these lessons, the participants of the Value-Based Health Care Delivery IXP are thus charged with a mandate to change the status-quo. Given the level of passion and enthusiasm exhibited by everyone that week, I have no doubt that they will.

January 26, 2009
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