Redefining Health Care, Revisited

Published April 3, 2008

In May of 2006–almost two years ago–Michael Porter and Elizabeth Tiesberg released a watershed book that, for the first time, explained clearly and comprehensively just what ails the U.S. health care system. There are two central reasons, Redefining Health Care explains, why competition hasn’t brought the same benefits to the greater health care system that it bestows on Lasik and cosmetic surgery.

First, patients need cost and quality data so they can vote with their wallets for the providers that offer the greatest value. Second, health care delivery should be centered on the medical condition instead of discrete procedures or academic areas of study. The authors said they believed the redefinition of health care was not only possible but already underway.

Since the book’s release, health care has become increasingly top-of-mind for Americans. Common topics on the evening news have ranged from HSAs to SCHIP, and from Michael Moore to Nataline Sarkisyan. Each of the presidential candidates has a plan to reform the system.

Unfortunately, few have taken advantage of the blueprint laid out by Porter and Tiesberg two years ago.

Valuable Information

The dearth of available information about the cost and quality of health care, Porter and Tiesberg argued, is one of the biggest obstacles to healthy competition in the sector. In fact, they said, “Mandatory measurement and reporting of results is perhaps the single most important step in reforming the health care system.” So, are we any closer to readily available results information?

Yes and no. What passes for data on quality gets more attention today than ever before. Many health insurance companies now have a way to indicate the providers (in their networks) that, according to the insurers’ data, deliver high-quality care. A growing number of providers now tout their own quality credentials. An unscientific sample of the hospitals in my home state found three in 10 offer at least some information about awards and accreditations. And Medicare is more attuned than ever to paying for performance.

But the definitions of “quality” and “performance” are critical–and often botched. Porter and Tiesberg warned against the temptation to substitute process for outcome when measuring the quality of health care. It’s certainly easier to determine whether a particular standard process is followed in treating patients than it is to measure (with appropriate risk adjustments) the outcome of the treatment. The problem with measuring adherence to procedures is that it limits–and often penalizes–innovation. Unfortunately, the information available to consumers today still tends to focus on process rather than results. The mandatory measurement and reporting of results that Porter and Tiesberg so strongly advocated has not come to pass. In fact, the Bush administration has fought pressure to release Medicare data that could be helpful in rating physicians’ results.

As for cost information, the industry has made major strides in the past two years. At least one major payer recently introduced real-time claim adjudication, so patients can know and pay their share of the bill while at the doctor’s office. Even better, tools such as Alegent Health’s My Cost allow patients to accurately estimate their out-of-pocket costs in advance. My informal poll of hospitals in my state found that two of the 10–part of the Alegent family–offered online cost estimates, and two others at least offered a phone number one can call to obtain an upfront estimate.

The increasing prevalence of pricing tools such as these, combined with the growth of quality information, is making it possible for some patients to shop for health care value.

Unconditional Care

The other big obstacle to properly functioning health care competition, Porter and Tiesberg illustrated, is that delivery is focused on discreet procedures (such as dialysis) instead of medical conditions (e.g., diabetes). Very little new progress has been made in this area. It’s impossible to be at all times abreast of all innovations as they occur, but even so, only a few isolated, anecdotal examples of new players or innovative practice models come to mind.

Other innovations are taking place in the health care market that the Redefining authors expressly welcomed or at least indirectly prescribed. Some notable examples are:

  • Firms such as are making it much easier for consumers to shop intelligently for health care, just as they do for other services.
  • Physicians are offering level payments and package pricing for some of their basic primary care services.
  • Health plans are beginning to measure their members’ health.
  • Some insurance companies are experimenting with new, low-cost plans that offer a measure of affordable coverage to younger, healthier consumers.
  • Medical Justice has created a solution that helps physicians avoid the cost and distraction of frivolous malpractice suits.

The Next Two Years While we don’t know exactly what the next two years will bring, we can count on the continuation of three trends:

Innovation — A market so big ($2 trillion) and so broken will continue to attract entrepreneurs and capital.

Regulatory Scrutiny — The pressure on the system to reduce costs and improve quality is causing participants to try new and often-bold solutions–the kind that often attract the attention of attorneys general and insurance commissioners.

Change — With health care already receiving much attention in the presidential campaign, we don’t know whether free-market principles will be embraced or rejected over the next two years, but one thing is certain: The system won’t look the same two years from now.

William Snyder is a senior manager at a major diversified health care company.