Skip to main content

Michael Porter on Fixing Health Care

By January 16, 2014Commentary

Michael Porter is an outstanding business strategist.  Several years ago he became focused on the problems with the US health care system.  In a modestly titled article in the Harvard Business Review–The Strategy That Will Fix Health Care–he and co-author Thomas Lee lay out his current comprehensive vision for how to fix the system that just about everyone says is broken, although that is a mischaracterization, since the system is performing exactly as we should anticipate it would given its economic and regulatory characteristics and incentives for patients, providers and payers.   (HBR Article)  Porter thinks that the key is making “value”, specifically consumer-centered value, the only goal of the system.  Value is defined as better health outcomes and status at the lowest possible price.  He sets out 6 primary steps to reaching this objective:  organize into integrated practice units; measure outcomes and costs for every patient; move to bundled payments; integrate care delivery; expand excellent services across geographies and build and enabling IT platform.  While those all may be worthy strategies, it is not at all clear that universal adoption would actually improve outcomes or lower costs, in fact some of what is suggested would likely raise spending.  And there are a number of at best questionable statements in the article.  To list a few; he says that profits for providers depend on increasing the volume of services not delivering good results.  Given the amount of at-risk payment in the system, that is not really true and there are a large number of programs which specifically reward or punish for results.  Payers are not aggressively reducing reimbursements, as he suggests, in fact private payers have been increasing them above the rate of inflation.  Medicare payments are not a fraction of private payments.  Most patients, especially the ones with a high level of health spending, do not know how to evaluate “quality” or “value” and often do so in terms of service quality, not health outcomes.  Much of what he suggests in terms of consolidation of providers, lack of duplication of service lines, employment of physicians, bundled payments is highly likely to create more economic consolidation, greater political power and higher spending in the form of unit prices.  And complex patients have multiple diseases which are difficult to manage by provider units focused on just one condition.   He also fails to consider the role of selection bias in the examples he uses of supposed successful change toward the goals he lays out.

Unfortunately, the misperceptions in the article fairly completely undercut the notion that this really is the “strategy that will fix health care.”  All ideas are worth considering, but they need to be more closely based in the daily, nitty-gritty reality of health spending and use and health markets.  Now here is a slightly different vision for the future of health care:  reduce the role of government spending by voucherizing Medicare and means testing it; turn Medicaid completely back to the states; limit health insurance to catastrophic coverage and encourage the use of health savings type accounts; reverse provider consolidation and regulate prices where competitive markets don’t exist, and ensure that people bear the full consequences of poor or good health behaviors.  Not likely to happen, but if it did, spending would decrease dramatically and rapidly and quality would likely improve.

Leave a comment