Focusing on Patient Outcomes and Costs

Throughout his career, Michael E. Porter, MBA, PhD, has played an important role in shaping the ways students learn and businesses operate. Dr. Porter, a Harvard Business School professor, advises corporations on strategy and provides guidance to the highest levels of government. His research and views are taught at most business schools in the United States and are applied every day at businesses both large and small.

For the past decade, Dr. Porter’s efforts have mostly shifted to an area he believes needs revamping: healthcare. In 2006, Dr. Porter and coauthor Elizabeth Olmsted Teisberg (a business professor at the University of Virginia) published Redefining Health Care: Creating Value-Based Competition on Results, an award-winning book. He also has shared his ideas in various articles published in the New England Journal of Medicine.

His work has led him to conclude that providers have 3 alternatives: (1) they can ration care, (2) they can take a “gigantic” pay cut, or (3) they can improve the value of care. Dr. Porter defines value as the health outcomes patients receive for every dollar spent delivering the care.

To transform the industry, he said healthcare organizations must put value to the patient as the centerpiece rather than the traditional method of shifting costs between parties and exercising bargaining power to push up or down reimbursement rates.

“We cannot do that by putting Band-Aids or incremental changes on the system as it is structured today,” said Dr. Porter, who spoke at the American Psychiatric Association Annual Meeting in Philadelphia in May. “It does not matter how hard we work, it does not matter how hard we try, it does not matter how smart we are—the structure of delivery today really will defeat us in trying to deliver value.”

Dr. Porter proposes 6 steps to creating a value-based delivery system: (1) organizing care into integrated practice units focused on medical conditions, (2) measuring outcomes and costs for each patient, (3) reimbursing providers with bundled payments based on a patient population or medical condition, (4) integrating delivery across facilities in health systems, (5) expanding the geographic areas that providers serve, and (6) building an information technology platform to help spur the change.

“Unless we actually attack the fundamental structure by which we deliver care, we are not going to succeed,” Dr. Porter added. “We have tried this incremental model for the last 20 or 25 years and we have not succeeded. We have to change the structure. We have to change the way we organize, the way we work together in actually delivering care.”

Although measurement in healthcare has improved in recent years, Dr. Porter said a common mistake is that healthcare organizations measure processes instead of outcomes. They know the protocol patients go through, how many drugs they are prescribed, and how often providers adhere to guidelines. However, most organizations do not know how to track a patient’s outcome such as his/her continued health status.

Better health, not more treatment, should be the goal, according to Dr. Porter, who added that “being healthy is the cheapest state.” When measuring outcomes, Dr. Porter suggests focusing on quality improvements such as preventing illness, early detection, correct diagnosis, fewer complications and mistakes, less invasive procedures, slower disease progression, and faster recovery.

Dr. Porter said measuring all outcomes for a hospital is “kind of meaningless” because outcomes vary depending on the condition. Thus, the industry should measure outcomes based on conditions, which he defined as not just the disease itself, but also co-occurrences. For example, a patient with diabetes may require vascular and/or eye care.

Other issues have plagued healthcare and created barriers to reform, according to Dr. Porter. He said there is “phenomenal confusion in healthcare” regarding costs, with most people considering what providers bill and receive in payments as the costs. Instead, Dr. Porter suggested the measurement should include the costs of the staff, resources, space, equipment, and other associated costs in providing the full circle of care for a patient’s condition.

Dr. Porter also believes the reimbursement system is flawed. He mentioned that providers are compensated well for some procedures such as kidney transplants, so they tend to focus on these procedures even if they do not have the necessary experience, team, or facilities.

In addition, there is confusion about integrated care, which Dr. Porter defines as care that is organized around a patient’s problem, involves a multidisciplinary team that takes responsibility for as much of the care cycle as possible, and measures and attempts to improve outcomes. Many people mistakenly believe integrated care is the same as a clinical pathway, a medical home, an accountable care organization, an institute, a multispecialty group practice, or a health plan/provider system such as Kaiser Permanente.

Further, in the current healthcare organizational structure, each patient is treated differently, according to Dr. Porter. However, to deliver value, he said a large volume of patients with the same conditions (such as elderly, disabled, or breast cancer patients) must be measured to compare them.

Still, Dr. Porter knows that many providers are skeptical of his theories. Through the years, they have heard numerous ways to change outdated or ill-advised practices. Implementing those ideas, though, is challenging.

“I think the biggest fear I have about all of you is that you are too fatalistic,” said Dr. Porter, addressing mental health professionals at the meeting. “You think there is nothing that can be done, that it is all [messed] up, health plans are idiots, Medicaid is never going to do anything differently, we have had all these pilots but nothing ever really happens. I hear that, but I firmly believe that we have now come to a potential inflection point.”

Dr. Porter admitted similar problems occur throughout the world, even in Germany, a country considered to be “insurance heaven” because all of its residents have health insurance coverage. Germans are able to visit any doctor at any time without referrals, and high-income people pay more than lower-income people. Still, costs are rising, according to Dr. Porter.

There are instances in which applying Dr. Porter’s methods have worked. He cited an inpatient eating disorder provider in Germany that treats >500 patients per year at 16 hospitals and dedicates an integrated care team to addressing their needs. People with eating disorders throughout the country are treated by a staff solely focused on treating the condition, including psychiatrists, psychologists, nurses, nutritionists, dieticians, and a chief internist. Other doctors are available once per week or on call, if needed.

The staff measures outcomes for each eating disorder patient and then meets with senior management to review the information and discuss areas of improvement. The chief executive officer also meets with leaders treating similar medical conditions to discuss their performance and any variations across the hospitals.

Also in Germany, there are migraine centers in which a neurologist, physical therapist, and psychologist work together with support staff in a common facility. When a patient makes an appointment, he/she is evaluated on the same day by all of the specialists. If it is a complex condition, he/she is brought to a “day hospital” for 5 days of group therapy. After a patient’s condition is stabilized, he/she can be referred to an affiliated neurologist, who shares the information with the staff members.

The migraine centers cost more than traditional care at the outset, but after 18 months, costs are reduced by 25% because of improved patient outcomes. Dr. Porter said disease control, emergency department visits, and repeat visits have improved “dramatically overnight” at the facilities.

In the United States, the University of Texas MD Anderson Cancer Center has been successful at integrating mental health and physical health practice units. Dr. Porter said the MD Anderson staff understands that depression is an obstacle in getting good outcomes, particularly in treating conditions such as head and neck cancer, in which patients can have disfigurement, lose their voice, and have trouble eating. More than 2000 new patients with head and neck cancer are treated at MD Anderson each year by a dedicated staff that includes medical, surgical, and radiation oncologists plus nurses, mental health professionals, and other providers.

The German and MD Anderson examples are not perfect, according to Dr. Porter, but they are models to follow for an industry always looking to improve patients’ health and reduce costs.

“I think so much of what is not working well in healthcare is not the talent of the individuals,” he said. “It is actually the system in which those individuals are trying to work. The system is working against [them], and it is dissipating [their] energy and [their] time and [their] enthusiasm. We have to change that."