One of the thought leaders in the arena of health care reform today is a Darden School professor, Elizabeth Olmsted Teisberg. She is virtually unknown in her home state of Virginia, but political leaders ought to make her acquaintance. She teamed up with Michael Porter, Harvard Business School’s competitiveness guru, to write a critically important book, “Redefining Health Care,” that should be must read for anyone legislating the makeover of the U.S. health care system.
Much of the Porter/Teisberg critique will sound familiar. Americans spend more per capita on health care than anywhere else in the world, but we get less value than many other nations. The American system provides inadequate access to health care for tens of millions of citizens. Quality breakdowns are endemic: Medical errors contribute to some 200,000 deaths a year. The diffusion of medical knowledge takes years. Fear of tort liabilities distort the practice of medicine.
Administrative costs, at 20-25% of expenditures, are staggering.
Unlike politicians, Teisberg doesn’t demonize particular groups — greedy doctors, rapacious pharmaceutical companies, predatory insurance carriers, etc. She and Porter suggest that the problem stems from the way competition is structured in the health care industry.
Health care competition is not focused on delivering value for patients. Instead, it has become zero sum: the system participants struggle to divide value when they could be increasing it. Although health care offers tremendous value, the unnecessary costs of zero-sum competition undermine and erode that value. It is the zero-sum competition in health care that has created … high costs, low or variable quality, under- and overtreatment, too many preventable errors in diagnosis and treatment, restrictions on choice, rationing of services, limited access, and a raft of costly lawsuits.
Zero-sum competition in health care is manifested in a number of ways, none of which creates value for patients:
Competition to shift costs
Competition to increase bargaining power
Competition to capture patients and restrict choice
Competition to reduce costs by restricting services
Healthy competition is competition to improve value for customers, or the quality of products or services relative to their price. It leads to relentless improvements in efficiency. Product quality and customer service improve. Innovation propels advances in the state of the art. Quality adjusted prices fall, and the market expands and more customer needs are met. Choice expands as firms work to distinguish their products or services from others. Excellent firms prosper while firms with low quality, poor service, or high costs decline or go out of business unless they make fundamental improvements in the way they operate.
And how do we create value-based competition? In Senate testimony, Teisberg made the case for universal access, measuring results, and restructuring the payment system. I won’t linger on the universal access issue, as it is familiar to most. But the other two recommendations warrant elaboration.
Measuring results. “Through meaningful outcomes measurement, clinical teams are able to accelerate learning about what truly improves health outcomes and what improves the efficiency of effective care,” Teisberg testified. Congress should require outcomes measurement and turn the data over to professional organizations for analysis. The purpose of measurement, she emphasizes, is not to enable consumer shopping. It’s to accelerate learning and improvement in medical practice.
Payment. “In the current system, financial success and medical success are not aligned,” testified Teisberg. The reimbursement system covers treatments piecemeal: by procedure, by visit, by intervention and by hospital stay. It encourages poor coordination, redundant treatments and inattention to the patient’s full cycle of care. Instead, the system should pay clinical “teams” for treatment of a patient’s medical condition over the full cycle of care.
Realigning the payment system would restructure the way health care is delivered. Providers would compete on their ability to deliver the best outcomes at the most reasonable price. Competition then would become a positive force rather than a negative one.
Sadly, while legislation discussed in Washington strives to deliver universal access, it does little to address the underlying problems of escalating cost and sub-par outcomes. Rather than creating healthy competition over how best to deliver value, legislation would perpetuate, perhaps even intensify, the zero-sum gamesmanship and cost shifting that is the bane of American health care. Is it too much to ask for Senators Mark Warner and Jim Webb to consult one of Virginia’s intellectual superstars in order to rechannel health care reform in a more positive direction?
