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Michael porter value of hc

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Value-Based Health Care Delivery
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Redefining Health Care Delivery

                    • The core issue in health care is the value of health care
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Creating a Value-Based Health Care System

                    • Significant improvement in value will require fundamental...

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Michael porter value of hc

  1. 1. Value-Based Health Care Delivery Professor Michael E. Porter Harvard Business School www.isc.hbs.edu Mount Sinai Department of Medicine Grand Rounds Arthur Ludwig, M.D. Lecturer for Humanism in Medicine May 8, 2012 This presentation draws on Redefining Health Care: Creating Value-Based Competition on Results (with Elizabeth O. Teisberg), Harvard Business School Press, May 2006; “A Strategy for Health Care Reform—Toward a Value-Based System,” New England Journal of Medicine, June 3, 2009; “Value-Based Health Care Delivery,” Annals of Surgery 248: 4, October 2008; “Defining and Introducing Value in Healthcare,” Institute of Medicine Annual Meeting, 2007. Additional information about these ideas, as well as case studies, can be found the Institute for Strategy & Competitiveness Redefining Health Care website at http://www.hbs.edu/rhc/index.html. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the permission of Michael E. Porter and Elizabeth O.Teisberg. 2012.5.8_Mt Sinai 1 Copyright © Michael Porter 2012
  2. 2. Redefining Health Care Delivery • The core issue in health care is the value of health care delivered Value: Patient health outcomes per dollar spent • Value is the only goal that can unite the interests of all system participants • How to design a health care delivery system that dramatically improves patient value • How to construct a dynamic system that keeps rapidly improving 2012.5.8_Mt Sinai 2 Copyright © Michael Porter 2012
  3. 3. Creating a Value-Based Health Care System • Significant improvement in value will require fundamental restructuring of health care delivery, not incremental improvements Today, 21st century medical technology is often delivered with 19th century organization structures, management practices, measurement methods, and payment models • Care pathways, process improvements, safety initiatives, case managers, disease management and other overlays to the current structure are beneficial, but not sufficient 2012.5.8_Mt Sinai 3 Copyright © Michael Porter 2012
  4. 4. Creating The Right Kind of Competition • Patient choice and competition for patients are powerful forces to encourage continuous improvement in value and restructuring of care • Today’s competition in health care is not aligned with value Financial success of Patient system participants success • Creating positive-sum competition on value is fundamental to health care reform in every country 2012.5.8_Mt Sinai 4 Copyright © Michael Porter 2012
  5. 5. Principles of Value-Based Health Care Delivery • The overarching goal in health care must be value for patients, not access, cost containment, convenience, or customer service Health outcomes Value = Costs of delivering the outcomes – Outcomes are the health results that matter for a patient’s condition over the care cycle – Costs are the total costs of care for a patient’s condition over the care cycle 2012.5.8_Mt Sinai 5 Copyright © Michael Porter 2012
  6. 6. Creating a Value-Based Health Care Delivery System The Strategic Agenda 1. Organize Care into Integrated Practice Units (IPUs) around Patient Medical Conditions − Organize primary and preventive care to serve distinct patient segments 2. Measure Outcomes and Cost for Every Patient 3. Reimburse through Bundled Prices for Care Cycles 4. Integrate Care Delivery Across System Facilities 5. Expand Areas of Excellence Across Geography 6. Build an Enabling Information Technology Platform 2012.5.8_Mt Sinai 6 Copyright © Michael Porter 2012
  7. 7. 1. Organize Care Around Patient Medical Conditions Migraine Care in Germany Existing Model: Organize by Specialty and Discrete Services Imaging Outpatient Centers Physical Therapists Outpatient Neurologists Primary Care Physicians Inpatient Treatment and Detox Units Outpatient Psychologists Source: Porter, Michael E., Clemens Guth, and Elisa Dannemiller, The West German Headache Center: Integrated Migraine Care, Harvard Business School Case 9-707-559, September 13, 2007 2012.5.8_Mt Sinai 7 Copyright © Michael Porter 2012
  8. 8. 1. Organize Care Around Patient Medical Conditions Migraine Care in Germany Existing Model: New Model: Organize by Specialty and Organize into Integrated Discrete Services Practice Units (IPUs) Affiliated Imaging Outpatient Imaging Unit Centers Physical Therapists West German Headache Center Essen Outpatient Primary Neurologists Univ. Neurologists Care Psychologists Hospital Physicians Physical Therapists Inpatient Primary Care “Day Hospital” Unit Physicians Inpatient Treatment and Detox Units Network Outpatient Affiliated “Network” Neurologists Psychologists Neurologists Source: Porter, Michael E., Clemens Guth, and Elisa Dannemiller, The West German Headache Center: Integrated Migraine Care, Harvard Business School Case 9-707-559, September 13, 2007 2012.5.8_Mt Sinai 8 Copyright © Michael Porter 2012
  9. 9. What is a Medical Condition? • A medical condition is an interrelated set of patient medical circumstances best addressed in an integrated way – Defined from the patient’s perspective – Involving multiple specialties and services – Including common co-occurring conditions and complications • In primary / preventive care, the unit of value creation is defined patient segments with similar preventive, diagnostic, and primary treatment needs (e.g. healthy adults, frail elderly) • The medical condition / patient segment is the proper unit of value creation and the unit of value measurement in health care delivery 2012.5.8_Mt Sinai 9 Copyright © Michael Porter 2012
  10. 10. Integrating Across the Cycle of Care Breast Cancer INFORMING  • Advice on self • Counseling patient • Explaining patient • Counseling on the • Counseling on • Counseling on long treatment options/ treatment process rehabilitation term risk AND  screening and family on the shared decision • Education on options, process management ENGAGING • Consultations on diagnostic process making managing side effects and avoiding • Achieving • Achieving compliance risk factors and the diagnosis • Patient and family compliance complications psychological • Achieving • Psychological counseling compliance counseling MEASURING • Self exams • Mammograms • Labs • Procedure-specific • Range of • MRI, CT • Ultrasound • Recurring mammograms • Mammograms • MRI measurements movement • Labs (CBC, etc.) • Side effects (every six months for the • Biopsy first 3 years) measurement • BRACA 1, 2… • CT • Bone Scans ACCESSING • Office visits • Office visits • Office visits • Hospital stays • Office visits • Office visits THE PATIENT • Mammography unit • Lab visits • Lab visits • Lab visits • Hospital visits • Visits to outpatient • Rehabilitation • Lab visits radiation or chemo- • Mammographic labs and facility visits imaging center visits • High risk clinic therapy units • Pharmacy visits visits • Pharmacy visits MONITORING/ RECOVERING/ MONITORING/ DIAGNOSING PREPARING INTERVENING PREVENTING REHABING MANAGING • Medical history • Medical history • Choosing a • Surgery (breast • In-hospital and • Periodic mammography • Control of risk • Determining the treatment plan preservation or outpatient wound • Other imaging factors (obesity, specific nature of • Surgery prep mastectomy, healing • Follow-up clinical exams high fat diet) the disease (anesthetic risk oncoplastic • Treatment of side • Treatment for any continued • Genetic screening (mammograms, assessment, EKG) alternative) effects (e.g. skin or later onset side effects or • Clinical exams pathology, biopsy damage, cardiac • Plastic or onco- • Adjuvant therapies complications • Monitoring for results) complications, lumps • Genetic evaluation plastic surgery (hormonal nausea, • Labs evaluation medication, lymphedema and • Neo-adjuvant radiation, and/or chronic fatigue) chemotherapy chemotherapy) • Physical therapy 2012.5.8_Mt Sinai 10 Copyright © Michael Porter 2012
  11. 11. Attributes of an Integrated Practice Unit (IPU) 1. Organized around the patient medical condition or set of closely related conditions (or patient segment in primary care) 2. Involves a dedicated, multidisciplinary team who devotes a significant portion of their time to the condition 3. Providers involved are members of or affiliated with a common organizational unit 4. Provides the full cycle of care for the condition − Encompassing outpatient, inpatient, and rehabilitative care as well as supporting services (e.g. nutrition, social work, behavioral health) 5. Incorporates patient education, engagement, and follow-up 6. Utilizes a single administrative and scheduling structure 7. Co-located in dedicated facilities 8. Care is led by a physician team captain and a care manager who oversee each patient’s care process 9. Measures outcomes, costs, and processes for each patient using a common information platform 10. Meets formally and informally on a regular basis to discuss patients, processes and results 11. Accepts joint accountability for outcomes and costs 2012.5.8_Mt Sinai 11 Copyright © Michael Porter 2012
  12. 12. Integrating Mental Health into Physical Health IPUs MD Anderson Head and Neck Center Dedicated Shared Center Management Team - 1 Center Medical Director (MD) - 2 Associate Medical Directors (MD) - 1 Center Administrative Director (RN) Dedicated MDs Shared MDs - 8 Medical Oncologists - Endocrinologists - 12 Surgical Oncologists - Other specialists as needed - 8 Radiation Oncologists (cardiologists, plastic surgeons, etc.) - 5 Dentists - Psychiatrists - 1 Diagnostic Radiologist - 1 Pathologist - 4 Ophthalmologists Skilled Staff Skilled Staff - 22 Nurses - Dietician - 3 Social Workers - Inpatient Nutritionists - 4 Speech Pathologists - Radiation Nutritionists - 1 Nutritionist - Smoking Cessation Counselors - 1 Patient Advocate 2012.02.29 UK Mental Health Care 12 Copyright © Michael Porter 2011
  13. 13. Volume in a Medical Condition Enables Value The Virtuous Circle of Value Improving Greater Patient Reputation Volume in a Medical Better Results, Condition Adjusted for Risk Rapidly Accumulating Experience Faster Innovation Better Information/ Clinical Data Costs of IT, Measure- ment, and Process More Fully Improvement Spread Dedicated Teams over More Patients Greater Leverage in More Tailored Facilities Purchasing Rising Process Wider Capabilities in Efficiency the Care Cycle, Including Patient Better utilization of Engagement Rising capacity Capacity for Sub-Specialization • Volume and experience will have an even greater impact on value in an IPU structure than in the current system 2012.5.8_Mt Sinai 13 Copyright © Michael Porter 2012
  14. 14. Low Volume Undermines Value Mortality of Low-birth Weight Infants in Baden-Würtemberg, Germany Five large centers 15.0% 8.9% All other hospitals 11.4% 33.3% < 26 weeks 26-27 weeks gestational age gestational age Source: Hummer et al, Zeitschrift für Geburtshilfe und Neonatologie, 2006; Results duplicated in AOK study: Heller G, Gibt es einen Volumen-Outcome- Zusammenhang bei der Versorgung von Neugeborenen mit sehr niedrigem Geburtsgewicht in Deutschland – Eine Analyse mit Routinedaten, Wissenschaftliches Institut der AOK (WIdO) 2012.5.8_Mt Sinai 14 Copyright © Michael Porter 2012
  15. 15. 2. Measure Outcomes and Cost for Every Patient Patient Adherence Patient Initial Processes Indicators (Health) Conditions Outcomes Protocols/ E.g., Hemoglobin Guidelines A1c levels for diabetics Structure E.g., Staff certification, facilities standards 2012.5.8_Mt Sinai 15 Copyright © Michael Porter 2012
  16. 16. The Outcome Measures Hierarchy Tier Survival 1 Health Status Achieved • Clinical Status Degree of health/recovery or Retained • Functional Status Tier Time to recovery and return to normal activities 2 Process of Disutility of the care or treatment process (e.g., diagnostic errors Recovery and ineffective care, treatment-related discomfort, complications, or adverse effects, treatment errors and their consequences in terms of additional treatment) Sustainability of health /recovery and nature of Recurrences Tier recurrences 3 Care-induced Sustainability Illnesses Long-term consequences of therapy (e.g., care- of Health induced illnesses) Source: NEJM Dec 2010 2012.5.8_Mt Sinai 16 Copyright © Michael Porter 2012
  17. 17. The Outcome Measures Hierarchy Breast Cancer • Survival rate Initial Conditions/Risk Survival (One year, three year, Factors five year, longer) • Stage upon diagnosis • Degree of remission • Functional status • Type of cancer Degree of recovery / health (infiltrating ductal • Breast conservation • Depression carcinoma, tubular, medullary, lobular, • Time to remission etc.) Time to recovery or return to • Time to functional • Estrogen and normal activities status progesterone receptor status (positive or • Nosocomial • Suspension of Disutility of care or treatment process infection therapy negative) (e.g., treatment-related discomfort, • Nausea/vomiting • Failed therapies • Sites of metastases complications, adverse effects, • Febrile • Limitation of diagnostic errors, treatment errors) neutropenia motion • Previous treatments • Depression • Age • Cancer recurrence Sustainability of recovery or • Sustainability of • Menopausal status health over time functional status • General health, including co- morbidities Long-term consequences of • Incidence of • Fertility/pregnancy secondary cancers complications • Psychological and therapy (e.g., care-induced • Brachial • Premature social factors illnesses) plexopathy osteoporosis 2011.09.03 Comprehensive Deck 17 Copyright © Michael Porter 2011
  18. 18. Adult Kidney Transplant Outcomes U.S. Centers, 1987-1989 100 90 80 Percent 1 Year Graft Survival 70 60 Number of programs: 219 Number of transplants: 19,588 One year graft survival: 79.6% 50 16 greater than predicted survival (7%) 20 worse than predicted survival (10%) 40 0 100 200 300 400 500 600 Number of Transplants 2012.5.8_Mt Sinai 18 Copyright © Michael Porter 2012
  19. 19. Adult Kidney Transplant Outcomes U.S. Center Results, 2008-2010 100 90 80 Percent 1-year Graft Survival 70 8 greater than expected graft survival (3.4%) 14 worse than expected graft survival (5.9%) 60 Number of programs included: 236 Number of transplants: 38,535 1-year graft survival: 93.55% 50 8 greater than expected graft survival (3.4%) 14 worse than expected graft survival (5.9%) 40 0 100 200 300 400 500 600 700 800 Number of Transplants 2012.5.8_Mt Sinai 19 Copyright © Michael Porter 2012
  20. 20. Measuring the Cost of Care Delivery: Principles • Cost is the actual expense of patient care, not the charges billed or collected • Cost should be measured around the patient • Cost should be aggregated over the full cycle of care for the patient’s medical condition, not for departments, services, or line items • Cost depends on the actual use of resources involved in a patient’s care process (personnel, facilities, supplies) – The time devoted to each patient by these resources – The capacity cost of each resource – The support costs required for each patient-facing resource 2012.5.8_Mt Sinai 20 Copyright © Michael Porter 2012
  21. 21. Mapping Resource Utilization MD Anderson Cancer Center – New Head and Neck Patient Visit Registration and Plan of Care Plan of Care Verification Intake Clinician Visit Discussion Scheduling Receptionist, Patient Access Nurse, MD, mid-level provider, RN/LVN, MD, mid-level Patient Service Specialist, Interpreter Receptionist medical assistant, patient provider, patient service Coordinator service coordinator, RN coordinator RCPT: Receptionist  MD: Medical Doctor, PHDB: Patient History DataBase INT: Interpreter MA: Medical Assistant PAS: Patient Access Specialist PSC: Patient Service Coordinator Decision  Time point (min) RN: Registered Nurse Pt: Patient, outside of process 2011.09.03 Comprehensive Deck 21 Copyright © Michael Porter 2011
  22. 22. 3. Reimburse through Bundled Prices for Care Cycles Bundled Fee for reimbursement Global service for medical capitation conditions Bundled Price • A single price covering the full care cycle for an acute medical condition • Time-based reimbursement for overall care of a chronic condition • Time-based reimbursement for primary/preventive care for a defined patient segment 2012.5.8_Mt Sinai 22 Copyright © Michael Porter 2012
  23. 23. Bundled Payment in Practice Hip and Knee Replacement in Stockholm, Sweden • Components of the bundle - Pre-op evaluation - All physician and staff fees and costs - Lab tests - 1 follow-up visit within 3 months - Radiology - Any additional surgery to the joint - Surgery & related admissions within 2 years - Prosthesis - If post-op infection requiring - Drugs antibiotics occurs, guarantee extends - Inpatient rehab, up to 6 days to 5 years • Currently applies to all relatively healthy patients (i.e. ASA scores of 1 or 2) • The same referral process from PCPs is utilized as the traditional system • Mandatory reporting by providers to the joint registry plus supplementary reporting • Applies to all qualifying patients. Provider participation is voluntary, but all providers are continuing to offer total joint replacements • The Stockholm bundled price for a knee or hip replacement is about US $8,000 2012.5.8_Mt Sinai 23 Copyright © Michael Porter 2012
  24. 24. Hip and Knee Replacement Bundle in Stockholm, Sweden Provider Response Change in Volume • Under bundled payment, volumes shifted from full-service hospitals to specialized orthopedic hospitals • Interviews with specialized providers revealed the following delivery innovations: – Defined care pathways – More patient education – Standardized treatment processes – More training and specialization of staff – Checklists – Increased procedures per day – New post-discharge visit to check wound – Decreased length of stay healing 2012.5.8_Mt Sinai 24 Copyright 2012 © Professor Michael E. Porter
  25. 25. 4. Integrate Care Delivery Across System Facilities Children’s Hospital of Philadelphia Care Network Saint Peter’s University Hospital Grand View (Cardiac Center) Hospital Indian Doylestown Valley Hospital Princeton Central Bucks University Bucks County Medical Center PENNSYLVANIA High Point at Princeton King of Flourtown Prussia Abington Newtown Phoenixville Hospital Chestnut Hospital Hill Holy Redeemer Hospital Exton Roxborough Salem Road Paoli Pennsylvania Hospital Chester Co. Haverford Coatesville Hospital Broomall University City Market Street West Chester Springfield Cobbs Mt. Laurel North Hills Springfield Creek South Philadelphia Media Drexel Kennett Square Hill Chadds Voorhees West Grove Ford NEW JERSEY The Children’s Hospital DELAWARE of Philadelphia® Harborview/Smithville Network Hospitals: Atlantic County CHOP Newborn Care Harborview/Somers Point Shore Memorial Hospital CHOP Pediatric Care CHOP Newborn & Pediatric Care Wholly-Owned Outpatient Units: Pediatric & Adolescent Primary Care Harborview/Cape May Co. Pediatric & Adolescent Specialty Care Center Pediatric & Adolescent Specialty Care Center & Surgery Center Pediatric & Adolescent Specialty Care Center & Home Care 2012.5.8_Mt Sinai 25 Copyright © Michael Porter 2012
  26. 26. Four Levels of Provider System Integration 1. Choose an overall scope of services where the provider system can achieve excellence in value 2. Rationalize service lines / IPUs across facilities to improve volume, better utilize resources, and deepen teams 3. Offer specific services at the appropriate facility – E.g. acuity level, resource intensity, cost level, need for convenience 4. Clinically integrate care across units and facilities using an IPU structure – Widen and integrate services across the care cycle – Integrate preventive/primary care units with specialty IPUs • There are major value improvements available from concentrating volume by medical condition and moving care out of heavily resourced hospital, tertiary and quaternary facilities 2011.10.27 Introduction to Social Medicine Presentation 26 Copyright © Michael Porter 2011
  27. 27. 5. Expand Areas of Excellence Across Geography The Cleveland Clinic Affiliate Practices Rochester General Hospital, NY Cardiac Surgery Chester County Hospital, PA Cardiac Surgery CLEVELAND CLINIC Central DuPage Hospital, IL Cardiac Surgery St. Vincent Indianapolis, IN Kidney Transplant Charleston, WV Kidney Transplant Pikeville Medical Center, KY Cardiac Surgery Cape Fear Valley Medical Center, NC Cardiac Surgery McLeod Heart & Vascular Institute, SC Cardiac Surgery Cleveland Clinic Florida Weston, FL Cardiac Surgery 2011.12.08 Comprehensive Deck 27 Copyright © Michael Porter and Elizabeth Teisberg 2011
  28. 28. 6. Build an Enabling Information Technology Platform Utilize information technology to enable restructuring of care delivery and measuring results, rather than treating it as a solution itself • Common data definitions • Combine all types of data (e.g. notes, images) for each patient • Data encompasses the full care cycle, including care by referring entities • Allow access and communication among all involved parties, including with patients • Templates for medical conditions to enhance the user interface • “Structured” data vs. free text • Architecture that allows easy extraction of outcome measures, process measures, and activity-based cost measures for each patient and medical condition • Interoperability standards enabling communication among different provider (and payor) organizations 2012.5.8_Mt Sinai 28 Copyright © Michael Porter 2012
  29. 29. A Mutually Reinforcing Strategic Agenda Organize into Integrated Practice Units Grow Measure Excellent Outcomes Services and Cost Across For Every Geography Patient Integrate Move to Care Bundled Delivery Prices for Across Care Separate Cycles Facilities Build an Enabling IT Platform 2011.09.03 Comprehensive Deck 29 Copyright © Michael Porter 2011
  30. 30. Creating a Value-Based Health Care Delivery Organization Implications for Physician Leaders 1. Organize Care into Integrated Practice Units (IPUs) Around Patient Medical Conditions • Lead multidisciplinary teams, not specialty silos 2. Measure Outcomes and Cost for Every Patient • Become an expert in measurement and process improvement 3. Reimburse through Bundled Prices for Care Cycles • Lead the development of new bundled reimbursement options and care guarantees 4. Integrate Care Delivery Across Separate Facilities • Champion value enhancing rationalization, relocation and integration with sister hospitals and outpatient units, instead of turf protection 5. Expand Excellent IPUs Across Geography • Aspire to influence patient care outside the local area 6. Create an Enabling Information Technology Platform • Become a champion for the right EMR systems, not an obstacle to their adoption and use 2012.5.8_Mt Sinai 30 Copyright © Michael Porter 2012

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