Michael Porter on "Value Based Health Care Delivery"

I'm Rob Hukman. I am the faculty co-chair of the

health

care

initiative. I've had the pleasure of getting to know many of you over the last year and a half and it's great to see you all here today. I just want a real quick issue thanks to the

health

care

initiative here, we are one of the co-sponsors of the event, but we are very close to the students who organized this event working with them and it has been a pleasure to host this Early co-host . series with you all year long on faculty perspectives in healthcare, today we have our last session, which is with Michael Porter, someone who really needs no introduction around here, but that won't stop us from doing it, so Let's have a quick introduction. by Emily and Z and then we'll move straight to Professor Porter's comments.

Thank you, well, thank you all for coming today. It is a great honor to introduce you to Professor Michael Porter. Professor Porter is a leading authority on competitive strategy and is generally recognized as the father. From the field of modern strategy, if you have ever taken an MBA strategy course, you most likely associate Professor Porter with his five forces. In addition to his contributions to the business world, Professor Porter serves as a university professor. , which is the highest professional recognition that can be awarded to a Harvard faculty member. He is the author of 18 books and more than 20,125 articles.

We are fortunate that since 2001 Professor Porter has devoted great attention to competition in the health system, focusing on improving the health care

delivery

system, and has influenced thinking and practice not only in the United States. United but in many other countries by developing a new framework for understanding how to deliver how to transform the

value

delivered by healthcare systems in 2007, Professor Porter's book, Redefining Healthcare, would receive the James Hamilton Award. Outstanding Healthcare Book of the Year Award without further ado, Professor Michael Porter, well it's a thank you for that kind introduction and a thank you Rob for leading our healthcare initiative which we are very proud of and it really has been a tremendous joy. for me. see how the school has been able to have a very important impact on the health system now that we have focused a lot and I think we have a great opportunity and I hope that the fact that there are quite a few of you here today suggests that many All of us who have the type of training we receive here we will understand that we have a perspective and a set of skills that are profoundly important in healthcare, and when I start saying those words, I hope everyone sees that they know what we are.

The type of perspectives that we have here at HBS contribute a lot to those topics, but the problem is that there are high barriers to entry to be able to apply management thinking to healthcare, you need to have a deep understanding of healthcare because it really is different. . very complex, this is one of the most complex service

delivery

challenges I have experienced working in countless industries, the early application of management thinking to healthcare was really about margin, it was about how to do more sophisticated coding . so you could get higher bills, you know that was the case and in fact the administration has a bad name in healthcare because a lot of what they did was piss off the doctors or game the system, but now I think We are beginning to understand that if we actually apply our management thinking in our healthcare management knowledge, but we really focus on the core action of the system, which is the delivery of care itself, and we actually have quite a bit of to contribute, so what I'm going to do is this.

In the afternoon we'll talk a little bit about a way of thinking about healthcare delivery. You'll recognize a lot of the core ideas here or ideas that to us here at HBS, these ideas seem kind of simple in some ways, but they're revolutionary in healthcare. system and they are very exciting because they give physicians and provider organizations in particular a completely new way to do what they do best and, as we'll see in a minute, that's going to be very important in avoiding some very, very unpleasant results that could happen if we don't really really rethink how we do things, so let's get started and I have here, as usual, a slideshow.

This slide presentation is published, it will be published on the website, my site and at the Institute, you can get these slides. I'm not going to cover them all in these slides, but I wanted to provide a sort of holistic view of this healthcare delivery issue for those of you who are interested. I invite you to dig deeper into this work and we can have an ongoing dialogue, but what is the problem with healthcare? Well, the fundamental problem in healthcare I think has recently become the focus of most of our attention. The fundamental problem in healthcare is the

value

delivered by the delivery system.

That is the fundamental problem now. Yes, you can argue that prevention. of diseases is really critical, but that is again part of how we think about the delivery of care and if we had a different type of delivery system, prevention would be just part of how care is delivered, it would be just one of a whole set . of the types of services that were provided why value is the problem value is the problem because only by improving value can we avoid it and can we really solve the problem, which is that healthcare systems are just out of control all over the world. world. in the UK last week and I was in Germany last week talking to healthcare leaders, every country has the same problem, why do they have the problem?

If demand is increasing dramatically as people age, while the developing world you know is trying to cope with providing more care technology is improving there is more we can do there is more we can deal with and unless Whether we want to ration services or unless we want every doctor to take a 25% pay cut or unless we want to pay more and more ourselves for our healthcare there is only one way out of that box and that is we have to dramatically improve value. and the value we will be talking a lot about this afternoon is defined as the patient health outcomes achieved in relation to the amount of money spent to achieve those outcomes it is a very simple concept for her, an HBS student values ​​value matters in care medical is a revolutionary concept has not been the way people think about providing care the way we have thought about providing care is that we think about access as the The critical issue that we have thought about is having a large number of services, the volume has really been providing a high volume of services, it's been kind of the way that people think that the system provides good equity in care so that all groups receive care, all of those issues are important. but ultimately they are secondary issues, the central issue is value, if we can achieve excellent results, if we can improve those results over time, if we can learn to do it more and more efficiently, then we can solve the problem of attention medical unless Are we only going to have unhappy and unhappy alternatives?

So the question that's been bothering me for about a decade is how do we think about the kind of healthcare delivery system that would truly maximize patient value, and of course, it turns out that the current system and the way it's structured and organized and the way we measure and the way we actually deliver care is not designed to maximize value and so the question is: how can we change that? That's what we're going to talk about this afternoon to create a high-value delivery system, a system that achieves great results more and more efficiently and improves those results over time.

Unfortunately, we can't simply make incremental improvements to the system. that we have today, the system we have today was designed and designed is too strong a word, it emerged from a legacy of a history that reflected very different circumstances than what we have today, you know the healthcare system. You know, now it's designed to be relatively local, most institutions serve, you know, really, only people who live around the hospital or in that, in that city, why was that? Because you know, 30, 40, 50 years ago, you know, mobility was not that high you would be in the hospital for days and days and days and days and weeks and weeks because the medical technology available to address the problems was very different than what We have today, so you wanted to be close to your relatives because you were going to be in that hospital for a long time and you want them to come see you and there wasn't much the doctors could do, a lot of it was just kind of watchful waiting and hoping that that you will improve, of course.

The world has changed dramatically today we want people to be in the hospital for only a few days and even for complex surgeries we are not going to be in the hospital for that long, most of the care will be outpatient, but we have a system. that's designed with the inpatient as the center of the universe and so you can see that the legacy system is really not aligned with the values, certainly the value that we can offer today and if we just put band aids on that legacy system, we will never make it. to get there and we've been trying these incremental improvements for 10, 20, 30 years and they're not working, so I think the hardest question here is how do we make a structural change to the current delivery system.

Instead of just how easy it is to add a safety initiative or introduce care pathways or do a disease management overlay, we can't do that, that's not going to work, we have to think much deeper about what the ideal would be. structure, we need a vision of where we want to go in terms of the delivery system and then we can't get there overnight, but at least now we will move in the right direction which takes us to the sort of third big challenge. in the design of a health care delivery system and that is, do you know how we change the role of competition?

How should it be? What should it look like again? Most of us in this room probably as a matter of principle and certainly our kind of core values ​​that we believe in. In competition we believe that competition is good, we see that everyday competition improves things, but in healthcare, that hasn't happened, you know, the value improvement has been very, very slow, there's a lot of inefficiency, there's a lot waste, there is a lot of duplication. of suppliers that do not produce very good results, how can we assume that the competition will solve this problem well? The answer to that riddle, which is actually the riddle that got me into this in the first place, because I'm a true believer in conference and this kind of this kind of violation of my core point of view and the deeper we get into it the more The more we come to understand that the problem is not competition, the problem is what we are competing in and competition in health.

Historically, health care, particularly in the United States, hasn't been more of a competition to shift costs and accumulate bargaining power and, in some ways, create, you know, control the patient if you want, rather than a competition to improve the value of medical care that you don't get today. necessarily rewarded for improving value, that's not the way you earn, given the payment system, given the lack of measurement and knowledge about the value that a given institution is creating, so we have to do it as well as we design the system over time. change the basis of competition and what we want in a health system is a health system where to win each actor has to improve value in a demonstrable way and the question is how do we get that type of system implemented in a way that So let's dig a little deeper into this and start to create sort of an intellectual architecture for thinking about a high value delivery system and then we can talk a little bit about some of the examples of how we're moving in this direction. various organizations in various parts of the world everything that I am going to talk about this afternoon is not a theory, it is happening today but it is not happening in enough organizations and the question is how can we begin to accelerate the pace of restructuring in this industry this industry has never gone through a restructuring, you know, everyone studies restructuring, you know it almost every day, you know in your cases, it is something that we believe happens and it is not the end of the world, it has never happened in this field and the question is how to get this accelerated here and maybe we can talk about that a little bit later, of course, the main goal of healthcare, so anyDelivery system has to deliver value for the patient, maximize value for the patient.

What do we mean by value? Let's be very clear: there are the results, which are the numerator, and then there is the cost, which is the denominator. Now, what do we mean by result? One outcome is the actual results of care in terms of how well the patient is doing. In reality, we are doing a lot of so-called quality measurements in healthcare today, but we almost never actually measure the outcomes. The quality movement in healthcare today is primarily about process compliance. Knows? Are we following any evidence-

based

guidelines? To provide attention to this or that problem, it's like in the Soviet Union, you know, from the top down, someone has said that these are the evidence-

based

guidelines in national quality in a registration system or whatever the acronym is. therefore, every provider must follow those guidelines when caring for a patient with a heart attack or a patient with problems organization has to measure its processes, but the problem in this field is that we also have to measure the results because there is a huge disconnection and gap between measuring a few processes out of thousands of processes and then inferring that this will mean that the results are good. , we have to measure outcomes directly when we look at any given medical problem, there is more than one outcome, you know that survival is one outcome, an important outcome, but it is not the only outcome, you know many patients, most patients. survive, then we have many other outcomes, like you know what the functional status of the patient is, how soon they could return to work, you know what kind of hell we put the patient through in treating them.

All of those things are part of the outcome set that matters and that outcome set will depend on the particular medical problem that an individual has as a diabetic. The outcomes relevant to a diabetic are different than the outcomes relevant to a patient with head and neck cancer, so we're going to have to learn how to measure those outcomes now, as we'll see later, there is some outcome measurement in the US. . system we are far behind other countries and it is a fundamental challenge if you could make one thing happen in the United States and only one thing in the delivery of health care, you know, it would be this, we would have to systematically and comprehensively measure the results. of everything. and everyone has to do it if we did this, many of the other things I will talk about this afternoon would start to happen naturally.

The denominator of the value equation is, of course, cost, and cost is the actual cost of providing care. The real cost. of the resources involved in providing care, whatever type of care it is and that could be preventive care, by the way, what matters to us is not the cost of an individual service, that is not what is really important, what is important is the total cost of all services necessary to deal with the lady. Jones breast cancer, the cost of the office visit is interesting, but what's really relevant is the total cost and the relevant cost is the cost of treating a particular medical problem and whether you can compare that cost to the results , then you're in the We're in a position to start judging value right now, as we'll see later, there's not a single provider organization that can measure costs that way and we'll talk a lot about that.

One of the fundamental problems that is causing our value problem in healthcare delivery is caustic counting, cost accounting, and of course that's something we all think is fun, you know, we like cost accounting here. , there aren't many people in the healthcare system who are interested in cost accounting and certainly doctors aren't, so I've always done it. It's fun when we have our courses for doctors that teach doctors about cost accounting and they really like it because it's ours to help them understand how they can really think about the fundamental purpose that most people want in medicine that you know how to achieve, which is delivering great results but doing it efficiently enough that we can afford it so we can help more people, so the kind of core goal has to be value and we need to learn to think about value in this way broader than we think in most cases. the field now to drive value improvement, we can improve the numerator or we can improve the denominator, but one of the central concepts in value-based healthcare is that if we have to choose which is more important, the appropriate and correct choice is the numerator if you really want to reduce healthcare costs, you have to drive improving outcomes, it's just improving outcomes, getting the patient healthy quickly, making the right diagnosis, leading to a higher functional status, it's just al improving results actually reduces costs in the long run, now of course we can do things more efficiently and we will talk about that later, but ultimately we cannot be afraid of excellence and results, We can't think that it is more expensive to provide excellent care, guess what is actually less expensive to provide excellent care?

The best organizations actually have the lowest cost in this field because they are the ones that minimize the burden of hell, get the patient healthy faster and healthier. they maintain that health more over time with fewer errors, complications, delays, discomfort, relapses and other problems, so again in this field of healthcare there is a fear of technology, there is a fear of innovation because some people They have gotten it into their heads that this is too expensive, we can't afford it, and of course we can intuitively understand that quality doesn't necessarily come at a higher cost in some cases over some periods of time, but often it doesn't, so the question is how do we design a service delivery system to drive this value equation and here what we have come to understand is that there are a number of basic strategic agendas in the service delivery system and for each service delivery organization Whether it's a hospital or clinic or whatever that's how we really achieve high value and they're listed on this slide number one, we actually have to reorganize the way we deliver care who's on the team how they work. together where they work and the kind of basic concept that exists is that the current system is organized around the services provided, it is organized around the doctors, it is organized around the tools that we have, the radiology tools and the tools of imaging and the chemotherapy tools and the psychological counseling tools and what we have to do is change the organization, we have to organize around the patient and the patient's problem, the patient's needs now again at Harvard Business School , that sounds, you know, it doesn't sound.

It's shocking, but again in healthcare, for legacy reasons, we end up with this organizational structure really around the tools, not the patient, who is number one, and the same kinds of concepts can be applied to primary care. and preventive in almost all of that. Brief number two: If we are going to have high value, we have to learn to measure the outcomes and the cost of each patient in the line of care that is not in retrospective studies, they are not such interesting archaeological exercises that look back, but we have than to do this. literally continuous measurement, the best provider organizations are now starting to do that so they know what the costs are all the time as the patients go through the system, they are tracking the outcomes as the patient goes through the system and they are kind to constantly looking at the value equation and that gives them sort of critical information to not only understand how well they did at the end of the day but also how well they're doing in the process, so number two is measurement and we will talk. a little bit about measurement later on number three, we have to pay differently for care and I think almost all observers would agree on this.

However, there is still a lot of disagreement about how to pay, but we don't think there is any real disagreement. It won't be any because there is really only one way to pay that makes sense from a value perspective and that is that we have to pay for the entire set of services necessary to treat the patient's medical problem, if in the case of a diabetic that is a chronic condition, so a diabetic we should get a certain amount of money to take care of a diabetic with a certain risk profile for a year, if we have someone with severe arthritis who needs a total joint replacement, we should get a price to provide that joint replacement, you know, starting with the initial visits and evaluation and going all the way to the end of the rehabilitation, we have to pay a price, what does that do?

That really aligns payment with how you deliver value, not deliver value. The surgeon does not add value on his own, you can have a great operation for that hip replacement, but you know that if you do not do the recovery well and if you do not do the rehabilitation well, you can completely nullify everything that the surgeon did. We no longer pay for surgery, the only way we can offer values, we have to pay for the entire psyche, what we call the cycle of care and right now we don't have the information, partly because we have no idea what they are the actual costs we don't have the information to do that but it's happening it's happening very quickly this is spreading around the world very quickly it's going to come and we'll talk a little bit later about what some of the competing ideas are and why certainly I don't think they make the same sense, so number three is reimbursement, number four is putting the pieces together in healthcare delivery systems today, most hospitals see themselves as organizations. independents that serve their community and even if the hospitals are part of the same hospital system, they still think that way here in Boston we have this colossus called partners and partners has Mass General and Brigham and Faulkner and Newton-wellesley and others that I'm forgetting , each of those organizations looks like an independent full-service organization, you can go to Brigham and Women's Hospital and get primary care, you can go to Brigham Women's Hospital and get some kind of routine outpatient rehab and that just doesn't make any sense since a value perspective.

We can't have the right care at the right center for the right problem. We cannot duplicate services at each center. We have to learn how to integrate these delivery systems, even if they are owned by different people. If rehab is separate from the hospital, we need to start connecting the rehab people in the hospital and start thinking together about value, because value is not about any particular service, but the entire set of services that you provides and in general. the system is completely failing when you can go to a world class hospital in Cordon Airy and get routine services, you can tell right away, we are not organized to maximize the value that we have and certainly the amount of resources that are they are using. wasted in the healthcare system not because of fraud and things like that, but because of things like this that everyone thinks is routine and normal, it's epic and we can talk about that a little bit later in number five, we have to break down the local nature of healthcare delivery we can no longer allow all regions to have their own different hospitals, each trying to reinvent the wheel.

It is a very family-oriented industry. Even the largest healthcare delivery organization in the United States is probably the one you know the least about. 1% or even 0.5% or 0.1% you know the industry, we have to get our great providers that are really great in cancer care or orthopedic care, we have to get them to spread their presence throughout the geography so that people living in rural Arkansas can receive quality cardiology care from Cleveland Clinic instead of what the small local hospital was able to figure out, you know, mom and dad, you know, reinvent the wheel without the technology right, without the right experience, without the right services, you know, we.

We have to break down that location, we want care to be provided close to where we are, generally, all things being equal, we would like to have care close by, but we don't necessarily want close care to be run by a small local organization that just operates This Community Hospital, we would like our local hospital to be managed by a community entity.world class that is really very valuable in terms of dealing with whatever medical problem they are trying to solve and the system in general is not set up that way, the final agenda revolves around information technology, there has been a lot of talk about IT and healthcare, it's very important to do all these other things that I've been talking about, we need to have the right IT. platform because if we are going to integrate care throughout the care cycle, if we are going to get the teams to work together as much as possible in different ways, if we are going to better connect the patient with the process, many of the things we have to do, We're going to need the right kind of IT platform and we're moving pretty quickly in that direction now.

I think the best vendors are probably 70% of the way to the right kind of IT platforms, or not, but We're moving, but this will ultimately be crucial, but what we're not doing, what we don't want to do , is that we don't want to just automate the way we deliver here today, that wouldn't be good and and that of course there's a risk that if you start something too early, before you actually change the structure and the basic processes that you want to use, your investment in IT turns out to be counterproductive. In some cases, these six types of fundamental steps are really the key to transforming healthcare and dramatically improving the value not a little, not a little, but a lot, the problem of healthcare delivery is absolutely solvable, not It doesn't require any Nobel Prize, it doesn't require any act of God, it doesn't require, you know, some incredible science that's becoming You do these six things and the problem with doing them is that this is really different from the way things are done.

Nowadays and people in healthcare and doctors in particular are conservative and we want them to be conservative, we don't want you to just you know, jump in and try the latest fad. I think the healthcare delivery system can only change from the bottom up as individual organizations adopt and understand these concepts from the top down, it will be very useful, certain things are very useful and we can talk about those briefly a little later and the other thing that is helpful is the pressure and what is good right now in the healthcare system in America is that there is a lot of pressure on the system, people are very nervous about what will happen if they will have a role, You know, people are starting to budget now for 25 percent cost cuts at major hospitals and we, what we can experience and feel right now is a thaw that will hopefully allow us to do a lot of these things. . and do them relatively quickly, this is the agenda so let me take a minute and go over some of the highlights of some of these areas just to fix what you think here what I'm talking about and then and then we can talk a little bit about what what the government could do and perhaps other actors could do to make all of this happen.

Really the central question in the central issue is the organizational model for the delivery of care. This is an example of migraine care. You know, relatively, it's not a rare condition. Many people have migraines. Otherwise healthy people. You know they have migraines, but it is a very debilitating medical condition. go to the emergency room there and if their illness is not controlled they have a tendency to want to go back to the doctor and help me help me then migraine is a case that you know, I think it is not very complex. in terms of understanding a medical problem, but I think it's a great illustration of the fundamental organizational challenge we have.

We have a case study that we teach in our value-based healthcare workshops on migraine care in Germany and today I am showing this example. because what we discovered is that although the insurance system is very different in various parts of the world, the delivery problems are very similar, the German delivery system, the way German hospitals work, the way doctors that you know are organized, it is very similar to the way we do it. here, although Germany has Nirvana from an insurance point of view, it has a wonderful insurance system, everyone is covered, you know that the premiums are based on your income, you know that there is no adjustment for pre-existing conditions, if you have been sick, that is not like that.

It means you have to pay more, you know, etc., etc. you have freedom of choice, you can go wherever you want, you don't have to get a referral, you know it's a great insurance system, but they have some serious value problems, just like us, and that's because of the type of organization of the care delivery itself, the traditional model is organized around services and specialties, a typical German would enter the system and a primary care doctor would do everything possible to help provide you know, maybe a medication, you know some advice , if it worked, that's great, if not, even though that patient would start a journey, you know this process of care, what is the nature of the existing process, number one, it's a sequential process that you basically do. one thing at a time marked by delays in weighing, in contrast to a parallel process where they are doing several things together, number two, this process involves multiple separate administrative interactions for each trip to each bubble and, by the way, a patient I could go here here. here here here here here here here here here over the course of a year or two each interaction with a bubble requires a separate phone call a separate scheduling process a separate trip to a separate waiting room a separate clipboard to fill out So there's a lot administrative complexity here administrative complexity in healthcare is not the insurance companies fault administrative complexity in healthcare is a function this way we have organized care where each bubble is separate and today you send a separate bill where each interaction is separated even if it's in the same, literally the same hospital building, it's separate, you go to a different place, even if they're all owned by the same organization, today everything is separate, the third thing about this process is that it involves a lot of coordination, that's very difficult to do because these people don't work together, if they want to coordinate, they have to put in a lot of effort now, of course, in medicine we write, you write notes, you know, the clinical notes and the Notes are transmitted, but those notes are You know very, very, you know that it is inadequate in terms of how to acquire that sacred sixth sense or what the general situation of this patient is from different points of view and it is very difficult for the people involved in this system coordinate and come to a shared idea about what the problem is and what needs to be done now and the last thing I would say about this structure here is that to the extent that it is a team and it is not a real team because the people don't work together, but to the extent that it's a team, it's what you might call a pick-up team, the particular people here that you interact with are, let's say, almost random, they don't have a particular necessary connection to your problem, you know you can go to a PCP and that PCP can Actually, I'm interested in immigrants and I've had a lot of migraine patients and I actually have quite a bit of experience with migraines and I know that there are like eight types of travel tans, which are the type of medication that is usually the medication of choice and up to date, you know which of those tripping hands works for which type of case, but chances are the PCP isn't particularly interested in migraine or isn't particularly up to date and the PCP you go to won't be the one who is up to date may necessarily have a one in X chance, but only a one in , they might refer you to an outpatient neurologist, but that neurologist also sees stroke patients, MS patients, all of neurology is a very complex field, there are many different diseases and conditions involved and the neurologist tends to think that their job or their job is to manage all those conditions, so who will have a stroke patient on one visit and then the next patient will have a headache, the next patient will be attending fibrosis or something like that and that's how the system works. is organized that neurologist is that neurologists have a deep interest in migraine?

He knows? Have they really studied this disease? Have they seen many patients over time? It may be, but not necessarily, so this system is actually strangely bad at attracting the patient. to the providers that it really is your problem, your problem now let me tell you something I want, I want to make it absolutely clear that the problem is not that the doctors are not workers or that they are nurses and other collisions, the people here really, really work. It's difficult, it's not that people aren't smart, skilled, and well trained; It is remarkable, and thank God for all of us, that the people who provide health care services almost everywhere in the world are very intelligent, very dedicated and very well trained, that is not the case. the problem the problem is that we have put our doctors in a structure where they cannot deliver value, no matter how hard they work, no matter how many hours they are on call, it is impossible, so we have to change the structure, which is the change?

We have to organize not around tools or services, we have to organize around the patient's problem if a primary care doctor cannot treat a migraine. What the Germans created was something called the West Room and the headache center, there are now Western headache centers there. about Germany and then they would send you to this place and within this place where there is all the experience that you probably needed to deal with this medical problem, so you would have your neurologists there, but you would also have your well-known physical therapists because that has can help. to control and manage the disease through psychological counseling and what would happen is that you would go to this organization, you would deal with a scheduling problem and then you would basically do a parallel process, so you go for a day or two and go through a structured process of evaluation and diagnosis and group therapy and advice from educators on what you could do and you know what strategy to abuse to control your illness.

It seems obvious that that would work better if you actually had a migraine than the system? We have today, of course, it's obvious, but again we have this in this field, we have the fundamental flaw that we are something in the business that we just think we take for granted and that is that you organize yourself around the customer and their needs, if We do it, we will have dramatic improvements in value to the extent that this organization, which is an outpatient organization, really needs other help, like a head imaging scan or a hospital stay to detox, today they said they need another support, they build affiliations, so they don't just send you to a random place to get your MRI, they send you to an affiliated place that is a real type of high volume MRI for head scans, a place where there is a relationship professional between the headache center and the imaging center. center and they interact back and forth and share information very well and there is a very rapid cycle in terms of that type of attention etc., what happened in Germany when this change was made, the results just went off the chart, the Patients with their illness control lost work days, doctor visits, trips to the emergency room essentially dropped to zero.

Because? Because you had a group of experts working as a multidisciplinary team to address that problem in the most sophisticated way. and these people spent five years a week, 10 hours a day working with migraine patients, the cost initially went up because this model spreads out the cost that you know you pay for your PCP visit and then you wait a month or six weeks and see If things are getting better and you're suffering but you don't want to go back to the doctor too soon and you're hoping things will get better eventually, you know, say, "Oh my God, I'm not getting better." better, then you end up going back to this person and this person and the costs spread somewhat over time.

What this model does is increase costs up front, but because they can achieve better results after not very long queues. At first this was more expensive, but eight months after it started, the average cost of a patient was lower than before for conventional therapy and right now they are running about twenty-five percent less, so we have results many best. Twenty-five percent lower costs in the healthcare system and we also don't have those days off from work in all those other costs to society. This is the changefundamental organizational that has to happen. We have to organize around the patients' problems now on the case. of a defined disease that is quite clear a diabetic patient with breast cancer an arthritic patient who needs a hip or knee replacement what about primary care?

What we find in primary care is that it is essentially the same problem as primary care today. The structure we have today is what I like to call mission impossible. The typical primary care doctor will have a panel of about 1,500 patients with every medical problem imaginable. There will be some people who will be completely healthy adults. There will be other people who will be dying there will be some people with chronic illnesses there will be other people who will be disabled this primary care practice with this structure this office this nurse and administrative assistant will try to meet the primary care needs for this incredible heterogeneity of patients that can't We can't do, we can't do it while delivering value, so what we're coming to understand is that the way to think about primary care is not to deliver it as a monolithic service;

In fact, primary care is the wrong way to think about it. They are really different segments of patients with very different primary and preventive care needs and if you have a healthy adult you want to hire staff and have your team and your process look very different than if you had disabled seniors with multiple chronic illnesses and we are now just getting started. to see a kind of revolution in primary care, where the best primary practices are starting to think this way and are starting to have teams within their practice and this also means that primary care practices need to grow as a single centre. doctor in a single office with a single nurse and you know that a single support staff will never provide high-value primary care, not because they don't work hard, not because they are not good people, not because they are well. trained, but because they won't be staffed and they won't have the right way, a real way to deliver that care or the right expertise on their team, we have to change the basic structure, we have to change it.

What we now call medical conditions is a common rejection we receive at this idea of ​​organizing around the patient's problem. What if the patient has many different problems? Then what do we do? And the answer is that you know a diabetic. usually has many different problems, it is not only the endocrinological problem, it is also the kidney problem, it is also the vascular problem, it is also the problem with the eyes and whatever is called retinopathy or something like that, when we define the needs of the patient , we have to think not just about one. narrow definition of the problem, we have to think about all the things that tend to be associated, so if you are going to have an integrated diabetic practice unit, you will have renal and vascular expertise and myself on the team, as well as diabetes educators to help to train the patient how to take care of himself, so that when we think about defining medical conditions for the purposes of organizing care, we have to think about it in the wrong way, we cannot think about it in a limited way and if virtually many patients with disease medical attention and ultimately we will figure it out.

There are some patients who are very complex. You know that they have, that they have cancer, that they have chronic conditions that they have. They have dementia and may have to be cared for by more than one of these units, but that will be much better than having each service in a separate bubble on the graph in terms of coordination, the organizational problem is really the central problem. we have to solve we have to change the basic way in which we have organized healthcare the organizational structure is partly based on the way doctors are trained, but it is also partly a structure that considers each case as different each patient It is a unique case, therefore, we have to let that unique process evolve.

The hard truth is that if you have breast cancer, the nature of what you need is relatively similar, so instead of organizing around the exception, we have to organize around the rule is that we have to build a team that be able to treat and provide the services that most patients need and then exceptions can be exchanged, you know, separately, rather than the system we have today, which is organized as if every patient is different. I've lost the power of volume and dedicated teams and defined processes and kind of rigorous measurement because we've organized the way we've done it, that's the number one thing, now there's a lot of other things we could talk about, you know. how to think about the cycle. of care how to define the characteristics of the type of integrated practice unit that we want to build, you know how we integrate physical and mental health, which I think is another great opportunity that we have in the field, there are many, many problems, but any but all of these, and the more we talk, the more I think you would see that this requires a different distribution of volume in the system right now, the system is hugely fragmented in terms of the services provided by each organization, each organization provides almost So , the entire volume of patients that any organization has in a particular problem tends to be small, but to have a dedicated team, to have dedicated facilities, to be good at measuring to be efficient, you need volume, therefore volume of patients with a given problem allows value, it doesn't guarantee value, if you get it wrong in terms of how you do it, you know you want excessive value, but volume gives you the ability to create a high value structure, but as we see on this slide and In many other slides that I could show you, the typical provider only sees a few patients with a given problem, so they are forced to organize themselves the way they do today and that is one of the limitations and one of the things that needs to happen. in health care delivery is the consolidation of the volume of patients with a given problem into fewer locations and fewer centers, that is starting to happen, but around the world it is a problem that is seen here, in the case of Sweden, the Typical The Swedish hospital sees one case per week of total knee replacement.

You know, one case a week or two cases a week of kidney failure. If you see two cases a week, you will never be able to talk about yourself because you will never be able to have you. the right team and the right expertise to really deliver excellent care and do it efficiently, you're going to have enormous underutilized capacity, massive duplication of assets and equipment, which is what we have in the healthcare delivery system today. Well, we have already talked about the fundamentals. change in measurement on the results side, which is moving from processes to actual results, in order to measure results we have to understand that there is a hierarchy of results for any given medical problem or for any segment of primary preventive care and, again, I won't.

We looked at this concept, but basically we haven't had a systematic way of thinking about the set of outcomes that need to be measured for any given problem, and now we're starting to understand that this is an example of what can be done. You would want to measure if you were treating patients with head and neck cancer, you would want to measure whether the patient survived and for how long, and that's generally all that's been measured in cancer care because it was kind of part of the health care system. clairvoyance, but you also want to measure you know things like you know if the patient you know was the patient capable of speaking in head and neck cancer there is a great risk that you will lose your voice given the type of surgery and care needed that you know was the The patient can eat normally, there is a high risk of swallowing problems, which means he must have a feeding tube.

Maintenance of facial appearance. There is a tremendous risk of disfigurement for a variety of reasons. With this disease, you want to measure how long it takes to achieve this. remission and return to normal life time time is an outcome for the patient the shorter the pattern you want to measure, you know the complications, fatigue, depression and anxiety that are required in the care process and so on and obviously when we measure outcomes we have to adjust for risk, but we're learning how to do that, the main purpose of measuring outcomes is really to inform clinicians. about how to improve, but we're losing the power of that in healthcare today, where we measure outcomes.

Remarkable things happen. This is one of the few areas in the United States where we measure outcomes everywhere, every day, everywhere, in every patient, and that is in organ transplant, this example is actually a kidney transplant, there is a mandatory measurement as part of the national organ system, if you get an organ or want to get an organ, you must measure each transplant patient and what you see here is one of the measures things that measure one-year graft survival, if you received a New kidney, was it still working after a year? In a very important result, they also measure many other outcomes and this is the first data set that was available by looking at that reporting system and you can see that there are 219 kidney transplant programs in this time period in the United States and This is how they did it in this particular measure, there is a risk adjustment algorithm that allows some providers to be considered. as better than expected in terms of their outcomes, those are the red dots, there are some and some providers are considered worse than expected given their patient mix, you know, those are the yellow dots, but for most patients does not have enough statistical degrees of freedom. to be able to demonstrably show that they are better than you would expect, adjusting for patient mix, age, and knowing how sick they were, etc., now some people believe that since you can't prove it statistically, that, That point is different than that point that shouldn't be measured, but of course we all know that in business we measure a lot of things that we can't do statistical tests and prove that you know this is better than that thing that we measure because we want to learn. we measure because we want to know where we are we measure because we want to compare how we did this year with how we did last year and in healthcare wherever we measure outcomes, that happens, what I'm going to show you now is the most recent. data set on the same medical condition and that looks like this look what happened everyone got better look what happened between the boundary between the weaker providers and the stronger providers why did this happen this happened because a lot of these people got better very quickly because what they improve because they knew where they were and they knew who was doing well and the diffusion of the technology happened quickly.

The most powerful lever we have in healthcare delivery is to systematically measure outcomes, but we also have to measure costs, the basic problem. in healthcare is that costs are confused with charges when people in healthcare say costs what they usually mean is how much the bill was and of course we all know price is not equal to cost and cost systems in healthcare were established around billing. not around the actual use of resources involved in care, which is why, as many of you know, Pressor Kaplan and I wrote an article about applying a modern cost accounting type of thinking to healthcare and the response is that it's not hard to do and it's transformative in terms of seeing the world differently and again I'm not going to go through these slides because we don't have time, but basically what you have to do is use time-driven activity-based costing. , which is classically relevant to healthcare because most of the resources involved in providing healthcare are shared resources, so you need to determine how much of this doctor's resources were actually consumed by this patient, how much space, how much equipment was actually consumed by that patient and TD ABC kind of provides you, the methodology to do that, we're now starting to apply it in maybe a dozen different healthcare organizations, it's going to spread very quickly and there's a lot of things you can do better If you do, let me cover one more topic and then we have to stop and that is the question of price, how will we pay again, as I said before?

The fundamental change that needs to happen is that we can no longer pay for individual services that do not work, which inIt is actually a disincentive to value. a disincentive for innovation, we also believe that we should not pay global capitation, as well as the idea that we would pay a delivery organization an amount of money and that would require them to deal with any conceivable problem they may have, we believe that decouples completely. paying the value that the delivery organization can actually control, what we need to do is align the payment with the value in the way that the delivery organization can actually control and that is pay the delivery organization around the care of the problem.

The patient actually has, but not the individual services, the really total package of services and that is what we call the combined reimbursement. Now a combined refund looks like this. This is Stockholm County, everyone who has a hip or knee replacement in Stockholm County today and for the last few years all of those people's providers have been paid a joint price, a single price that covers all the things in the yellow box, there are no separate rates for all these services, there you get an amount of money and then the provider can decide where I spend this money.

You know what I should do to help me get the best results, most efficiently, and the number that usually catches the attention of all my friends. You know that in the clinical space is the real number. package price eight thousand US dollars now you are all too young, most of you to have had a hip or knee replacement, so you would have no way of knowing, but here in the United States it would be between thirty and thirty five thousand dollars and these organizations are making money now. We have begun to analyze the underlying reasons for these huge differences.

Part of this is because we choose to pay more for medications and implants in the United States than anywhere else in the world. I don't really know why. We Americans should be subsidizing everyone else in the world and paying more for these things, but we do, and that's part of it. Nurses and doctors are actually paid a little better here in the United States than in Sweden or Germany, and you know, that's not true here. I also don't mean that people should be paid as much as they can, I guess, and earn, but we have no way to assign and decide if their value is there, so we just pay based on historical algorithms, you know, certain specialties get pay. more than others, who knows if that makes any sense, but what we found is that the real reason we have thirty thousand in the US and eight thousand in Sweden is the use of resources to provide care, and in Sweden are just much better and more efficient at using resources and not doing things they don't need to do and doing the things they do better so they have less complications, problems and delays, and I think a case like this tells them that we can solve this health care problem, it is not an insurmountable problem if people in Sweden, which is not a cheap place to do anything, can do a total joint replacement for eight thousand dollars and the provider can make money and all the people in the system can be paid, you know, fairly, you know, that tells us that there are a lot of opportunities here to dramatically improve the value and, by the way, they get results as good as what we have here in the United States and our best hospitals, so basically I think the message I want to leave you with is the question: the central issue in healthcare is actually the way we organize the delivery of care, the central guiding principle that must be true to the North in every choice we We think about the value for the patient that leads us to a set of other options and implications that have to do with our organization, our measurement, our prices. the way we connect and it it's in the system and the way we mobilize IT, I think they're all doable, they're all actionable and they're all happening in one organization or another, the challenge is how do we accelerate this transformation and that's a that's a topic that Rob Buckman and I and many of my colleagues here think every day.

I personally think that the government right now is not being very helpful, so I have chosen to focus primarily on bottom-up change by engaging with the provider communities and hospital systems around the world, but health policy as well. they can have a big impact, for example, we need mandatory measurement of results, we need new cost accounting standards, you know, we need several changes in the payment system so that the government can help, but the good news The important thing is that every supplier organization, without anything else having to happen, will benefit in doing its job if it can begin to adopt these principles, so I am very hopeful about the likelihood of solving this problem.

I'm very optimistic about the potential, but it's going to take a lot of organizational changes and things that all of us in this room understand well. We know there's always resistance to that and discomfort with that, but I think little by little that's going to change, so that's a point of view again. our time is up. I'll be happy to answer some questions later here because I don't want to keep this group cold, but I'm really glad you guys came. It is a great honor that everyone has come. I hope this gives you a mindset that will allow you to sleep better tonight.

I hope and expect that many of you will enter the healthcare delivery system because there are abundant opportunities by doing all of these things to create a huge positive impact on society and also do a lot. of money if you provide some of the technology and services involved, that's fine, so thank you very much.