In their recently published manifesto, Redefining Health Care (2006), Michael E. Porter and Elizabeth Olmsted Teisberg — hereafter simply PT — offer a utopian vision of a health system that might occur to anyone possessed of a modicum of common sense but not too familiar with the real world of health care.

In these authors’ utopian vision — summarized in the Conclusion of their book, and also in an earlier article in the Harvard Business Review (24 June 2004) — our health system would consist of a myriad of mini health care systems, each clinically integrated around one of a myriad of clearly identifiable “medical conditions,” each of which has a standard, finite life cycle. Each of several competing health systems specializing in a particular condition would quote for its treatment a single price, covering the entire life cycle of the episode.

Just how and when that price would be paid is not made clear. An individual afflicted with, say, standard medical condition no. 387 would be provided with accurate information on the price charged and the “health outcomes” achieved by the competing health systems specializing in condition no. 387. The afflicted individual would then choose the system offering the best “health outcomes” per dollar the consumer would have to pay. This market is described by the authors as a “positive sum” game in which the economic and professional incentives of all participants are aligned towards one goal only: the maximization of the “value,” defined by the authors as “the quality of patient outcomes [sic] relative to the dollars expended” (p. 98).

In a recent interview in the Conference Board’s Across the Board (July/August 2006), Porter professes himself “stunned” that this vision has not driven the health policy debate before. In fact, numerous distinguished authors before PT have hit upon the central idea of their book, that “value must be measured for the patient, not the health plan, hospital doctor, or employer.” The reason why no health system anywhere in the world has yet been structured around this idea is that the real world of health care is much more complex, and solutions to its problems are much more intractable than these two authors dream in their philosophy.

For starters, PT vastly underestimate how hard it will be in practice to categorize the complaints patients present to the health system neatly into a finite set of standard “medical conditions,” each with a standard life cycle. Next, they vastly underestimate how hard it will be to define, measure, and capture in user-friendly metrics the often subtle, multidimensional “health outcomes” for which the providers of health care are to be rewarded in PT’s utopian market.

Who would read the meter on these metrics and report them to the public: the providers themselves, or some third party? If providers, who would audit the data for accuracy, and what penalties would there be for gaming the numbers? Furthermore, these “health outcomes” are driven by many environmental, socioeconomic, and behavioral factors completely outside the health system’s control. Absent proper statistical control for these other factors in the published metrics, the mini health systems in PT’s world surely would be tempted to control for these factors operationally, by discriminating against certain patients thought to be associated with infelicitous external factors — e.g., race or educational attainment. It would allow them to report better “value” along PT’s definition.

The Reality Of Health Policymaking

Finally, and most importantly, PT seem totally innocent of the often cynical modus operandi by which modern democracies make health policy. To illustrate with just one example, in the early 1990s the Physician Payment Review Commission (PPRC), which advised Congress on paying physicians for services rendered Medicare beneficiaries, had proposed to bundle the services of radiologists, anesthesiologists, and pathologists (the RAPs) into the per case fees Medicare pays hospitals for some 550 or so distinct, diagnostically related groupings of inpatient episodes (the DRGs). The objective was to let hospitals become the integrators for the entire inpatient episode, taking both fiscal and clinical responsibility for it. Fearing their loss of professional and economic independence, and also a loss of income, the RAPs heavily lobbied Congress to drop this clinically and economically sound idea. Ever beholden to these providers’ well-endowed political action committees (PACs) that help finance political campaigns, Congress promptly obliged.

PT seem to imply that if only someone like PT had told providers what to do, they naturally would do the right thing for patients, even at the cost of their own economic independence and profit. A very small number of providers, cited over and over again by the authors, have moved gingerly and experimentally toward partially integrated episodic bundles of health care, even without the authors’ advice, and probably not to their own disadvantage. On the other hand, in the 1990s Oxford Health Plan of New York had tried with great fanfare to put entire episodes of cardiac care out for competitive bid, only to fail in that attempt.

Not only Congress has failed to encourage patient-centered health care. It can fairly be concluded that by and large, the private sector has not moved in that direction either, although, unencumbered by the need for campaign financing, it would have been perfectly free to do so. PT might ponder why that is so. Unfortunately, PT’s book offers few practical hints on how the U.S. health system would transit from its current, allegedly negative-sum game to the allegedly positive-sum utopia PT envision. That transition would vastly rearrange the distribution of economic power and clinical autonomy in our health system. It is naive to assume that the potential losers in that transition would simply roll over and accept their fate.

See also in Health Affairs: Book Review of Redefining Health Care

Uwe Reinhardt on “The Pricing Of U.S. Hospital Services: Chaos Behind A Veil Of Secrecy” [2-week free access]

Tomorrow, Alain Enthoven on competition and consumers.

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