October 12th, 2006
The American health care systems perform impressively, producing what they are designed to deliver: cost inflation, inefficiency, and inequity. At regular intervals, local pundits declare that the outcomes of the incentive structures in the constituent parts of the systems are unacceptable, usually emphasising that “the nation cannot afford to spend 16 percent of GDP on health care” [2-week free access]. Such “insights” ignore the fact that inflation is a consequence of the systems’ perverse incentives and that improved control of expenditure inflation would oblige physicians, nurses, hospitals, and the pharmaceutical industry to moderate their lifestyles.
Michael Porter, a management guru at Harvard, along with colleague Elizabeth Olmsted Teisberg, has now decided to switch his attention to the health care industry, no doubt in part because he has recognised that it is big and remunerative. The extent to which the lessons of Enron and the “successes” of other capitalist enterprises can inform health care policy can and should be debated carefully.
Any cure for the malaise of U.S. health care, or the British NHS to which Porter has also offered his vision of a New Jerusalem, is dependent on diagnostic skills and the evidence base for the treatments offered. Like many gurus before him, Porter makes an adequate job of the diagnostics, offering insights very reminiscent of the Jackson Hole proposals over a decade ago.
However when he gets to cures, there is nothing new to break the logjam of inertia and self-interest that stabilizes the inefficiency of the health care system, be it public or private. He rightly indicates that the industry needs a measure of value added and that instead of focusing on cost and activity, it is necessary to measure patient-reported outcomes — i.e., measures of whether patients feel better. Such a conclusion is welcome but ignores the forces that have prevented the use of outcome measures in health care for centuries. Another Bostonian, Ernest Codman, suggested systematic management for Massachusetts General Hospital — in particular, plans for evaluating the competence of surgeons in the early twentieth century — and, as a consequence of the unpopularity of his proposals, he lost his staff privileges in 1914.
Insurers and Governments Fixated on Failure
The RAND Insurance Experiment [2-week free access] produced a generic health profile, Short Form 36. Work in Europe has produced a generic health index, EQ5D. These have been translated into dozens of languages and used in thousands of clinical trials. But with physicians and policy makers fixated with the measurement and management of failure (e.g. mortality), these measures of success have been ignored by insurers and governments alike as a means of measuring success and of bringing to account those providers failing to make their customers “better,” in terms of physical and mental functioning.
Porter’s lack of specificity about the outcome measures needed to improve the performance of the U.S. health care systems, and his glib reliance on “competition” to institute change, flies in the face of international evidence: Nowhere has any public or private institution managed to curb the excesses of powerful providers more interested in their wallets than demonstrably improving patients’ health. Porter adds little new to the debate, but he is a welcome and potentially powerful addition to the chorus advocating change.
1. P.M. Ellwood, A.C. Enthoven, and L. Etheredge, “The Jackson Hole Initiatives for a Twenty-First Century American Health Care System,” Health Economics 1, no. 3 (1992): 149-168.
2. A. Maynard, ed., The Public-Private Mix for Health: Plus ça Change; Plus c’Est la Meme Chose (Oxford and Seattle: Nuffield Trust and Radcliffe Publishing, 2005).
For more on the Jackson Hole proposal ideas of health care competition, see: “Why Managed Care Has Failed to Contain Costs” and “`Responsible Choices:’ The Jackson Hole Group Plan for Health Reform.”
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