Effective Health Care Policy: Improving Value for Patients 2014/Official Opening... ·...

Copyright © Michael Porter 201112012.3.1_Book Launch_Redefining German Health Care_Porter_Guth

Effective Health Care Policy: Improving Value for Patients

Professor Michael E. Porter

Presentation at HealthAchieveOntario Hospital Association

Ontario, CanadaNovember 3, 2014

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. For further information about Value Based Health Care Delivery,please see http://www.isc.hbs.edu/resources/courses/health-care-courses/Pages/health-care-curriculum.aspx


• Delivering high and improving value for patients is the fundamental purpose of health care

• Value is the only goal that can unite the interests of all system participants

• Improving value is the only real solution versus further cost shifting, restricting services, or reducing the compensation of health care professionals

Solving the Health Care Problem

• The core issue in health care is the value of health care delivered

Value =Health outcomes that matter to patients

Costs of delivering the outcomes


Principles of Value-Based Health Care Delivery

• Value is measured for the care of a patient’s medical condition over the full cycle of care

• Outcomes are the full set of 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

Value =Health outcomes that matter to patients

Costs of delivering the outcomes

Copyright © Michael Porter 201142012.02.29 UK Plenary Session

Creating a Value-Based Health Care Delivery SystemThe Strategic Agenda

1. Re-organize Care into Integrated Practice Units (IPUs) around Patient Medical Conditions

− For primary and preventive care, organize to serve distinct patient segments

2. Measure Outcomes and Costs for Every Patient

3. Move to Bundled Payments for Care Cycles

4. Integrate Care Delivery Systems

5. Expand Geographic Reach In Areas of Excellence

6. Build an Enabling Information Technology Platform


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

Primary Care Physicians Inpatient

Treatmentand Detox

Units

OutpatientPsychologists

OutpatientPhysical

Therapists

OutpatientNeurologists

Imaging Centers

Existing Model: Organize by Specialty and Discrete Service

1. Organize Care Around Patient Medical ConditionsMigraine Care in Germany


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

Affiliated Imaging Unit

West GermanHeadache Center

NeurologistsPsychologists

Physical Therapists“Day Hospital”

NetworkNeurologists

Essen Univ.

HospitalInpatient

Unit

PrimaryCare

Physicians

Affiliated “Network”Neurologists

Existing Model: Organize by Specialty and Discrete Service

New Model: Organize into Integrated Practice Units (IPUs)

1. Organize Care Around Patient Medical ConditionsMigraine Care in Germany

Primary Care Physicians Inpatient

Treatmentand Detox

Units

OutpatientPsychologists

OutpatientPhysical

Therapists

OutpatientNeurologists

Imaging Centers


• 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 complicationsExamples: diabetes, breast cancer, knee osteoarthritis

What is a Medical Condition?

• 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)

Source: Porter, Michael E. with Thomas H. Lee and Erika A. Pabo. “Redesigning Primary Care: A Strategic Vision to Improve Value by Organizing Around Patients’ Needs,” Health Affairs, Mar, 2013

• The medical condition / patient segment is the proper unit of value creation (and value measurement), in health care delivery

Specialty Care

Primary/Preventive Care


Integrating Care Over The Full Care CycleAcute Knee-Osteoarthritis Requiring Replacement

Other Provider Entities

• Specialty office• Pre-op evaluation center

• Operating room• Recovery room• Orthopedic floor at

hospital or specialty surgery center

• Specialty office• Imaging facility

• Nursing facility• Rehab facility• Physical therapy clinic• Home

MONITOR• Consult regularly with

patient

MANAGE• Prescribe prophylactic

antibiotics when needed• Set long-term exercise

plan• Revise joint, if necessary

SURGICAL• Immediate return to OR for

manipulation, if necessary

MEDICAL• Monitor coagulation

LIVING• Provide daily living support

(showering, dressing)• Track risk indicators

(fever, swelling, other)

PHYSICAL THERAPY• Daily or twice daily PT

sessions

ANESTHESIA• Administer anesthesia

(general, epidural, or regional)

SURGICAL PROCEDURE• Determine approach (e.g.,

minimally invasive)• Insert device• Cement joint

PAIN MANAGEMENT• Prescribe preemptive

multimodal pain meds

IMAGING• Perform and evaluate MRI

and x-ray-Assess cartilage loss-Assess bone alterations

CLINICAL EVALUATION• Review history and

imaging• Perform physical exam• Recommend treatment

plan (surgery or other options)

• Specialty office• Primary care office• Health club

• Expectations for recovery• Importance of rehab• Post-surgery risk factors

• Meaning of diagnosis• Prognosis (short- and

long-term outcomes)• Drawbacks and benefits

of surgery

INFORMING AND ENGAGING

MEASURING

ACCESSING

• Importance of exercise, maintaining healthy weight

• Joint-specific symptoms and function (e.g., WOMAC scale)

• Overall health (e.g., SF-12 scale)

• Baseline health status• Fitness for surgery (e.g.,

ASA score)

• Blood loss• Operative time• Complications

• Infections• Joint-specific symptoms

and function• Inpatient length of stay• Ability to return to normal

activities

• Joint-specific symptoms and function

• Weight gain or loss• Missed work• Overall health

MONITOR• Conduct PCP exam• Refer to specialists, if

necessary

PREVENT• Prescribe anti-

inflammatory medicines• Recommend exercise

regimen• Set weight loss targets

• Importance of exercise, weight reduction, proper nutrition

• Loss of cartilage• Change in subchondral

bone• Joint-specific symptoms

and function• Overall health

OVERALL PREP• Conduct home

assessment• Monitor weight loss

SURGICAL PREP• Perform cardiology,

pulmonary evaluations• Run blood labs• Conduct pre-op physical

exam

• Setting expectations• Importance of nutrition,

weight loss, vaccinations• Home preparation

• Importance of rehab adherence

• Longitudinal care plan

Orthopedic Specialist

• PCP office• Health club• Physical therapy clinic

DIAGNOSING PREPARING INTERVENINGMONITORING/PREVENTING

RECOVERING/REHABBING

MONITORING/MANAGING

CARE DELIVERY


Integrating Across the Care CycleAn Orthopedic Surgeon Teaches A Course to Independent

Physical Therapists About Treatment Post-Surgery


Attributes of an Integrated Practice Unit (IPU)

1. Organized around a medical condition or set of closely related conditions (or defined patient segments for primary care)

2. Care is delivered by a dedicated, multidisciplinary team who devote a significant portion of their time to the condition

3. Providers see themselves as part of a common organizational unit4. The team takes responsibility for the full cycle of care for the condition

− Encompassing outpatient, inpatient, and rehabilitative care, as well as supporting services (such as nutrition, social work, and behavioral health)

5. Patient education, engagement, and follow-up are integrated into care6. The unit has a single administrative and scheduling structure7. Care is co-located in dedicated facilities to the extent feasible8. A physician team captain or a clinical care manager (or both)

oversees each patient’s care process9. The team measures outcomes, costs, and processes for each patient

using a common measurement platform10. Accepts joint accountability for outcomes and costs11. The team meets formally and informally on a regular

basis to discuss patients, processes, and how to improve results


Volume in a Medical Condition Enables Value

• Volume and experience will have an even greater impact on value in an IPU structure than in the current system

Better Results, Adjusted for Risk Rapidly Accumulating

Experience

Rising Process Efficiency

Better Information/Clinical Data

More Tailored Facilities

Rising Capacity for

Sub-Specialization

More Fully Dedicated Teams

Faster Innovation

Greater Patient Volume in a

Medical Condition

Improving Reputation

Costs of IT, Measure-ment, and ProcessImprovement Spread

over More Patients

Wider Capabilities in the Care Cycle,

Including Patient Engagement

The Virtuous Circle of Value

Greater Leverage in Purchasing

Better utilization of capacity


Fragmentation of Care in the U.S. System

Procedure / Specialty Est. Number of Inpatient

Procedures

% of Procedures at Hospitals Performing <10 Cases per Year

% of Procedures Performed at Minimum

Adequate Volume Hospitals

Rectal cancer surgery 26,692 45% 35%

Bariatric surgery 48,672 28% 49%

Radical prostatectomy 77,030 3% 53%

Breast cancer surgery 120,704 23% 39%

AAA repair 54,819 17% 50%

CABG 427,380 1% 62%

Coronary stenting 558,349 <1% 62%

13 Copyright © Michael Porter 201113 Copyright © Michael Porter 20112012.03.07 Value-Based Health Care Delivery

Patient Experience/

Engagement

E.g. PSA,Gleason score,surgical margin

Protocols/Guidelines

Patient Initial Conditions

Processes Indicators (Health) Outcomes

StructureE.g. Staff certification, facilities standards

2. Measure Outcomes and Costs for Every PatientThe Measurement Landscape

14 Copyright © Michael Porter 20122012.03.07 Value-Based Health Care Delivery

The Outcome Measures Hierarchy

Survival

Degree of health/recovery

Time to recovery and return to normal activities

Sustainability of health/recovery and nature of recurrences

Disutility of the care or treatment process (e.g., diagnostic errors and ineffective care, treatment-related discomfort,

complications, or adverse effects, treatment errors and their consequences in terms of additional treatment)

Long-term consequences of therapy (e.g., care-induced illnesses)

Tier1

Tier2

Tier3

Health Status Achieved

or Retained

Process of Recovery

Sustainability of Health

Source: NEJM Dec 2010

• Achieved clinical status

• Achieved functional status

• Care-related pain/discomfort

• Complications

• Reintervention/readmission

• Long-term clinical status

• Long-term functional status

Copyright © Michael Porter and Elizabeth Teisberg 2011152011.12.08 Comprehensive Deck

6.5%

34.7%

95%

43.3%

75.5%

94%

Incontinence after one year

Severe erectile dysfunction after one year

5 year disease specific survival

Average hospital Best hospital

Measuring Multiple Outcomes Prostate Cancer Care in Germany

Source: ICHOM


International Consortium for Health Outcomes Measurement (ICHOM) Standard Sets Developed

Conditions in Year One (2013)

Conditions in Year Three (2015)

Conditions in Year Two (2014)

• Coronary Artery Disease• Lower Back Pain• Cataracts• Localized Prostate Cancer

• Parkinson’s disease• Cleft Lip and Palate• Stroke• Hip and knee osteoarthritis• Macular degeneration• Lung cancer• Depression and anxiety• Advanced prostate cancer

▪ Dementia▪ Heart Failure▪ Inflammatory bowel

disease▪ Gastro‐esophageal reflux

disease▪ Frail elderly▪ Brain tumors▪ Breast cancer▪ Colon cancer▪ Pregnancy and childbirth▪ Cystic fibrosis▪ Bipolar disorder▪ Epilepsy▪ Hip Fractures

Burden of Disease Covered

18% 35% 43%


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, not just for departments or the provider organization as a whole

• Cost should be aggregated over the full cycle of care for the patient’s medical condition

• Cost depends on the actual use of resources involved in a patient’s care process (personnel, facilities, supplies, and support services)

- Time-Driven Activity Based Costing (TDABC)

• “Overhead” costs should be associated with the patient-facing resources which drive support services usage

Sources: Kaplan, Robert and Michael E. Porter, “The Big Idea: How to Solve the Cost Crisis in Health Care”, Harvard Business Review, September 1, 2011 and Kaplan, R.S and Haas D.A. (2014). How Not to Cut Health Care Costs. Harvard Business Review. November 2014.


Mapping Resource UtilizationMD Anderson Cancer Center – New Patient Visit

Registration andVerification

Receptionist, Patient Access Specialist, Interpreter

IntakeNurse,

Receptionist

Clinician VisitMD, mid-level provider,

medical assistant, patient service coordinator, RN

Plan of Care Discussion

RN/LVN, MD, mid-level provider, patient service

coordinator

Plan of Care Scheduling

Patient Service Coordinator

Decision Point

Time (minutes)


Major Cost Reduction Opportunities in Health Care• Reduce process variation that lowers efficiency and raises inventory

without improving outcomes• Eliminate low- or non-value added services or tests

− Sometimes driven by protocols or to justify billing• Rationalize redundant administrative and scheduling units• Improve utilization of expensive physicians, staff, clinical space, and

facilities by reducing duplication and service fragmentation• Minimize use of physician and skilled staff time for less skilled

activities• Move routine or uncomplicated services out of highly-resourced

facilities• Reduce cycle times across the care cycle• Process steps that optimize total care cycle cost versus minimizing

investments in the costs of individual services• Increase cost awareness in clinical teams

• Many cost reduction opportunities will actually improve outcomes

Copyright © Michael Porter 2011202011.10.27 Introduction to Social Medicine Presentation

3. Move to Bundled Payments for Care Cycles

Bundledreimbursement

for medicalconditions

Fee for service

Bundled Payment• 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

Globalcapitation

Global provider budgets

Source: Porter, M.E., Kaplan, R.S. (2014). How Should We Pay for Health Care? Working Paper.


• Components of OrthoChoice bundle

• Initially applied to all relatively healthy patients (i.e. ASA scores of 1 or 2) • Mandatory reporting by providers to the joint registry plus supplementary

reporting

• The Stockholm bundled price for a knee or hip replacement is about US $8,300

- Pre-op evaluation- Lab tests- All Radiology- Surgery & related admissions- Prosthesis - Drugs- Inpatient rehab

- All physician and staff fees and costs- 1 follow-up visit within 3 months - Responsible for complications and any

additional surgery to the joint within 2 years- If post-op deep infection requiring

antibiotics occurs, guarantee extends to 5 years

Bundled Payment in PracticeHip and Knee Replacement in Stockholm, Sweden

Early Results:‒ Wait times fell dramatically‒ Complications fell 16.9% in the first another 25.9% in the second year‒ Functional outcomes constant‒ Volume shifted toward specialty hospitals and away from full service acute

hospitals‒ Private providers restructured the care process to improve efficiency and lower

complication


Elements of a Value-Based Bundle

• Condition based, not specialty, procedure or episode based• Risk adjusted, or covering a defined patient group in terms of

complexity- 80/20 rule

• Contingent on outcomes, including care guarantees• Payment based on the cost of efficient and effective care, not

past charges• Specified limits of responsibility for unrelated care needs, and

stop loss provisions to mitigate against outliers• A level of price stability


Value Based Bundle: Swedish Spine

0

10,000

20,000

30,000

40,000

50,000

60,000

Base Payment Warranty Payment Performance Payment Total Payment

SEK

Standard Payment

Risk Adjustment

54,537 ($8,139*)

* Based on Jan 1, 2012 exchange rate of 6.8 SEK to 1 USD

42,044

4,357

Average 10% of Base

8,136

Base PaymentCovered: Preoperative consultation, surgery, inpatient stay, implants, medications, laboratories, radiology, physical therapy, and follow-up care.

Risk adjustment: Age, gender, patient-reported pre-operative pain measured by Visual Analog Scale (VAS)

Performance PaymentAmount: Average of 10 percent of base reimbursement

Criteria: Based on the actualimprovement in pain at 1 year after surgery (Global Assessment Scale) versus expected pain outcome based on registry data for similar patients

Warranty Payment

Risk adjustments: Age, gender, preoperative VAS, pain duration, smoking, comorbidities, operative treatment, employment status

Covered:•Surgery wrong side/level•Disk herniation•Re-stenosis•Mechanical complication•Pseudoarthrosis

•Cerebrospinal fluid leak•Ongoing Bleeding•Infection•Pain in neck/arm/back•Wound dehiscence•Implant related pain

Condition: Spinal Stenosis Requiring Decompression

Standard Payment

Risk Adjustment


4. Integrate Care Delivery SystemsChildren’s Hospital of Philadelphia Care Network

CHOP Newborn Care

CHOP Pediatric CareCHOP Newborn & Pediatric Care

Pediatric & Adolescent Primary CarePediatric & Adolescent Specialty Care CenterPediatric & Adolescent Specialty Care Center & Surgery CenterPediatric & Adolescent Specialty Care Center & Home Care

Harborview/Cape May Co.

Shore Memorial HospitalHarborview/Somers Point

Atlantic County

Harborview/Smithville

Mt. Laurel

Salem Road

Holy Redeemer Hospital

Newtown

UniversityMedical Centerat Princeton

Princeton

Saint Peter’sUniversity Hospital

(Cardiac Center)

Doylestown Hospital

Central BucksBucks County

High Point

Indian Valley

Grand ViewHospital

AbingtonHospital

Flourtown

ChestnutHill

Pennsylvania Hospital

University CityMarket Street

Voorhees

South Philadelphia

Roxborough

King ofPrussia

Phoenixville Hospital

West GroveKennett Square

CoatesvilleWest Chester

North Hills

Exton PaoliChester Co.

HospitalHaverford

Broomall

Chadds Ford

DrexelHill

MediaSpringfieldSpringfield

The Children’s Hospitalof Philadelphia®

CobbsCreek

DELAWARE

PENNSYLVANIA

NEW JERSEY

Network Hospitals:

Wholly-Owned Outpatient Units:


Integrating Care Delivery SystemsFour Levels of Provider System Integration

1. Define the scope of services for each facility and for the system as a whole based on value

2. Concentrate volume by condition in fewer locations

3. Choose the right location for each service based on the medical condition, acuity level, resource intensity, cost level and need for convenience

E.g., shift routine surgeries out of tertiary hospitals to smaller,more specialized facilities

4. Integrate care across appropriate locations through IPUs


Matching Patient and FacilityRothman Institute, Philadelphia

* Based on Age, Weight, Expected Activity, General Health, and Bone Quality (Clin Orthop Relat Res. 2006)

Ambulatory Surgery Center

Rothman Orthopaedic Specialty Hospital

Jefferson University Academic Medical Center

Bryn MawrCommunity Hospital

Lowest Complexity

LowMediumHighest Complexity

Matching Patients to Facility*

Cost of Total Knee

Replacement: ~$12,000 USD

Cost of Total Knee

Replacement ~$45,000 USD


Central DuPage Hospital, ILCardiac Surgery

McLeod Heart & Vascular Institute, SCCardiac Surgery

CLEVELAND CLINIC

Chester County Hospital, PACardiac Surgery

Rochester General Hospital, NY Cardiac Surgery

5. Expand Geographic ReachThe Cleveland Clinic Affiliate Programs

Pikeville Medical Center, KYCardiac Surgery

Cleveland Clinic Florida Weston, FLCardiac Surgery

Cape Fear Valley Medical Center, NCCardiac Surgery

Charleston, WVKidney Transplant

St. Vincent Indianapolis, INKidney Transplant


6. Build an Enabling Integrated IT Platform

Utilize information technology to enable restructuring of care delivery and measuring results, rather than treating it as a solution itself

Attributes of a Value-Based IT Platform• Combines all types of data (e.g. notes, images) for each patient• Uses common data definitions• Data encompasses the full care cycle, including care by referring entities• Allows access and communication among all involved parties, including

with patients• Provides views and templates by medical condition to enhance the user

interface for IPU teams• Creates searchable “structured” data vs. free text• The architecture allows easy extraction of outcome measures, process

measures, and activity-based costing measures for each patient /medical condition

• Enables data exchange and aggregation among different provider (and payor) organizations involved with each patient


A Mutually Reinforcing Strategic Agenda

1Organize into

Integrated Practice

Units (IPUs)

2Measure

Outcomes and Cost For Every Patient

3Move to Bundled

Payments for Care Cycles

4Integrate

Care Delivery Systems

5Expand

Geographic Reach

6 Build an Integrated Information Technology Platform


Where to Start?

1Organize into

Integrated Practice

Units (IPUs)

2Measure

Outcomes and Cost For Every Patient

3Move to Bundled

Payments for Care Cycles

4Integrate

Care Delivery Systems

5Expand

Geographic Reach

6 Build an Integrated Information Technology Platform


40

50

60

70

80

90

100

0 100 200 300 400 500 600

Percent 1 Year Graft Survival

Number of Transplants

Adult Kidney Transplant OutcomesU.S. Centers, 1987-1989

16 greater than predicted survival (7%)20 worse than predicted survival (10%)

Number of programs: 219Number of transplants: 19,588One year graft survival: 79.6%


8 greater than expected graft survival (3.4%)14 worse than expected graft survival (5.9%)

40

50

60

70

80

90

100

0 100 200 300 400 500 600 700 800

Percent 1-year Graft Survival

Number of Transplants

Adult Kidney Transplant OutcomesU.S. Center Results, 2008-2010

Number of programs included: 236Number of transplants: 38,5351-year graft survival: 93.55%

8 greater than expected graft survival (3.4%)14 worse than expected graft survival (5.9%)


Measuring and Reporting Outcomes is the Single Most Important Step in Transforming Health Care

• Outcomes define the goal of every health care organization and its accountability to patients

• Outcomes inform the team and the services that should be part of the Integrated Practice Unit (IPU)

• Outcomes highlight and verify value-enhancing cost reduction

• Outcomes are critical to value-based bundled reimbursement models

• Outcomes unite clinicians and administrators around practice improvement

• Outcomes define areas for service line growth

• Ontario should commit to roll out ICHOM standard sets across the province


Key References1. Porter, M.E., Teisberg, E. (2006). Redefining Health Care. Harvard Business

Publishing.2. Porter, M.E. and Lee, T.H. (2013). The Strategy that Will Fix Health Care. Harvard

Business Review. October 2013. Prod. #: R1310B‐PDF‐ENG.3. Porter, M.E. (2010). What Is Value in Health Care? New England Journal of Medicine;

363:2477‐2481.4. Porter, M.E. (2010). Value in Health Care. Supplement 1 to “What Is Value in Health

Care?” New England Journal of Medicine; Appendix 1.5. Porter, M.E. (2010). Outcomes Measurement. Supplement 2 to “What Is Value in

Health Care?” New England Journal of Medicine; Appendix 2.6. Kaplan, R.S and Porter, M.E. (2011). How to Solve the Cost Crisis in Health Care.

Harvard Business Review. September 2011. 7. Kaplan, R.S and Haas D.A. (2014). How Not to Cut Health Care Costs. Harvard

Business Review. November 2014. 8. Porter, M.E., Pabo, E.A., Lee, T.H. (2013). Redesigning Primary Care: A Strategic

Vision To Improve Value By Organizing Around Patients’ Needs. Health Affairs; 32: 516‐525.

9. Porter, M.E. (2009). A Strategy for Health Care Reform—Toward a Value-Based System. New England Journal of Medicine; 361:109-112.

Additional information about these ideas, as well as case studies, can be found at the Institute for Strategy and Competitiveness Redefining Health Care website at http://www.hbs.edu/rhc/index.html For information about the VBHCD Curriculum please see: http://www.isc.hbs.edu/resources/courses/health-care-courses/Pages/health-care-curriculum.aspx

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