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The Conference Board Review® Article
The Healthcare Crisis — Solved?
In an interview in our July/August issue, Harvard management guru Michael Porter discussed his new book, Redefining Health Care: Creating Value-Based Competition on Results — co-written with Elizabeth Teisberg of the University of Virginia's Darden School of Business — and the book's competition-based proposals for tackling America's healthcare calamity. We asked several healthcare authorities to evaluate and comment on those proposals. The original interview is available on our website.
By A.J. Vogl
Uwe E. Reinhardt:
With the wisdom of hindsight, it may fairly be said that, in their Communist Manifesto of 1848, Karl Marx and Friedrich Engels vastly underestimated what it would take to goad unruly humankind toward the utopian vision of the classless society they sought to market. Much the same is likely to be said a decade or so hence about the utopian vision now being marketed by Michael Porter and Elizabeth Teisberg in their manifesto Redefining Health Care.
In these authors' utopian vision, our health system would consist of a myriad of clinically integrated mini-healthcare systems, each organized around one of a myriad of clearly identifiable "medical conditions" with standard life cycles. The unit of "output" for which each mini-system would quote its price in a competitive market would be the multidimensional "health outcomes" that the system achieves over the entire life cycle of the medical condition in which it specializes. Thus, an individual afflicted with, say, medical condition #387 would have accurate and timely information on the prices quoted and the "health outcomes" achieved by the various rival mini-health systems specializing in condition #387 in the relevant market area. Perhaps assisted by a primary-care physician, the afflicted consumer (formerly "patient") would then choose to seek help from the one mini-system that offers the greatest "value," which, in Porter's words, is defined as "health outcomes per dollar spent." In such a market, the economic and professional incentives of all participants would be aligned toward a single goal: the maximization of "value" for the healthcare dollar. Even the greediest and most misanthropic providers of health care would have no choice but to work hard toward that goal, lest they be driven out of the market.
In his interview with A.J. Vogl, Porter declares himself "stunned" that this vision has not driven the health policy debate thus far. He might be less surprised if he descended from the lofty perch of a theoretical strategist into the messy rough-and-tumble of the real healthcare world. Here he would discover that many of the ailments patients bring to the healthcare sector cannot be neatly categorized into a finite set of standard "medical conditions" with standard life cycles. Over half of total national health spending, for example, is incurred on behalf of patients with multiple chronic diseases, in a huge set of different permutations. In the real healthcare world, Porter would discover that defining and measuring the multidimensional "health outcomes" for which the providers of health care are to be rewarded is far more difficult than he may dream, particularly because these outcomes are driven by environmental, socioeconomic, and behavioral factors outside the health system's control. Finally, Porter would learn that, even if the utopian market he envisages truly were a positive-sum game, the transition from the present to the utopian system would leave in its wake scores of losers, many of whom have huge equity positions in Congress and in state legislatures whose votes can be purchased to protect traditional economic turf.
Porter calls himself a strategist, and strategists certainly have their place in the health policy debate. But while the strategist who invented the wheel surely was pretty smart, the true genius was the tactician who thought of the other three wheels. What is needed in American health care is not more diagnosticians and theoretical strategists but, rather, tactical geniuses who can translate the mainly old ideas repackaged by Porter and Teisberg into good tactical decisions that actually transform the health system. It is here where the authors could have made a real contribution to U.S. health policy.
Uwe E. Reinhardt is James Madison Professor of Political Economy at Princeton University and a member of the Council on the Economic Impact of Health Reform and the National Leadership Coalition on Health Care.
Comments? Write a letter to the editor.
Return to the September/October 2006 The Conference Board Review® issue.
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