The Healthcare System's Dirty Secrets | Big Think

The Healthcare System's Dirty Secrets

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Insurance companies are rewarded for excluding sick people, says Harvard Business School professor Michael Porter.

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Michael Porter:

Michael Porter is generally recognized as the father of the modern strategy field and has been identified in a variety of rankings and surveys as the world’s most influential thinker on management and competitiveness. He is also a leading authority on the application of competitive principles to social problems such as health care, the environment, and corporate responsibility. Porter is the Bishop William Lawrence University Professor at the Harvard Business and the author of 18 books and over 125 articles. He received a B.S.E. with high honors in aerospace and mechanical engineering from Princeton University in 1969; an M.B.A. with high distinction in 1971 from the Harvard Business School, where he was a George F. Baker Scholar; and a Ph.D. in Business Economics from Harvard University in 1973. In 2001, Harvard Business School and Harvard University jointly created the Institute for Strategy and Competitiveness, dedicated to furthering Porter’s work.

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TRANSCRIPT:

Topic: Healthcare: Problems and Solutions

Porter: The fundamental problem with healthcare in the US and many other countries as well by the way is that the system is not really organized and structured around delivering value for the patient.

Michael Porter, Professor, Harvard Business School.

Question: Where did the healthcare industry go wrong?

Porter: We have a system where in America particularly we don’t have everybody covered by an insurance system and the insurance system that we do have is again not structured around value. Insurance companies have been rewarded for actually excluding sick people and their modus operandi is to bargain down prices with providers rather than actually improve the health of their subscribers. We don’t even know if insurance companies do a good job of actually assisting their members or their subscribers in improving their health conditions and so the insurance market has been really not rewarding value but really rewarding cost shifting, pushing cost from one entity to the another, passing more cost on to the consumers. So the insurance system is really a key part of a problem. But what we, I think understand now is the real fundamental problem is that we’re not delivering healthcare in a way that creates value or the maximum value for the customer and that’s fundamentally because the organization of healthcare is misaligned with really the needs of the patient. Healthcare is organized around specialties and interventions. You go to the radiologist, you go to the internal medicine person, you go to rehab, these are all separate departments, separate people, separate interventions with separate administrative structures, but that’s not what creates value. What creates value is really to integrate all the expertise and specialties and interventions necessary to address the patients' medical condition—whether it’s diabetes or heart problem or an arthritic hip—over the full cycle of care of that patient, and fundamentally then the organization of the delivery of care is really not organized around the patient and the value for the patient but it’s really organized around the traditional divisions and specialties in the field. And what makes it worst is that we don’t actually measure the value delivered, we don’t even measure health outcomes at all except in very rare cases. So it’s very hard to drive value in a system where value really isn’t measured and where pricing actually reinforces the fragmentation and lack of coordination in the system. Today, we pay for services basically, we pay the doctor separate from the hospital, we pay the radiologist separately from the surgeon, we pay the surgeon separately from the anesthesiologist, we pay the office visit separately from rehab and essentially the payment system then simply encourages people to do more services, rather than to optimize the overall value that is delivered in terms of the patient outcomes per dollar spent. So we’ve got a real mess in our hands because the structure of the system is really fundamentally disconnected to value.

Question: What can we do to improve the system?

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