Matthew Holt

Michael Porter–seduced, converted, or bludgeoned into accepting reality?

6a00d8341c909d53ef0105371fd47b970b-320wi What a difference a few years makes. Michael Porter is the Harvard Business School prof who charged into health care a few years back. He (with Elizabeth Teisberg) wrote a book called Redefining Health Care which suggested how all kinds of changes on the delivery side of health care would solve all of our problems. Those changes were not exactly secrets to people who, say, read Michael Millenson’s Demanding Medical Excellence—a much better book written ten years earlier which explained why radical change on the delivery system side wasn’t going to happen. The answer?

It’s the Incentives, stupid.

There was a lot of fuss in the blogosphere in which in which people who understand health care (like Vince Kuraitis, Brian Klepper and, um, me) essentially told Porter and Teisberg that what they were espousing couldn’t work without a change in incentives. The two B school profs in public (and also from Teisberg to me in a series of very bizarre emails) left us all in no doubt that we were wrong, and that the delivery system could change without any radical insurance structure reform. Quoting my 2007 piece:

According to Porter “Most proposals to overhaul US healthcare systems — including extending insurance to all Americans — address the “margins” of the problem”.

In fact the very first time Porter presented on health care in a webinar in 2004 I asked him directly why he didn’t espouse Enthoven’s managed competition proposal which would change the incentives in the market and allow providers to compete based on outcomes. His response was that you couldn’t manage competition and to live diss Enthoven. I quote the relevant passage from my review below

He managed to talk for 45 minutes about how providers should change behavior without mentioning incentives. I asked a question about why he felt that the system might change in the absence of Medicare or any other big payer pushing a change in incentives. As part of the question I mentioned that the changes he wanted were the same ones that Enthoven’s managed competition would have brought into fruition. Porter was pretty dismissive of managed competition and Enthoven, saying that there was no such thing as competition that could be “managed”, but here he’s just wrong.

Well what a difference a few years makes. I’ve heard rumblings from the odd Porter talk that we did have to think about how this all impacts providers, but yesterday I think he formally came over to the light.

In a piece published in the NEJM yesterday Porter now says that we should do six things (my paraphrasing here)

1. Change the nature of health insurance competition. so that insurers are incented to improve their population’s health.

2. Keep employers in the system (MH-he’s wrong but it’s not a biggie)

3. Equalizing the tax deductibility of insurance (MH-we should remove it but at least leveling the playing field is OK)

4. Create large statewide or multi-state insurance pools,

5. Give income-based subsidies to help lower-income people buy insurance.

6. Individual mandate

Fabulous. Porter now gets it. Unless we change the way that payers pay providers—which requires massive change in insurer regulation and management of what they do and how they compete—we wont get change in the health care system. It’s good to have him on board.

Only a curmudgeon would mention that his list mostly matches what Enthoven wrote when he introduced the notion of managed competition in 1977

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ScottWendell MurrayMatthew HoltjdKarl Recent comment authors
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Scott
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Scott

Many good points in this conversation. There are ways to compare plans and providers based on quality. US News & World Report publishes results of the NCQA’s measurement efforts each year..http://health.usnews.com/sections/health/health-plans/index.html. Many employers consider HEDIS information in their choice of health plans. Medicare mandates its use in measuring Medicare Advantage plans and 30+ states mandate it in measuring their Medicaid plans. The New England states have created all-payer’s database in order to provide quality and price measures to each state’s citizens across plans and to the level of physician groups and/or systems. Utah and, most recently, Oregon and Tennessee have… Read more »

John
Guest

Seems like the idea of capitation is being used a bit loosely in the comments here. Kaiser Permanente is an insurance company (much like any other) as well as care provider (where it is very different), and it’s more descriptive to call the care side of the house integrated care delivery. One significant issue for cost control in the integrated care model is that salaried doctors have no incentive to perform high-reimbursement but unnecessary procedures (or procedures with less expensive substitutes). There is also greater incentive to provide preventive care, though not as much as there should be, since customers… Read more »

Karl
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Karl

“Makes sense to me.”
Sir: as Churchill might note: “yes — and to you, only.”
Nationwide capitation will happen when EHRs/EMRs provide authentic benefits.
Have a good day, sir.

Wendell Murray
Guest

Karl: Your comments lack any factual basis so far as I can tell, plus they seem to be intentionally insulting to other commenters, so please make them on, say, the WSJ’s HealthBlog, where there is a better fit. From my perspective most of the analysis in the Porter/Teisberg book is excellent, but none of it is unique. The primary weakness in its analysis (leaving aside its recommendations) is its dismissal of the structure of healthcare systems outside the USA. Needless to say those systems universally “perform” – as measured by population health status/cost per capita – dramatically better than the… Read more »

Karl
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Karl

“And if you think capitation failed, I look forward to seeing you at Kaiser Permanente’s bankruptcy hearings.”
Is that after California’s Chapter 11 bankruptcy reorganization filing?
Or Obama’s bailout of California with funds from North Dakota and MORE printing of worthless paper money?
Or both?
Get a calculator, sir. Those in bankruptcy need them.

Matthew Holt
Guest

John. You may be right but if that’s the case Porter certainly sold a whole bunch of us a dummy. I myself read not only the book but all the other articles he and Teisberg wrote at the time in preparation for the interview that never was with her, and several others I trust agreed with me. On the other hand maybe he didn’t believe what he was saying about Enthoven. Docannon is of course correct. Medicare FFS, itself based on Blue Cross payment circa 1936, is the root cause of the problem. But the change to a more rational… Read more »

Karl
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Karl

Nate, you got that right. Capitation FAILED. Get a clue, jd.

Nate
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Nate

jd, we tried capitation and it failed big time. Let me correct that, it succeded at it’s goal but failed politicaly, leading the Democrats that championed it to throw it under the bus. With Obama’s penchant for bus murders he would throw them under the same day he proposed another round. The discussions on MedPac popping up are another flavor of capitation but why should be expect the public to accept rationing this time? If the public won’t accept it why do you think the politicians won’t throw it under the bus once again when it succeeds? Or do we… Read more »

jd
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jd

Karl, thanks for pointing to something that Porter actually wrote. Now please address what Matt actually wrote. It is not enough, and actually naive, for Porter to say the following: “Results data not only will drive providers and health plans to improve outcomes and efficiency but also will help patients and health plans choose the best provider teams for their medical circumstances.” The whole disagreement Matt and others had with Porter is that under the current system there are inadequate incentives to collect, disseminate and use this data. You need to change the incentives first to get providers to try… Read more »

Karl
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Karl

WOW! Does this mean that President Obama is NOT going to call Porter? And call you, instead?
I doubt it. Very seriously.
This is what Porter *actually* wrote:
“First, measurement and dissemination of health outcomes should become mandatory for every provider and every medical condition. Results data not only will drive providers and health plans to improve outcomes and efficiency but also will help patients and health plans choose the best provider teams for their medical circumstances.”
Disclosure is one method. A huge government bureaucracy handing out taxpayer goodies for politically-correct behavior is very much another.
This is much ado about nothing. Nothing. Zero.

rbar
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rbar

Thanks, bev. MD and Deron, for your replies. Even though I didn’t read Porter’s book yet (I ordered it) – as opposed to many other folks here, as it seems, I want to point out re. the concepts discussed here: 1) how is quality/outcome exactly measured in practice? The only clear parameter I know of is the quality adjusted life year (QALY), if I recall correctly 2) what is a care episode/cycle exactly? Most chronic diseases are year long processes with multiple acts of care/services, and outcome is often hard to define and depending on multiple parameters. What about the… Read more »

John
Guest

All six of the points in this article are entirely in keeping with the various theses of the Porter/Teisberg book. The idea that they ignore incentives is absurd–this book is ALL about incentives, as any book (co)written by an economist/management consultant will be. Also absurd is the idea that the book only covered the care delivery side–it gives approximately equal coverage of public policy, the insurance industry, employers, and patients. A quick perusal of the contents page on Amazon will verify that this is true. So will reading the book. As others have stated above, care delivery systems can only… Read more »

docanon
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docanon

@ Dustin Lipson: The power to set incentives is _currently_ concentrated within a single quasi-governmental entity known as the RUC. This tiny and secretive little politburo sets nearly all Medicare Part B payment rates. Since Medicare is such a huge and inflexible purchaser of physician services, no private insurer can deviate too far from its price pegs for physician labor. And because physician behavior is a powerful driver of all medical spending, the RUC exerts insidious power over all aspects of the U.S. health care system. Google “RUC” or “RVU Update Committee” and prepare to be horrified. This is where… Read more »

Dustin Lipson
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Dustin Lipson

Dr. Motew, I think Porter would agree with you and in fact argue that this is where government could help by mandating both outcome reporting and more price transparency. There would be plenty of info aggregators chomping at the bit to provide consumer friendly explanations of value analyses if the data were available. In every case where outcomes were measured (as far as I have found) and shared, quality improved and cost decreased…it’s hard not to buy some of Porter’s argument. On a separate note, while I agree that incentives are absolutely key to driving change, I don’t think that… Read more »

Stephen Motew, MD, FACS
Guest

bev MD, thank you, points well taken. Nonetheless even relating my comments more directly to Porter’s definition of patient-centric value, the impact of the patient’s role in defining this value must be accounted for somewhere in the system. The integrated organizations or hospitals or insurers can assume the responsibility for involving the patients or pass it down the chain, but I still contend that at the end of the line unless the patient is brought more directly into the model, then this critical variable will limit its applicability and success.