Value-Based Health Care Delivery - Presentation Brigham and Women's

2012.03.26 VBHCD Core Concepts 1 Copyright © Michael Porter 2013 Value-Based Health Care Delivery Professor Michael E. Porter Harvard Business School Institute for Strategy and Competitiveness www.isc.hbs.edu Brigham and Women’s Hospital Grand Rounds March 14, 2013 This presentation draws on Redefining Health Care: Creating Value-Based Competition on Results (with Elizabeth O. Teisberg), Harvard Business School Press, May 2006; “A Strategy for Health Care Reform—Toward a Value-Based System,” New England Journal of Medicine, June 3, 2009; “Value-Based Health Care Delivery,” Annals of Surgery 248: 4, October 2008; “Defining and Introducing Value in Healthcare,” Institute of Medicine Annual Meeting, 2007. Additional information about these ideas, as well as case studies, can be found the Institute for Strategy & Competitiveness Redefining Health Care website at http://www.hbs.edu/rhc/index.html. 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 and Elizabeth O.Teisberg. 2012.03.26 VBHCD Core Concepts 2 Copyright © Michael Porter 2013 • Delivering high and improving value is the fundamental purpose of health care • Value is the only goal that can unite the interests of all system participants • How to design a health care delivery system that dramatically improves patient value • How to construct a dynamic system that keeps rapidly improving Redefining Health Care Delivery • The core issue in health care is the value of health care delivered Value: Patient health outcomes per dollar spent 2012.03.26 VBHCD Core Concepts 3 Copyright © Michael Porter 2013 Creating a Value-Based Health Care System • Significant improvement in value will require fundamental restructuring of health care delivery, not incremental improvements • Today’s delivery approaches reflect legacy organizational structures, management practices, and payment models that are inconsistent with modern learning practices and today’s medical science. Care pathways, process improvements, safety initiatives, case managers, disease management and other overlays to the current structure are beneficial, but not sufficient 2012.03.26 VBHCD Core Concepts 4 Copyright © Michael Porter 2013 Creating The Right Kind of Competition • Patient choice and competition for patients are powerful forces to encourage continuous improvement in value and restructuring of care • But today’s competition in health care is not aligned with value Financial success of Patient system participants success • Creating positive-sum competition on value for patients is fundamental to health care reform in every country 2012.03.26 VBHCD Core Concepts 5 Copyright © Michael Porter 2013 Principles of Value-Based Health Care Delivery • The overarching goal in health care must be value for patients, not access, cost containment, convenience, or customer service Value = Health outcomes Costs of delivering the outcomes – Outcomes are the full set of health results 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 2012.02.29 UK Plenary Session 6 Copyright © Michael Porter 2011 Creating a Value-Based Health Care Delivery System The Strategic Agenda 1. Organize Care into Integrated Practice Units (IPUs) around Patient Medical Conditions − Organize primary and preventive care to serve distinct patient segments 2. Measure Outcomes and Cost for Every Patient 3. Reimburse through Bundled Prices for Care Cycles 4. Integrate Care Delivery Across Separate Facilities 5. Expand Geographic Coverage by Excellent Providers 6. Build an Enabling Information Technology Platform 2012.03.26 VBHCD Core Concepts 7 Copyright © Michael Porter 2013 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 Treatment and Detox Units Outpatient Psychologists Outpatient Physical Therapists Outpatient Neurologists Imaging Centers Existing Model: Organize by Specialty and Discrete Services 1. Organizing Care Around Patient Medical Conditions Migraine Care in Germany 2012.03.26 VBHCD Core Concepts 8 Copyright © Michael Porter 2013 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 German Headache Center Neurologists Psychologists Physical Therapists “Day Hospital” Network Neurologists Essen Univ. Hospital Inpatient Unit Primary Care Physicians Affiliated “Network” Neurologists Existing Model: Organize by Specialty and Discrete Services New Model: Organize into Integrated Practice Units (IPUs) 1. Organizing Care Around Patient Medical Conditions Migraine Care in Germany Primary Care Physicians Inpatient Treatment and Detox Units Outpatient Psychologists Outpatient Physical Therapists Outpatient Neurologists Imaging Centers 2011.10.27 Introduction to Social Medicine Presentation 9 Copyright © Michael Porter 2011 • 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 complications – E.g., diabetes, breast cancer, knee osteoarthritis • 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) • The medical condition / patient segment is the proper unit of value creation and the unit of value measurement in health care delivery What is a Medical Condition? 2012.03.26 VBHCD Core Concepts 10 Copyright © Michael Porter 2012 INFORMING AND ENGAGING MEASURING ACCESSING THE PATIENT • Counseling patient and family on the diagnostic process and the diagnosis • Counseling on the treatment process • Education on managing side effects and avoiding complications • Achieving compliance • Counseling on long term risk management • Achieving compliance • Self exams • Mammograms • Labs • Procedure-specific measurements • Range of movement • Side effects measurement • MRI, CT • Recurring mammograms (every six months for the first 3 years) • Office visits • Mammography unit • Lab visits MONITORING/ PREVENTING DIAGNOSING PREPARING INTERVENING RECOVERING/ REHABING MONITORING/ MANAGING • Medical history • Control of risk factors (obesity, high fat diet) • Genetic screening • Clinical exams • Monitoring for lumps • Medical history • Determining the specific nature of the disease (mammograms, pathology, biopsy results) • Genetic evaluation • Labs • Advice on self screening • Consultations on risk factors • Office visits • Lab visits • High risk clinic visits • Mammograms • Ultrasound • MRI • Labs (CBC, etc.) • Biopsy • BRACA 1, 2… • CT • Bone Scans • Office visits • Hospital visits • Lab visits • Hospital stays • Visits to outpatient radiation or chemotherapy units • Pharmacy visits • Office visits • Rehabilitation facility visits • Pharmacy visits • Choosing a treatment plan • Surgery prep (anesthetic risk assessment, EKG) • Plastic or oncoplastic surgery evaluation • Neo-adjuvant chemotherapy • Surgery (breast preservation or mastectomy, oncoplastic alternative) • Adjuvant therapies (hormonal medication, radiation, and/or chemotherapy) • Periodic mammography • Other imaging • Follow-up clinical exams • Treatment for any continued or later onset side effects or complications • Office visits • Lab visits • Mammographic labs and imaging center visits • In-hospital and outpatient wound healing • Treatment of side effects (e.g. skin damage, cardiac complications, nausea, lymphedema and chronic fatigue) • Physical therapy • Explaining patient treatment options/ shared decision making • Patient and family psychological counseling • Counseling on rehabilitation options, process • Achieving compliance • Psychological counseling Integrating Across the Cycle of Care Breast Cancer 2012.3.1_Book Launch_Redefining German Health Care_Porter_Guth 11 Copyright © Michael Porter 2012 Attributes of an Integrated Practice Unit (IPU) 1. Organized around the patient medical condition or set of closely related conditions (or patient segment in primary care) 2. Involves a dedicated, multidisciplinary team who devotes a significant portion of their time to the condition 3. Providers involved are members of or affiliated with a common organizational unit 4. Takes responsibility for the full cycle of care for the condition − Encompassing outpatient, inpatient, and rehabilitative care as well as supporting services (e.g. nutrition, social work, behavioral health) 5. Incorporates patient education, engagement, and follow-up as integral to care 6. Utilizes a single administrative and scheduling structure 7. Co-located in dedicated facilities 8. Care is led by a physician team captain and a care manager who oversee each patient’s care process 9. Measures outcomes, costs, and processes for each patient using a common information platform 10. Providers function as a team, meeting formally and informally on a regular basis to discuss patients, processes and results 11. Accepts joint accountability for outcomes and costs 2012.03.26 VBHCD Core Concepts 12 Copyright © Michael Porter 2012 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, Measurement, and Process Improvement 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 2012.3.1_Book Launch_Redefining German Health Care_Porter_Guth 13 Copyright © Michael Porter 2012 Role of Volume in Value Creation Fragmentation of Hospital Services in Sweden Source: Compiled from The National Board of Health and Welfare Statistical Databases – DRG Statistics, Accessed April 2, 2009. DRG Number of admitting providers Average percent of total national admissions Average admissions/ provider/ year Average admissions/ provider/ week Knee Procedure 68 1.5% 55 1 Diabetes age > 35 80 1.3% 96 2 Kidney failure 80 1.3% 97 2 Multiple sclerosis and cerebellar ataxia 78 1.3% 28 1 Inflammatory bowel disease 73 1.4% 66 1 Implantation of cardiac pacemaker 51 2.0% 124 2 Splenectomy age > 17 37 2.6% 3 <1 Cleft lip & palate repair 7 14.2% 83 2 Heart transplant 6 16.6% 12 <1 2011.09.03 Comprehensive Deck 14 Copyright © Michael Porter 2011 Patient Adherence E.g., Hemoglobin A1c levels for diabetics Protocols/ Guidelines Patient Initial Conditions Processes Indicators (Health) Outcomes Structure E.g., Staff certification, facilities standards 2. Measuring Outcomes and Cost for Every Patient The Measurement Landscape 2011.09.03 Comprehensive Deck 15 Copyright © Michael Porter 2011 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., careinduced illnesses) Tier 1 Tier 2 Tier 3 Health Status Achieved or Retained Process of Recovery Sustainability of Health Recurrences Care-induced Illnesses Source: NEJM Dec 2010 2011.09.03 Comprehensive Deck 16 Copyright © Michael Porter 2011 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 Outcomes U.S. Centers, 1987-1989 16 greater than predicted survival (7%) 20 worse than predicted survival (10%) Number of programs: 219 Number of transplants: 19,588 One year graft survival: 79.6% 2011.09.03 Comprehensive Deck 17 Copyright © Michael Porter 2011 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 Outcomes U.S. Center Results, 2008-2010 Number of programs included: 236 Number of transplants: 38,535 1-year graft survival: 93.55% 8 greater than expected graft survival (3.4%) 14 worse than expected graft survival (5.9%) 2012.02.29 UK Plenary Session 18 Copyright © Michael Porter 2011 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 • Cost should be aggregated over the full cycle of care for the patient’s medical condition, not for departments, services, or line items • Cost depends on the actual use of resources involved in a patient’s care process (personnel, facilities, supplies) – The time devoted to each patient by these resources – The capacity cost of each resource – The support costs required for each patient-facing resource 2011.09.03 Comprehensive Deck 19 Copyright © Michael Porter 2011 Mapping Resource Utilization MD Anderson Cancer Center – New Patient Visit Registration and Verification Receptionist, Patient Access Specialist, Interpreter Intake Nurse, Receptionist Clinician Visit MD, 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 RCPT: Receptionist PAS: Patient Access Specialist RN: Registered Nurse PSC: Patient Service Coordinator Decision point PHDB: Patient History DataBase Time (min) INT: Interpreter MD: Medical Doctor, MA: Medical Assistant Pt: Patient, outside of process 2011.10.27 Introduction to Social Medicine Presentation 20 Copyright © Michael Porter 2011 Major Cost Reduction Opportunities in Health Care • Process variation that reduces efficiency without improving outcomes • Over-provision of low- or non-value adding services or tests − Sometimes to follow rigid protocols or justify billing • Redundant administrative and scheduling units • Low utilization of expensive physicians, staff, clinical space and equipment, partly due to duplication and service fragmentation • Use of physicians and skilled staff for less skilled activities • Delivering care in over-resourced facilities − E.g. routine care delivered in expensive hospital settings • Long cycle times and unnecessary delays • Excess inventory and weak inventory management • Focus on minimizing the costs of discrete services rather than optimizing the total cost of the care cycle • Lack of cost awareness in clinical teams • There are numerous cost reduction opportunities that do not require outcome tradeoffs, but will actually improve outcomes 2011.10.27 Introduction to Social Medicine Presentation 21 Copyright © Michael Porter 2011 3. Reimbursing through Bundled Prices for Care Cycles Bundled reimbursement for medical conditions Fee for service Bundled Price • 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 Global capitation 2012.01.11_VBHCD_Reimbursement 22 Copyright © Michael Porter 2012 • Components of the bundle • Currently applies to all relatively healthy patients (i.e. ASA scores of 1 or 2) • The same referral process from PCPs is utilized as the traditional system • Mandatory reporting by providers to the joint registry plus supplementary reporting • Applies to all qualifying patients. Provider participation is voluntary, but all providers are continuing to offer total joint replacements • The Stockholm bundled price for a knee or hip replacement is about US $8,000 - Pre-op evaluation - Lab tests - Radiology - Surgery & related admissions - Prosthesis - Drugs - Inpatient rehab, up to 6 days - All physician and staff fees and costs - 1 follow-up visit within 3 months - Any additional surgery to the joint within 2 years - If post-op infection requiring antibiotics occurs, guarantee extends to 5 years Bundled Payment in Practice Hip and Knee Replacement in Stockholm, Sweden 2011.09.03 Comprehensive Deck 23 Copyright © Michael Porter 2011 4. Integrating Care Delivery Across Separate Facilities Children’s Hospital of Philadelphia Care Network CHOP Newborn Care CHOP Pediatric Care CHOP Newborn & Pediatric Care Pediatric & Adolescent Primary Care Pediatric & Adolescent Specialty Care Center Pediatric & Adolescent Specialty Care Center & Surgery Center Pediatric & Adolescent Specialty Care Center & Home Care Harborview/Cape May Co. Shore Memorial Hospital Harborview/Somers Point Atlantic County Harborview/Smithville Mt. Laurel Salem Road Holy Redeemer Hospital Newtown University Medical Center at Princeton Princeton Saint Peter’s University Hospital (Cardiac Center) Doylestown Hospital Central Bucks Bucks County High Point Indian Valley Grand View Hospital Abington Hospital Flourtown Chestnut Hill Pennsylvania Hospital University City Market Street Voorhees South Philadelphia Roxborough King of Prussia Phoenixville Hospital West Grove Kennett Square Coatesville West Chester North Hills Exton Paoli Chester Co. Hospital Haverford Broomall Chadds Ford Drexel Hill Media Springfield Springfield The Children’s Hospital of Philadelphia® Cobbs Creek DELAWARE PENNSYLVANIA NEW JERSEY Network Hospitals: Wholly-Owned Outpatient Units: 2012.3.1_Book Launch_Redefining German Health Care_Porter_Guth 24 Copyright © Michael Porter 2012 1. Choose an overall scope of services where the provider system can achieve excellence in value 2. Rationalize service lines / IPUs across facilities to improve volume, better utilize resources, and deepen teams 3. Offer specific services at the appropriate facility – Based on medical condition, acuity level, resource intensity, cost level, need for convenience – E.g., shifting routine surgeries to smaller, more specialized facilities 4. Clinically integrate care across units and facilities using an IPU structure – Integrate services across the care cycle – Integrate preventive/primary care units with specialty IPUs There are major value improvements available from concentrating volume by medical condition and moving care out of heavily resourced hospital, tertiary and quaternary facilities Four Levels of Provider System Integration 2012.3.1_Book Launch_Redefining German Health Care_Porter_Guth 25 Copyright © Michael Porter 2012 Leading Providers • Grow areas of excellence across geography: − Hub and spoke expansion of satellite pre- and post-acute services − Affiliations with community providers to extend the reach of IPUs • Increase the volume of patients in medical conditions or primary care segments vs. widening service lines locally, or adding new broad line units Community Providers • Affiliate with excellent providers in more complex medical conditions and patient segments in order to access expertise, facilities and services to enable high value care − New roles for rural and community hospitals 5. Expanding Geographic Coverage by Excellent Providers 26 Copyright © Michael Porter and Elizabeth Teisberg 2011 Central DuPage Hospital, IL Cardiac Surgery McLeod Heart & Vascular Institute, SC Cardiac Surgery CLEVELAND CLINIC Chester County Hospital, PA Cardiac Surgery Rochester General Hospital, NY Cardiac Surgery Expanding Geographic Coverage by Excellent Providers The Cleveland Clinic Affiliate Programs Pikeville Medical Center, KY Cardiac Surgery Cleveland Clinic Florida Weston, FL Cardiac Surgery Cape Fear Valley Medical Center, NC Cardiac Surgery Charleston, WV Kidney Transplant St. Vincent Indianapolis, IN Kidney Transplant 2012.03.26 VBHCD Core Concepts 27 Copyright © Michael Porter 2013 6. Building an Enabling Information Technology Platform Utilize information technology to enable restructuring of care delivery and measuring results, rather than treating it as a solution itself • Common data definitions • Combine all types of data (e.g. notes, images) for each patient • Data encompasses the full care cycle, including care by referring entities • Allow access and communication among all involved parties, including with patients • Templates for medical conditions to enhance the user interface • “Structured” data vs. free text • Architecture that allows easy extraction of outcome measures, process measures, and activity-based cost measures for each patient and medical condition • Interoperability standards enabling communication among different provider (and payor) organizations 2012.03.26 VBHCD Core Concepts 28 Copyright © Michael Porter 2013 A Mutually Reinforcing Strategic Agenda Organize into Integrated Practice Units Measure Outcomes and Cost For Every Patient Move to Bundled Prices for Care Cycles Integrate Care Delivery Across Separate Facilities Grow Excellent Services Across Geography Build an Enabling IT Platform 29 Copyright © Michael Porter 2011 Creating a Value-Based Health Care Delivery System Implications for Physician Leaders • Lead multidisciplinary teams, not specialty silos • Become an expert in measurement and process improvement • Proactively develop new bundled reimbursement options and care guarantees • Champion value enhancing rationalization, relocation, and integration with sister hospitals, as well as between inpatient and outpatient units, instead of protecting turf • Create networks and affiliations to expand high-value care outside the local area • Become a champion for the right EMR systems, not an obstacle to their adoption and use 1. Integrated Practice Units (IPUs) 4. Integrate Across Separate Facilities 3. Move to Bundled Prices 5. Expand Excellence Across Geography 6. Enabling IT Platform 2. Measure Cost and Outcomes