In the June 2004 issue of the Harvard Business Review, there's a very interesting article, "Redefining Competition in Health Care," by Michael E. Porter and Elizabeth Olmsted Teisberg, who maintain, "The wrong kinds of competition have made a mess of the American health care system. The right kinds of competition can straighten it out."
Porter and Teisberg appropriately point out employers have a lot at stake in how the U.S. health care system performs. They say, "Businesses' health care costs have out-paced inflation in 13 of the last 17 years, reaching more than $6,200 per employee in 2003. Double-digit increases the last three years, projected to continue in 2004, have caught senior management's attention."
The two major premises of the article are that U.S. health care has been struggling under zero-sum competition-the system participants divide value instead of increasing it-rather than positive-sum competition, and to reform in a meaningful manner, U.S. health care employers have to consider and follow through on purchasing health care in a different manner. The authors state, "The most fundamental and unrecognized problem in U.S. health care today is that competition operates at the wrong level. It takes place at the level of health plans, networks, and hospital groups. It should occur in the prevention, diagnosis, and treatment of individual health conditions or co-occurring conditions. It is at this level that true value is created-or destroyed-disease by disease and patient by patient. It is here where huge differences in cost and quality persist. And it is here where competition would drive improvements in efficiency and effectiveness, reduce errors, and spark innovation."
Rather than focusing on short-term reductions in individual payer's costs, the authors suggest employers need to base their health care decisions on value. Porter and Teisberg propose seven major changes to create successful competition in health care:
- No restrictions to competition and choice for consumers, but include meaningful co-payments and medical savings accounts with high deductibles, all of which give consumers incentives to seek good value.
- Accessible information regarding treatments and alternatives should be formally collected and widely disseminated, including information about providers' experience in treating particular diseases and conditions.
- Transparent pricing, whereby providers establish a single price for a given treatment or procedure.
- Simplified billing, with one bill per hospitalization or per period of chronic care, and the payer has legal responsibility for medical bills of paid-up subscribers.
- Nondiscriminatory insurance, including no re-underwriting, assigned risk pools for those who need them, and required health plan coverage that would create equity and value throughout the system.
- Treatment coverage based on a national list of minimum required coverage with additional coverage resulting from competition-not litigation.
- More accessible information means more disclosure of risks and better-informed choices by patients, with the remaining lawsuits addressing use of obsolete treatments and carelessness.
We at OSF Healthcare System are committed to continuing to work with employers, large and small, to provide the most appropriate health insurance coverage, as well as care and treatment in the most cost effective manner possible so both the employer and its employees receive the best value. To that end, in collaboration with Caterpillar, OSF Saint Francis Medical Center has developed a substantial 6 Sigma program that's identified and executed numerous projects that have resulted in tremendous gains in efficiency and value, as well as cost reduction, during the past three years. IBI