Pret a Porter?: what a US business guru has to teach the NHS

An academic tome about the US health system, even one co-authored by one of the world's most renowned business theorists, seems an unlikely hit for an NHS audience. But Redefining Healthcare: creating value-based competition on results, by Michael Porter and Elizabeth Olmsted Teisberg, has caught the attention of UK policy-makers, commentators, reformists and politicians for its diagnosis and prescription for a health system high on cost and low on quality; heavy on process and light on measurement.

Reflecting its influence, HSJ gathered together a panel to debate the book's applicability to NHS reform. This article pulls together the major themes of that discussion - no view should be construed as the opinion of any one individual.

The book's central argument is that the US system is inefficient because it has the wrong sort of competition. Health plans compete on price and avoiding risk. Providers try to shift costs and maximise income.

Rather than improving quality and efficiency, it ties all parties up in a zero-sum game. The emphasis has been on shifting short-term costs and 'battling over who pays what'.

Porter argues that the best focus for adding patient value through competition is at the level of medical condition over the full care cycle rather than episodes of care provided by organisations offering broad service lines which lack focus, quality and efficiency. Hospitals try to do everything rather than some things very well. This solution would be based on much greater specialisation of acute care, and a huge expansion of comparative quality and cost data.

The overall feeling was that Porter's diagnosis was where he was most consistently correct, and the panel welcomed its close focus on frontline patient care rather than policy and process.

Porter argues that, contrary to popular belief, higher quality tends to cost less, based as it is on right-first-time operation, appropriate standardisation and avoiding safety incidents. The relatively little work that has been done on NHS trusts suggests the rule applies here, too.

They also supported his emphasis on measuring and publishing information on care outcomes and cost as the single biggest step in healthcare reform. Even when the data was far from perfect, the view, though unpopular with many doctors, was that it was better to get it out in the open.

There was less agreement with Porter on his basic building block of the medical condition, and therefore whether you could really think of it as a definable product. 'There is an assumption that you go to the GP with a diagnosis rather than a set of symptoms.' Without a certainty of diagnosis at the beginning of the process, how can the patient be guided into the right part of the system? Could something stretching from initial diagnosis to a managing condition over many years really be taken as a unit of care?

The panel were not convinced. 'How many medical conditions are there? If you can't answer that clearly, you can't use it.' And doctors want to be paid for a piece of work soon after doing it: 'The cost of treating a patient with diabetes over 20 years is about£100,000. At what point do physicians get compensated?'

The issue of paying clinicians is particularly acute when patients can move between payers. This is ironic in view of the fact that Porter comes out so strongly against a single-payer system.

This problem is exacerbated by the question of co-morbidities, which the panel felt the book failed to deal with. Neither does it acknowledge how little is known about the optimal mix of care for patients with co-morbidities. This underlined a major weakness, and one that reflects the US system - a downplaying of generalised primary care. One immediate-term way to measure outcomes for long-term conditions was to base it on quality of patient experience rather than length of life - paying on the basis of 'how well have you kept me this quarter'.

The accountability issue

This raised the question of the extent to which commissioners and practices should be held to account for quality of care. Choosing the care co-ordinator becomes the key decision for the patient rather than directly choosing the provider or clinician.

A major theme of Porter's book is specialisation of acute care. Work by McKinsey, for instance, argues that in a post-genome world cancer care might become a game for a handful of global franchises.

It is not clear whether value-based competition on its own would be enough to move vested interests - is it enough to close facilities because they are in the wrong place or business? There was a view that a tariff-based system was quite removed from Porter's concept of value-based competition and would need to evolve further - standardisation of price was only stage one.

A good example is stroke services in London. If there should only be about eight specialist stroke units in the capital, for example, who actually does the planning? Is it decided by first-mover providers, a commissioning consortium or Whitehall?

There was consensus that it was definitely not the latter, but a strong sense that competition alone was not enough to create efficient service spread naturally. 'There would be a lot of mis-investment over 10 to 15 years with capital and people tied up.'

One way to address the problem of specialisation was franchising so that although services could still be distributed they would be run by a small number of players. This is commonly known as the Great Ormond Street in every hospital. Tertiary centres come down to a handful of sites - 'how long can a district general [hospital] pretend it does cancer' when there is a world class facility in the same half of the centre?

This drove the panel into discussing the link between primary and acute care - the system needed 'high quality generalists to get diagnosis and manage long-term conditions and very specialist interventions, and very little in the middle.' Getting an accurate diagnosis early became more important.

One of the concerns was fragmentation of hospitals, split physically or organisationally down service lines. The panel argued that behind the apparently integrated walls of an institution, care was already highly fragmented and agreed with Porter that widespread joint working between clinicians was a myth.

Freedom and finance

Would a system in which patients have enough information and freedom to switch actually drive performance? Porter argues that commissioners should punish poor performers by sending patients elsewhere rather than impose price penalties. There is little evidence that providers are sensitive to small price incentives and plenty of history that suggests organisations can survive while running at a loss.

Although patient power under a Porter model could eventually shut down facilities that did not focus on patient value, there are concerns about 'whether you could open the ones you wanted'. The market would be an expensive, slow way of doing it because you would have over-capacity for some time. In most markets, poor performers hang around. A key issue would be the power of market entry - would a provider need to hit certain quality outcomes in order to continue working on a particular condition?

Porter talks a lot about what and how much information could drive system change. There was a view that the only way to get better data was to start working with what you have. And people felt performance data tended to improve performance even without it being shared with patients. That said, Porter's view of data tended to be based on interventions rather than the whole care pathway.

The key thing about information was that, whether interpreted through a 'middle man' or not, it is much harder to change a poor doctor's behaviour than to favour a good one.

Publishing information and uncovering variation in quality is key. Evidence shows a greater than 10 per cent difference in survival rates for breast cancer between comparable hospitals. Could patient organisations, possibly working with national clinical directors, be the driving force in assessing and publicising quality in the big disease areas?

What were the overriding conclusions of the panel? They found the approach to diagnosing the problem of high costs and low quality was fresh and illuminating. The focus on care delivery is also much more useful than the standard approach of talking about funding systems' structure and incentives. Porter's solutions were less useful.

The main objections are that the solutions are incomplete, underestimate the complexity of the service and underplay the practical and methodological difficulties of measuring outcomes. Nevertheless there are hugely important insights about the need to focus on, and measure, value and to use this as the benchmark by which the system should be assessed. 'It is the answer to quite a large question, but it is not an answer to everything.'

Redefining Healthcare: creating value-based competition on results is published by Harvard Business School Press. For a longer version of Nicolaus Henke's column, registered users can go to the Speak Out section of www.hsj.co.uk

Porter's book is well worth reading, both for what it gets right as well as wrong. His diagnosis of a central problem of the US healthcare system seems spot on - if you design a healthcare system around the wrong kind of competition, don't be surprised at the outcomes you get. Poor quality, high costs and dissatisfied patients stem from a system rooted in zero-sum competition where the participants' major incentive is to shift costs from themselves to someone else rather than improve quality.

Porter is also right to insist that one 'currency' should sit at the heart of health systems - what he calls patient value - or the quality of outcomes per unit of resource invested. Indeed, Porter's central contention is

that health systems should be designed around value-based competition, with the claim that this will hugely improve both outcomes and productivity.

There is also wide agreement on Porter's claim that simply measuring and publishing information on (risk-adjusted) care outcomes would be the single biggest step any healthcare system could take to get a stronger focus on patient value. It would have profound effects on commissioner decisions and provider responses. And you don't need perfect measures - good enough outcomes metrics would be a start, and stimulate all sides to produce better metrics themselves.

Finally, Porter is right to say that the anguished debates around choice somewhat miss the point. Choice on its own will not save healthcare systems - but choice as one part of a set of appropriate institutions and aligned incentives that reward the delivery of high-quality, cost-effective care is a sensible way forward.

However, Porter argues strongly that value-based competition should be around the 'medical condition', with the health system restructuring itself into specialist organisations. This seems strongly rooted in single disease management approach, where you can define more clearly a medical condition and surround it with a stable network of professionals. This ignores vast areas of healthcare - everything from the unspecified symptoms and complaints that make up the bulk of GP caseloads to the emergency events that need a web of health facilities and relationships. Hospitals exist for a reason.

There are two big strategic challenges over the next five to 10 years. The first is to get serious about health prevention and promotion, to head off the impending crises of chronic ill-health rooted in unhealthy individual lifestyles. On this major issue, Porter offers no insight at all.

The second is to deliver safe, effective and responsive healthcare in every place and every time. Here Porter's insistence that improving patient value should be at the heart of healthcare is more valuable. It is exactly what the government's health reform programme is all about. Whether choice, risk-weighted capitation, practice-based commissioning, tariff, information on outcomes, or foundation trusts and other new providers; these are the building blocks of a system whereby local commissioners and providers are incentivised to come together to redesign care pathways to improve the responsiveness, quality and cost-effectiveness of care. What we can take from Porter is that getting this design right is a challenging but hugely important task.

Dr Will Cavendish is director of strategy at the Department of Health

The US healthcare systems are a triumph of perverse incentives that produce cost inflation, inefficiency and inequity. Over 16 per cent of the US gross national product is spent on health, twice as much per head as spent on the often equally inefficient NHS.

Porter asserts that competition can drive down costs and improve quality in healthcare. This must be music to the ears of British optimists favouring ill-defined and unregulated competition as the solution to woes created by fragmented, evidence-free reforms of the Blair era.

The Americans have a high-cost system with low quality. The British have a less costly but low-quality system that does too little to mitigate inequity, and has severely damaged capacity to control expenditure inflation. Porter's solution is a market where care is focused on single medical conditions with clearly defined outcomes.

Competing providers would offer care for such conditions and consumers would have price and outcome data to inform their choices.

But medicine is not like selling bananas.

The majority of patients have multiple conditions, and treatment of some will vary in cost and outcome.

So what does Porter offer? He is reiterating how poorly healthcare systems work and how the measurement of outcomes is crucial to improvement. Health economists who have been arguing for outcome measurement for decades should welcome the conversion of this influential guru.

However, the tactical issues must now be tackled and Porter offers us little help on this. What outcome measures should be adopted that are valid and sensitive? How can patients and providers be incentivised to use such measures and integrate them into management systems?

These are not simple issues. Florence Nightingale advocated outcome measurement over 150 years ago,

and in the early 20th century American physician Ernest

Codman was sacked from Massachusetts General Hospital for advocating measurement and management of

medical practice.

Porter offers a Utopian vision that ignores the practicalities of implementing reform. Like health economists who have been ignored, the issue now is how to develop outcome measurement to protect the patient from bad medicine and offer the taxpayer demonstrable value.

If his book awakens sleepy local policy makers on the potential of outcome measurement, Porter will have been helpful. But for many serious students of these issues this is a book of great superficial appearance and all too little substance.

Alan Maynard is

professor of health economics

at York University.

Competition is the

mantra of the book, and Porter rightly says competition in healthcare is not always about the right things.

Therefore regulation and commissioning functions need to guide competition to the right areas and parameters. Unless that is understood, free entry and exit will not produce the outcomes needed.

Page 119 illustrates a perfect case: stroke. It is absolutely true that ambulances should not go to the nearest hospital, but to a stroke unit less than 30-45 minutes away.

It is also true that a good stroke unit should, for many reasons, have 500-1,000 cases per year and not 50-100 as in many UK cases. But I doubt that the most efficient way to get

to 500-1000 cases is by letting everybody invest in stroke units and equipment which need high volumes to pay off.

One way for England to get there is to have a smart commissioner who, for example, determines 40 stroke units for England or three to five per strategic health authority, as leading practitioners suggest.

Uncontrolled competition tends to create demand. A major problem in the US is unmitigated demand fuelled by rapidly growing numbers of outpatient procedure centres.

I applaud Porter's suggestion that providers need to plan strategically for the longer-term. It is absolutely true that there is a tremendous quality and productivity mandate to specialise.

The key trends of medicine in the future further push this trend - in 20 years we may have three to four globally leading cancer players run as a franchise who master complex and ever-changing protocols.

In fact, some UK hospitals are beginning to put plans together to revolutionise care in certain services and various groups benchmark to learn clinical best practice.

Also, there is a strong appetite in foundation trusts to understand better, service by service, what outcomes, patient value, and profits and losses are for service, education and research.

But all of that does not mean that the only player in town is offering total care across an entire medical condition.

The need to have accident and emergency and chronic-disease management coverage at the same time as high-end secondary and tertiary specialisation may mean we actually have demerging providers, and not all offer a continuum as is implied.

This said, specialisation is a key opportunity. Why not have Great Ormond Street run paediatrics on a franchise basis at 100 sites or Royal Marsden with 20 [cancer] sites across the country?

Nicolaus Henke is head of global health systems at McKinsey.