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 / Autumn 2009 / Issue 56(originally published by Booz & Company)


A Better Model for Health Care

An innovative experiment in Florida shows the potential for more systemic collaboration as the catalyst for lower costs and improved quality.

In 2009, U.S. health-care reform moved rapidly to the front burner, and it will stay there. President Barack Obama and his advisors have made it clear that reducing health-care costs is a necessary prerequisite to achieving their broader economic goals.

The levers that the new administration plans to pull will address the obvious issues: treatment variability (standardized procedures tend to be more cost-effective), value-in-use analysis (evaluating costs and benefits), chronic disease management, enhanced information technology, and utilization rates. (Utilization rates measure the amount of health care delivered and received per capita. Preventive medicine and other means of reducing long-term utilization while maintaining overall public health thus represent a major cost-saving opportunity.) The reforms are all expected to involve both public and private initiatives, reassuring voters that “if you have insurance you like, you can keep it.”

But it isn’t yet obvious how the government’s changes will actually work in the current industry structure of health-care delivery and finance. Today’s health-care system in the U.S. is set up to optimize everyone’s interests except the consumer’s. Unlike other industries, in which products and processes tend to be about 80 percent standardized, and a purchaser has a reasonable sense of what to expect, the U.S. health-care industry is full of fragmentation, friction, unnecessary customization, and excessive costs. Reducing those costs would require holistic change in the practices and structures of the industry. It would mean reshaping everything from the patient care experience to the methods of gathering and sharing data.

In short, even if the new government health-care policies are well designed and effective, the U.S. will still be a long way from having a health-care finance and delivery system that can offer the right combination of incentives and relationships among sponsors (such as employers and associations), payors (health-care insurance companies and reimbursement plans), providers (including hospitals and physicians), and consumers. The federal government alone has the scope and authority to mandate top-down change across the United States, but only the industry can implement it. The challenge facing the U.S. health-care industry is thus significant: Its many varied components must cooperate to rebuild their programs and structures from the bottom up.

To use an analogy to American football, the government “kicking team” is getting ready for the game to begin. But will the “receiving team” of employers, plans, providers, and consumers be ready?

Fortunately, there are some models that the industry can draw on to answer that question. One of the most promising is an innovative experiment just getting under way in Florida. The model, dubbed Healthcare of the Future (HOF), addresses health-care reform from the ground up and engages plans, providers, and consumers. Although it has started modestly with three initial services (involving cardiac care, lung cancer treatment, and hip and knee surgery), the program is expected to expand to as many as 25 offerings, covering the great majority of services and costs.

Compared with other health-care reform efforts, HOF is distinctive because it is both comprehensive (involving multiple participants in potentially broad-scale reform) and organic (evolving from current efforts and priorities). That makes it a relevant model for any country or health-care system. Different countries have their own approaches to the way health care is funded, but they are all wrestling with the same cost and effectiveness issues, and they must all figure out how to embrace technological innovation and best-quality science. In addition, many nations face the challenge of an aging population that will have an increasing need for care and thus raise utilization rates.

If the United States is fortunate, and if models like HOF prove influential, there is a genuine possibility that the receiving team members will not just accept the ball from the government; they will change the very nature of how the game is played.

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