strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
 / Autumn 2009 / Issue 56(originally published by Booz & Company)


A Better Model for Health Care

One is, in fact, the example we gave earlier for a strong-form product: an ambulatory care program for managing cardiac risk. The program focuses on outpatients, managing risk factors and undertaking interventions for diagnostic catheterization, angioplasty, and electrophysiology (for example, ablations). The goal is better outcomes at lower cost, primarily achieved by avoiding bypass surgery where possible, and the program builds on a large regional provider’s strength in cardiac services.

A second program, designed for inpatients, involves surgery for hip and knee replacement — an area that would clearly benefit from greater standardization, continuity, and predictability of outcomes and costs. The product spans diagnosis through rehabilitation. Again, a strong regional provider team is the foundation of the clinical side.

The third pilot program is for lung cancer treatment, drawing on the clinical strengths of a world-class oncology brand name. Experience and efficacy are keys to this product, since the variability of treatments and outcomes for this disease is far greater than for many other major clinical interventions (such as cardiac bypass). Like the knee and hip replacement product, this program is aimed at inpatients; the scope of services begins immediately after diagnosis and continues through treatment and rehabilitation.

Carrots, Sticks, and Precedents

If producing standardized care from best-science protocols were all that these efforts hoped to achieve, the concept would be laudable, but the program would merely amount to an expanded version of “centers of excellence” (high-quality health-care facilities with little or no influence on the larger system). What sets HOF apart — and may provide a model for federal initiatives — are the structural innovations and incentives that involve plans and patients in new relationships with health-care providers.

Products and services, for example, are priced to be all-inclusive. A single fee encompasses everything from diagnosis to rehabilitation to final disposition. Providers are paid a set amount to cover facility costs, devices, drugs, and professional fees. This not only makes large-scale costs more predictable for plans and sponsors, but gives consumers a clear picture of their obligations at the beginning of treatment, not after months of claims adjudication and confusion.

The best health-care services, based on the best available medical science, are not much use if they aren’t embraced by large numbers of patients. Thus, HOF offers financial and service incentives to encourage consumer participation. Reduced or forgiven deductibles and co-pays, combined with added amenities, are used as carrots.

The Healthcare of the Future approach may ultimately incorporate some sticks as well, perhaps moving nonparticipants into a more generic major medical plan whose premium reflects the fact that they have moved themselves into a higher-risk group. This form of “prescriptive” insurance — allowing patients to opt out of best-science approaches for a cost — is akin to requiring motorcyclists to wear helmets and charging them more if they choose not to.

This undertaking is both more significant and more difficult than other reform efforts to date because it seeks to align incentives across the entire structure of health-care finance and delivery — far more than just encouraging the use of a handful of high-profile, costly inpatient procedures. HMOs have done this as well, but they lack several key features that stand in the way of a truly consumer-centric marketplace: Relatively few consumers have access to a fully integrated HMO, and such programs are hard to start up; HMOs, no matter how good, will almost certainly not achieve best-of-breed status for all their clinical products; and consumers really make only one choice in an HMO system (whether or not to participate). HMOs will have a place in a post-reform health-care world, but HOF-like approaches could very likely achieve a higher level of consumer choice and satisfaction while lowering overall costs.

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store


Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.