strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
 / Autumn 2011 / Issue 64(originally published by Booz & Company)


Transforming Healthcare Delivery

Third, the lack of adoption of proven, standardized approaches to care and evidence-based guidelines frequently results in expensive, flawed care. Intermountain Healthcare, which runs hospitals and clinics in Utah and Idaho, offers a good example of gains that can be captured. By implementing standardized care protocols, the company successfully halved both adverse drug events and the death rate for coronary bypass surgery.

Fourth, patients are largely disengaged from their own medical care. In the U.S., 81 percent of patients are insured through government payors, such as Medicare, or through plans offered by their employers, and as a result do not need to consider the cost-benefit trade-offs inherent in care decisions or the overall cost of their care. Some patients may prefer to remain uninvolved, but the system itself fails to reward informed decision making by other patients, even when it could lead to more effective prevention and treatment. Even consumers who would never buy a flat-screen television or a laptop without thoroughly researching their options are reluctant to question physicians about decisions that are often critical to their future well-being.

Bold Goals for Reform

To overcome the structural barriers to systemic reform and transform care delivery, the three principal stakeholders in healthcare systems — providers, payors, and patients — have to work together toward common goals. This will demand some difficult adjustments in the traditional stances of these three stakeholder groups, but their closer alignment throughout care delivery is the best approach to achieving transformative change.

Other industries have been successful in finding new value by making similar adjustments. Automakers, for instance, have collaborated with their vendors throughout the design, production, and distribution processes to create value; ongoing innovation has led to vastly better quality at much lower cost. By building a system based on trust and well-aligned incentives, carmakers were able to draw on their suppliers’ knowledge as well as provide constructive feedback that helped the entire industry become much more productive. Consider the returns that such a collaborative effort could yield in the untamed and bloated U.S. healthcare-delivery system alone: The elimination of the 30 to 40 percent of spending that is wasted would result in annual savings of $750 billion or more at current expenditure levels.

To attain such savings, broad collaborations and bold goals are necessary. In the U.S., healthcare initiatives championed by a single stakeholder group have been unable to deliver better-quality care or lower costs. In the 1980s, for example, insurers attempted to push down the cost side of the medical value equation through managed care approaches, such as HMOs, but they were forced to back away when consumers and employers raised concerns about choice and quality. A decade later, providers failed to generate new value through major consolidations of hospitals and physician practices.

Incremental efforts involving multiple players have also proven unsustainable. For example, recent initiatives that attempted to create medical value by linking a small portion of provider pay to patient outcomes did not generate significant results because they were implemented on top of the traditional fee-for-service model that rewards complex and extensive care. Indeed, these well-intentioned measures can also create another layer of complexity — and cost — for providers and payors, because they need to add administrative processes to their operations to measure and manage the outcomes-based framework.

A Collaborative Vision

What might the collaborative models necessary to transform care delivery look like? The recently enacted healthcare reform legislation in the U.S. calls for some demonstration projects based on collaborative models, but before leaping into the adoption and implementation of these models, healthcare providers and other industry players need to step back and think hard about the vision and objectives of their collaborative efforts.

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.