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The Value Proposition for Healthcare


In health care there is nothing more complex than the simple.


In a recent New England Journal of Medicine article, What is Value in Health Care?, Michael Porter, a Harvard trained PhD in business economics, makes a compelling case for defining, measuring and rewarding value in health care. By shifting our focus on value, simply defined as quality divided by cost, we can lower costs and improve quality.

The elegantly written article shows that value is what drives consumers.

Not quality. Most of us wouldn’t shell out $100,000 for a new automobile, regardless of its quality.
Not cost. We wouldn’t buy a new car for $5,000 if we were convinced it would spend most of its time in the repair shop. Honda and Toyota have been kicking Detroit’s butt because of value. Most of us see Honda or Toyota automobiles as providing high quality and low cost. It’s time we move health care in the direction of value.
The value proposition is easy to understand, but its implementation will be complex.

There are three complexity challenges that will require effective physician leadership:

  1. Defining and measuring quality outcomes
  2. Identifying and understanding the true costs involved in delivering care
  3. Shifting the paradigm of our health care culture from a physician-centric to a patient-centric one

Dr. Porter outlines some of the challenges in defining and measuring quality outcomes. These include the fragmented and insufficient state of medical informatics, the length of time needed to track outcomes, and the dynamic nature of quality outcomes.

He explores the difficulties in measuring costs (not charges) across a continuum of care. Dr. Porter also recognizes that to properly measure value, one needs to identify the proper consumer. In health care the proper consumer is the patient, not the physician. The culture therefore needs to be patient-centric.
As an economist, Dr. Porter presents a well nuanced analysis of the first two hurdles in achieving value in health care: measuring quality outcomes and tracking costs acurately. He may, however, have underestimated the challenge involved in the third: moving from a physician-centric to a patient-centric culture.

Our physician-centric health care culture has deep roots. It is planted in the elitist soil of medical school selection, fertilized by the academic docents of physician indoctrination, and nurtured by the competition skewed by a physician friendly supply-demand curve with further nutritional supplements supplied by a perverse payment incentive system.

The future culture of patient-centric healthcare will not take root in today’s American health care soil unless the current physician-centric culture is uprooted. No one should underestimate this task’s importance nor its challenges.

Uprooting the current physician-centric culture before it uproots the foundation of the American health care system is the biggest challenge facing our physician leaders. This task will require effective physician leadership in academic medical centers, in hospitals, in outpatient clinics, and in our medical societies. It’s time to develop and support effective medical leaders by teaching them the leadership skills required for success.