The Science of Improvement
What is the actual cost of health care? Rising health care costs threaten the growth of the American economy. Despite the amount we spend, quality is uneven, errors continue to occur and the health status of Americans, in general, is no better than many other developed countries that spend less. Health care spending in the United States currently exceeds 17 percent of our gross domestic product, according to the Commonwealth Fund. A lack of knowledge and transparency about costs and outcomes of delivering patient care is a principal driver of high and escalating expenditures.
In an effort to counter that imbalance, the Texas Medical Center worked to bring a course titled Value-Based Health Care Delivery (VBHCD) to Houston, earlier this year. The course, taught by renowned Harvard Business School (HBS) professors Michael E. Porter, Ph.D., and Robert S. Kaplan, Ph.D., emphasized a simple but essential idea: the fundamental purpose of any health care organization is to improve value for patients—defined as the health outcomes achieved per dollar spent.
“Value for patients is the only goal that can unite the interests of all system participants, and improving value is the only real solution to the health care challenge,” said Porter, Bishop William Lawrence University Professor at the Harvard Business School. “Value improvement will require major changes in the way health care is delivered, measured and reimbursed, not just incremental improvement.” Porter characterizes value as the “true north” with which to navigate the major challenges in health care.
Aiming to educate executives, physician leaders, practicing physicians and senior administrators responsible for health care delivery within the Texas Medical Center, the curriculum was anchored in actual in-depth case studies, including a new case on Texas Children’s Heart Center. The course took place in April at the Bioscience Research Collaborative. It was sponsored by a steering committee that included, among others, Robert C. Robbins, M.D., president and chief executive officer of the Texas Medical Center, Charles Fraser Jr., M.D., surgeon-in-chief of Texas Children’s Hospital, Thomas W. Feeley, M.D., head of The University of Texas MD Anderson Cancer Center’s Institute for Cancer Care Innovation (ICCI) and Kathleen Carberry, R.N., MPH, director of the Texas Children’s Hospital Outcomes & Impact Service.
“The senior leaders attending quickly recognized the universal relevance of the issues and choices faced by the organizations highlighted in the case studies—there’s a huge potential to rapidly translate those ideas into action within their own organizations,” said Porter. “The course was also a good platform for those senior leaders to develop relationships with their peers in other organizations, facilitating collaborations and ongoing discussions.”
Embracing an inherently optimistic view of health care reform, Kaplan, HBS’s Marvin Bower Professor of Leadership Development, Emeritus, is adamant that sacrificing quality through harsh reduction of costs isn’t a tenable, or even necessary, solution to these problems. “There’s a lot of pressure on the health care system to do more with less and there’s an emphasis on trying to contain costs or even reduce costs, which can be detrimental to the patients we’re trying to serve,” he explained. “By measuring outcomes and costs and introducing new reimbursement approaches, we can deliver better care with fewer resources.”
Kaplan, who pioneered a methodology to calculate costs known as time driven activity-based costing (TDABC), felt that the timing was right do expose value framework to the Texas Medical Center. “This framework can be applied across the medical center and beyond— the questions that we’re addressing are global in scope and not necessarily limited to the Texas Medical Center or even the United States,” he reflected. “It addresses health care delivery problems that systems around the world are trying to solve.”
The work conducted by Porter and Kaplan has sent ripples across the medical center that extend far beyond their two days teaching in Houston. MD Anderson’s ICCI has used Porter’s model of value creation since its inception—most of ICCI’s programs center around outcome and cost measurement. Porter’s advice has been instrumental in setting the institute’s current course, and will be essential for the future courtesy of his recent appointment to the ICCI’s external advisory board to serve as the institute’s key external advisor.
Kaplan, a founding member of the ICCI’s external advisory board, provided the basis to implement TDABC in health care, which was first used at MD Anderson in a pilot project to calculate costs of care in the head and neck multidisciplinary center. ICCI has partnered with MD Anderson’s Business Analytics team, led by James Incalcaterra, Ph.D., director for value measurement and analysis, to evaluate and expand the use of TDABC in multiple venues, including analyzing and planning for an institution-wide software application that will enable the use of TDABC in all clinical care areas and an evaluation of bundled payments for cancer.
“The Institute for Cancer Care Innovation was established to demonstrate the value of MD Anderson’s research-driven multidisciplinary care—we wanted to display the fact that we have excellent outcomes and a care delivery system that adds value to patients with cancer,” said Feeley, who helped to organize the ICCI. “All of the projects that we have directly relate to Professor Porter’s strategic agenda.
We want to show the practical applications of these concepts.”
According to Feeley, the potential for the course to act as an entry point of engagement for administration within the medical center is tremendous. “I think that most people don’t really appreciate a concept like VBHCD until they’ve truly participated in thinking about it,” he said. “The real challenge is how to build upon these conceptual foundations and integrate them into the culture of MD Anderson and the Texas Medical Center. I’m so excited to work with students and residents, as well, the next generation of health care providers, so that they can start to think about these things up front and during the course of their medical education.”
Carberry remains similarly excited about the opportunity to leverage the instruction they received into action. “I was so proud to host these two gurus in the field of business—for them to come to Houston and see, firsthand, what’s happening in the medical center is incredible,” she said. “Historically, thought leadership in medicine has been centered in New England, but I’d love to see that transition down to Texas. The stars are aligning for the TMC to really be the powerhouse in medicine that we were always meant to be.”
In keeping with the sincere brand of enthusiasm that characterizes their philosophy on health care reform, Porter and Kaplan’s bright vision for the future necessitates a foundation of uniform strategy and collaboration. “Solving our health care crisis begins with getting all stakeholders to agree on a single overarching goal—improving the quality of care delivered for each dollar spent—and providing them with a common strategic framework to accomplish this goal,” Porter said. “Too few physicians are trained in applying strategic thinking to health care delivery, with so much of that training being based in their particular specialty. This curriculum will significantly change their perspective on how to solve the current challenge of unsustainable cost growth and variable quality in health care, and our hope over time is to expand the reach of value framework to every interested physician or physician-in-training.”