"Competition the Cure for Health Care"

Harvard Business School Working Knowledge:

Last month HBS Working Knowledge offered an excerpt from Redefining Health Care: Creating Value-Based Competition on Results, by Harvard Business School professor Michael E. Porter and Elizabeth Olmsted Teisberg. The U.S. healthcare system is dysfunctional, a Rube Goldberg contraption that rewards the wrong things and doesn't create value for the consumer. In this Q&A, Porter discusses his research.

Roger Thompson: What went wrong with the American model? On paper it looks ideal. It's private, it's competitive, yet it doesn't seem to work.

Michael E. Porter: The United States has a system with the wrong kind of competition, on the wrong things. Instead, we have a zero-sum competition to restrict services, assemble bargaining power, shift the cost to others, or grab more of the revenue versus other actors in the system.

Zero-sum competition does not create value; it can actually destroy value by adding administrative costs and leads to structures involving health plans and providers and other actors, which are misaligned with patient value. In a world of zero-sum competition, for example, providers will consolidate into provider groups to gain clout against insurers. But, as we point out in our book, the provider group doesn't create any value, but value is not created by breadth of services but excellence in particular medical conditions.

NPR's OnPoint recently interviewed Harvard's Michael Porter: [20MB MP3 Audio]

Health care expenses have been much discussed with respect to the Madison School District's $332M+ budget.

Posted by Jim Zellmer at July 11, 2006 7:27 AM
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