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Michael Porter: Overhauling Health Care
Arar Han (RA), Contributing Writer
Issue date: 2/28/05 Section: News
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University Professor Michael E. Porter laid out his long-anticipated evaluation of the ailing American health care system to an audience of students, scholars, and health care professionals at the Spangler auditorium on February 17th. Porter, whose new book Redefining Health Care: Creating Positive-Sum Competition to Deliver Value (coauthored by Elizabeth Olmsted Teisberg) will be released by the Harvard Business School Press in June, provided a scathing critique of a system he called "broken" and fraught with "zero sum" tendencies like cost-shifting among insurers, providers, and patients. Such a system, he pronounced, fosters competition among those who should not be competitors, on issues that should not be at the nexus of competition.
Insurance-and access to insurance-and care coverage, said Porter, make up the bulk of all debate about health care in the United States. But fundamental to the questions of 'who pays?' and 'what they pay for,' he advanced, is the issue of how health care is delivered and the results of the care. In most cases, said Porter, drawing on his extensive experience in competitiveness and strategy, competition encourages innovation, cost-cutting, and superior results. But the "paradox of health care," he continued, was that while the health care system in the United States features more competition than virtually all other systems globally, "it isn't working," and "many people [even] blame innovation as the problem" in an increasingly expensive health care system.
The story according to Porter is that competition is occurring at the "wrong level and on the wrong things" because the system is set up so that "benefit to one party comes at a cost to another." Provider and insurer, federal government and states, employer and employee: all, said Porter, are competing to shift costs towards the other party, and resorting to tactics like restricting choice of providers and services, and using volume clout to negotiate lower rates. The result? Skyrocketing administrative costs, and a "perverse cross subsidy in the system" that favors large corporations at the cost of "the little man."
Insurance-and access to insurance-and care coverage, said Porter, make up the bulk of all debate about health care in the United States. But fundamental to the questions of 'who pays?' and 'what they pay for,' he advanced, is the issue of how health care is delivered and the results of the care. In most cases, said Porter, drawing on his extensive experience in competitiveness and strategy, competition encourages innovation, cost-cutting, and superior results. But the "paradox of health care," he continued, was that while the health care system in the United States features more competition than virtually all other systems globally, "it isn't working," and "many people [even] blame innovation as the problem" in an increasingly expensive health care system.
The story according to Porter is that competition is occurring at the "wrong level and on the wrong things" because the system is set up so that "benefit to one party comes at a cost to another." Provider and insurer, federal government and states, employer and employee: all, said Porter, are competing to shift costs towards the other party, and resorting to tactics like restricting choice of providers and services, and using volume clout to negotiate lower rates. The result? Skyrocketing administrative costs, and a "perverse cross subsidy in the system" that favors large corporations at the cost of "the little man."
