October 31, 2016

One of the more thought-provoking highlights of ANESTHESIOLOGY^® 2016, held last week in Chicago, was the opening session keynote speech by Michael E. Porter of Harvard Business School.  Dr. Porter shared his vision for value-based healthcare and its implications for anesthesiologists and anesthesia providers.  Following are selected, slightly edited excerpts from Dr. Porter’s presentation.

The Healthcare ‘Problem’

Healthcare has been one of the world’s truly fundamental and intractable problems.  We’ve been struggling with the problem of healthcare for decades.  The cost of healthcare just keeps going up.  At the same time, we realize that the quality of healthcare is far from perfect.  After a lot of uncertainty and a lot of false starts, I think we’re now on a path that’s going to transform healthcare in a very positive way.

On Anesthesiology

I feel strongly that there’s an opportunity for a whole new era in anesthesia.  My perception as I’ve been working in healthcare is that anesthesiologists have been struggling to preserve their roles.  The general orientation in this field has been defensive.  I think we’re entering a period where it’s going to be exciting, more interesting and more satisfying to be an anesthesiologist.

The Meaning of Value

We’ve been worrying about costs in healthcare for forty to fifty years.  It’s not a new problem. It’s also not an area where people haven’t tried things, and we’re still trying these solutions.  Right now we’re focusing on high-cost areas such as readmissions.  We’re also seeing a consolidation wave in healthcare.  The problem is that none of this has worked.

We can’t solve the problem of healthcare with incremental add-on solutions.  We can’t just layer more requirements on the existing structure of healthcare delivery.  We have to change the very structure of how we deliver healthcare and how we think about it.  The good news is that I think we now understand the path forward, and the path forward is value-based healthcare. 

If you want to achieve success in any field, you have to start with clarity on the goal and purpose of what you are doing.  In healthcare, that goal must be value for the patient—the outcomes we’re delivering that matter to the patient and how good they are, relative to the total cost of actually delivering those outcomes.  If we can deliver great outcomes and improve those outcomes over time, we are succeeding.  We are starting to understand that value must be the central goal for all of us.  It is a goal where everybody can win and a unifying purpose that is starting to bring us together. 

The Value Agenda

Value-based healthcare is actually a different way of thinking about practicing medicine.  The question is, where do we fit in this new reimbursement environment that’s coming at us like a freight train?  Value-based reimbursement is something we should embrace, because if we don’t, we’re going to be stuck with pressure on fees and lower reimbursement.  But if we can move to value-based reimbursement and figure out where we fit, we can actually sustain our incomes and fair compensation for what we do.

Key Concepts

The first idea in value-based care is the unit of analysis.  In healthcare we’ve tended to think of the units as hospitals, hospital systems, specialties, care sites, inpatient or outpatient interventions, or surgeries.  We have to change our frame of reference.  We can’t measure value for a hospital, a specialty or a surgery. We can’t just think about our silo; we have to think about the whole process of care.

A surgery is part of a much longer process.  What happens after the surgery may be much more important than the actual surgery itself for determining value.  We can’t think about the specific intervention; we have to think about the whole condition of the patient and the entire care cycle for that patient condition, whether it’s breast cancer or heart disease or another condition.  Value is created around conditions and the set of outcomes that matter for that condition, not around sites, specialties, interventions or services. 

Strategic Transformations

There are fundamental strategic transformations at which we must succeed:

We have to reorganize the way we practice.  We have to reorganize around the patient’s condition and a concept that we call the integrated practice unit (IPU).  We have to create IPUs around conditions, not specialty siloes.  Anesthesiologists have been especially siloed. You’ve got to see yourselves on a different team.  You’re not on the anesthesia care team any more.  You’re on the team to care for breast cancer or whatever the condition is.

The idea is to optimize the care cycle and think of the intervention not as separate, but as part of that cycle.  This changes how we work, who we work with and how we think about our work, and it’s great for the patient.  Patients love it, value gets better and efficiency goes up.

We’ve got to start measuring value.  We don’t know if we’re creating value today because we’re not measuring outcomes systematically and all the time, condition by condition.  And we also don’t understand the cost of the full set of interventions for a particular condition.  We haven’t been measuring the most important thing that we ultimately know is our purpose, which is delivering value for the patient, condition by condition.

We have to change the way we get paid.  Right now we’re getting paid for volume, not whether we’ve delivered value.  We’re on the path to start to change the reimbursement model to value-based reimbursement.  This is something that the field must jump on. We can’t pull back or be afraid of it, because this is going to give us tremendous new flexibility and opportunities to be more productive and get better rewarded for what we do.

We’ve got to turn our healthcare industry into a health system rather than confederations of stand-alone units that largely duplicate services.  We’ve got to stretch ourselves, build connections geographically and not just think of ourselves as local. 

We need the right information technology platform.  We need a different kind of platform that allows us to understand that cycle of care for the condition, pull the data together, aggregate all of the people involved and inform everybody about what they need to know to deliver high-value care.

The Volume Proposition

In order to deliver value-based care, you’ve got to have a volume of patients with a particular problem.  If you have a hip replacement every two weeks, you can’t deliver value.  It doesn’t matter how hard you try.  If you don’t have the volume, you can’t have the team, the integrated, efficient processes of care or the experts coming together to deliver that superb outcome or set of outcomes.  We have a world today of massive fragmentation with lots of organizations all trying to do the same services. 

We still have too many clinicians today who revel in the variety of different things that they do.  There’s no way that you can do 72 different kinds of conditions with different complexities and do them superbly well.  It’s not how to deliver value.  It’s not where we’re going.  The more we’re accountable for value, the more we’re going to have to change. 

Measuring Success

We’ve been measuring many things in quality.  These have been mostly processes, because it’s easy to measure processes.  Processes and indicators are not outcomes.  They’re helpful, but they’re not what we really care about.  What we care about is the outcomes.

How do we measure outcomes?  We measure them around the condition, not around the intervention.  We understand that outcomes are always multidimensional, and that there is never just one outcome.  Some are outcomes we’re going to have to get from the patient, not just from our clinical expertise.  Those outcomes have to cover things that happen through the full cycle of care, not just 30 days after surgery.  We’ve got to control for patient variation in order to be able to get comparative data that we can really learn from.  Finally, we need to standardize.  For each condition, ideally, we need a standard set of outcomes.  And everyone should be measured, because that gives us the maximum power to compare, learn and improve.

In measuring outcomes, we want patients to tell us how they are doing.  We’ve resisted that because we haven’t thought it was “scientific” enough.  It’s plenty scientific.  Patients know much better how they’re doing than we do, except for their clinical indicators.   

Rethinking Cost

Cost has been the bane of our existence.  We’re under tremendous cost pressure.  We’ve tried all kinds of things to cut costs and none of them have worked.  The problem is that we haven’t understood cost in healthcare.  We haven’t measured it in a way that’s useful.

We’re going to have to learn a different way of thinking about cost.  We’ve got to measure costs around a condition.  We can’t allocate costs based on charges.  The charge is what we have paid.  The cost is the cost of the resources, people, equipment and space we’ve used. 

One of the key steps involved in reducing costs is practicing at the top of your license.  In healthcare, we have some of the biggest gaps in the cost of frontline employees.  If we can just do what we need to do and let other people do the things we don’t need to do and that they can do perfectly well, we would get a huge uptick in efficiency. 

Bundled Payments

There are two kinds of value-based reimbursement: capitation and bundled payments. Capitation is really about systems. It puts the control at the hospital level because they have to optimize the overall spending and make sure the spending is less than the sum of all the payments they get for all the members of the population.

Bundled payments are an alternative payment model, in which you get paid for care for a condition.  You get a fixed payment for that full cycle of care, risk adjusted.  If you can do it more efficiently, you get to keep the difference.  If you’re not very good, you might lose money and be held accountable for outcomes for that condition.

Anesthesiologists need to jump on bundled payment.  It’s physician-centric.  You and the others you work with in caring for a condition get the flexibility to do things in the most efficient way.  It rewards you for doing great work. If you can reduce complications, you get economic incentives.  With capitation, the hospital is in the driver’s seat. 

We can no longer duplicate services across many sites.  We’ve got to get the right services in the right sites.  We can’t do simple surgery in tertiary hospitals. We’ve got to be the drivers and enablers of this systems integration.

If we clinicians can be more productive and not waste money doing things in places that are draining all the revenue, we can sustain our incomes, and we might even be able to improve our incomes.  We’ve got to be champions of productivity.

Questions for Anesthesiologists

You can’t think about anesthesia as a discreet service. You’ve got to think in terms of conditions. What conditions are going to anchor you to value?

Where do we fit in the care cycles?  How do we stretch our role to make sure that we help maximize the value of the whole team?

What is our role in IPUs?  What IPUs should we be part of?  How should we help organize our colleagues with whom we work on care for given types of patients?  What are the outcomes that we influence? 

How do we understand our costs so that we can actually start dealing with efficiency rather than this anger that our reimbursement is getting cut?

A lot of fields in medicine have worked on mortality.  We’re way beyond that now.  We have to start thinking systematically in a value-based way about what other outcomes we influence or could influence.

There has been increasing discussion in anesthesiology about stretching the care cycle and getting involved in more of it.  I think that’s a very good idea.  Hopefully, many of you are already embracing this idea.  By just thinking about the surgery and being safe and efficient in the OR, we minimize our impact.  We have lots of things we can influence, particularly collaboratively. We’ve got to look for opportunities outside the OR and realize that if we can deliver value in a variety of contexts, we’re going to get rewarded for that.  We’ve got to get on the bus with bundles. Bundled payment is a way to preserve our incomes and to get credit for what we do.

We’re not a silo.  We can’t defend the roles we have had in the past.  It’s not good for patients, the system or us.  Anesthesiology is an enormously important field that has a massive effect on both efficiency and outcomes.  Let’s get on with it.

We hope this highlight from ANESTHESIOLOGY^® 2016 gives you some food for thought.  We will provide other highlights from the meeting in upcoming eAlerts.

With best wishes,

Tony Mira
President and CEO