Opinion: Competitive approaches to health-care reform

June 1, 2009

Finding the best way to fix our broken health-care system remains one of our major challenges. Dr. Charles J. Lockwood summarizes two competing approaches, one championed by Michael Porter, which revolves around integrated practice units (IPU), and one recommended by Alain Enthoven, which hinges on the use of large integrated health-care delivery systems (IHS).

If these changes leave you feeling a bit breathless, or induce tightening in the chest, they are just the beginning. Ultimately, health-care costs can only be contained by scrapping our current third-party FFS payment system. Under FFS, providers face relentless economic pressure to perform more and more procedures while patients are immune to the price of such care. To be successful in the long run, health-care reform must address this fundamental flaw in the payment system. But how can this be accomplished? Moreover, how will health-care reform ultimately impact ob/gyn practice? In this issue of Contemporary OB/GYN, I present the first of a two-part series that reviews the theories of two leading proponents of serious health-care reform.

Michael E. Porter, PhD, the Bishop William Lawrence University Professor at the Harvard Business School, has championed value-based competition. In his model, care is provided by relatively small independent, specialized teams of providers who compete on publicly disclosed patient outcomes relative to dollars expended across a cycle of care.2 Payments are ultimately based on free market competition, and cover either a complete care cycle (e.g., management of acute myocardial infarction) or a discrete interval of chronic care (e.g., 6 months of management of a patient with type 2 diabetes) rather than discrete FFS payments per procedure or encounter. To maximize consumer awareness and choice, actual payments are split between the patient and their private health plan. Porter argues that it is only through these high-quality, well-coordinated, specialized teams of providers, called integrated practice units (IPUs), which compete on value (i.e., published outcomes over price) coupled with real consumer choice that health-care costs can be contained without stifling innovation and progress. This is because IPUs would have the requisite increasing experience, scale, and efficient processes of care to make earlier, more accurate diagnoses, use less invasive and expensive therapies, and better integrate and coordinate care to avoid duplication and errors.