Why Strategy Matters Now

That is the title of a paper by Michael Porter and Thomas Lee published in the New England Journal of Medicine.

In that article, they discuss the coming wave of what they call “integrated practice units (IPUs)”, and I call Centers of Excellence (COEs). They’re the same thing.

They describe a new era dominated by employers doing direct contracts with COEs/IPUs that achieve superior outcomes for patients in certain areas such as spine surgery. As readers of this blog know, I’ve been saying the same thing on this blog and in Al Lewis’s and my book, Cracking Health Costs, an Amazon trade best seller.

Porter and Lee write, “Bargaining power has shifted away from providers…having a good brand is no longer enough: patients and payers are looking for good value (defined as superior outcomes), service by service.”

They describe how enlightened employers and other payers are becoming unwilling to pay big dollars to providers for efforts or reputation but rather for superior patient outcomes. (The biggest provider quality failure is to misdiagnose a patient. When that happens serious patient harm follows.)

They describe how going forward providers will no longer have the upper hand in setting prices but rather employers will gain control of that crucial component.

“Until recently, most health care organizations could get by without a real strategy….They didn’t need to worry about how to be different or make painful decisions about what not to do. As long as patients came in the door, they did fine, since fee-for-service contracts covered their costs and a little more…That era is ending.” Repeat…that era is ending.

“Developing a unique value proposition means organizing around value….,” but rather organizing around integrated practice units comprised of “multidisciplinary teams with the deep expertise, skill range, and facilities necessary to achieve good outcomes efficiently and expeditiously throughout the care cycle.”

The stage is set. The opportunity is there. Employers need only to get moving in the right direction. Kudos to leaders like Walmart, Lowes, Kohl’s, Pepsi, General Electric, and Intel who are paving the way.

This is the most exciting trend in benefits in 30 years. If your consultant is trying holding you back on this new trend, or throw obstacles in your way, you need to tell them to get out of the way!

First posted on Cracking Health Costs on 05/26/15.