Five Imperatives for Improving Health Care

Innovation in health care treatment seems to far outpace innovation in health care business management. Just ask President Obama—two weeks ago he delayed enactment of a key provision of the new health care law for fear its requirements would swamp small-business owners.

So results of a recent conference and survey from Harvard's business and medical schools may prove particularly timely. Delivered by the Forum on Healthcare Innovation, which was formed last year with encouragement from the respective deans of the two institutions, the report makes five recommendations for how to improve quality, reduce costs, and, consequently, increase value in the American health care industry.

To kick off its work, the Forum in November 2012 hosted its inaugural conference, entitled "Healing Ourselves: Addressing Healthcare Innovation Challenge," which brought together some 125 health care experts including executives, policy makers, and academics. In association with the conference, the Forum launched an HBS and HMS Survey of Executive Sentiment in Health Care.

“There's a lot of activity that goes on in health care that doesn't necessarily contribute to overall value”

"We were not asking those executives to provide objective information about their own organizations or specific numbers; rather, we simply wanted to capture where the industry feels most optimistic and pessimistic about delivering value," explains Robert S. Huckman, Albert J. Weatherhead III Professor of Business Administration at HBS and a member of the Forum's faculty steering committee.

Other committee members include William W. Chin, Executive Dean for Research at HMS; Richard G. Hamermesh, MBA Class of 1961 Professor of Management Practice at HBS; Barbara J. McNeil, Ridley Watts Professor of Health Care Policy at HMS; and Joseph P. Newhouse, John D. MacArthur Professor of Health Policy and Management at Harvard University.

The key findings from the conference and survey are detailed in the Forum's recent report, 5 Imperatives: Addressing Healthcare's Innovation Challenge, and discussed below:

Making value the central objective: Regarding the current quality of US health care, survey respondents expressed varied sentiment: 14 percent were "strongly positive," 20 percent "strongly negative," and the rest somewhere in between. But adding cost to the mix of issues changed their sentiments considerably.

Asked about the prospects for cost and quality of health care in the US, 22 percent felt strongly negative and only 1 percent felt strongly positive. "It was pretty stark," Huckman says. "The concern is that the costs have become so great that anything we do to improve quality becomes almost irrelevant if we can't finance the system to deliver it."

Hence the imperative to focus on value, the quality of outcome achieved per unit of cost spent by the system.

"There's a lot of activity that goes on in health care that doesn't necessarily contribute to overall value," Huckman says. "Think about a company that runs very profitable hospitals. Are they profitable because they've figured out how to offer high quality care at low cost? Or are they profitable because they've figured out that specific types of procedures tend to be reimbursed very well by insurance companies, and they've set themselves up to do a lot of those particular procedures?

"Those are two different scenarios, and we'd like to see more of the former than the latter."

Promoting novel approaches to process improvement: Although health care innovation efforts traditionally have focused on new products such as drugs and devices, survey respondents ranked process improvements in care delivery as the most promising opportunity for improving the cost and quality of health care.

"A lot of hospitals have been running the same way for the last 30 years. We want providers to look at their processes for activities, such as running an operating room, discharging patients, or conducting physician rounds, and figure out cost-effective ways to improve upon them," Huckman says.

Making consumerism really work: In contrast to process improvement, "consumer incentives to encourage healthy behavior" ranked last among 11 possible innovations in terms of its ability to increase value in health care, according to survey respondents. The reason: Incentives aren't effective unless paired with good information. And the oft-fragmented nature of the American health care system makes it hard to turn patients into active consumers.

“A lot of hospitals have been running the same way for the last 30 years”

At the conference, attendees agreed that a few things need to happen to help patients to make informed choices. All agreed that it's critical to encourage consumers to pursue healthier lifestyles. But just as importantly, patients also need better access to data on both the cost and potential outcome of specific medical procedures. Moreover, they need a mechanism for understanding that data.

"Let's face it," Huckman says. "We've long had our clinical decisions in the hands of physicians who have had, in most cases, at least seven years of post-baccalaureate medical training. These are often technical decisions that can be very nuanced. So how do we help consumers have a role in the decision-making when the information is so complex? The key is not just to get the information to the consumers but to help them process it."

Decentralizing approaches to problem solving: Conference attendees and survey respondents generally applauded the fact that health care delivery is becoming more decentralized—with care delivery spreading beyond traditional facilities and into new models such as the MinuteClinic, a for-profit provider that operates some 640 clinics inside CVS pharmacies.

"So much of health care has grown up around centralized organizations," Huckman says. "Now what we're seeing in all sectors of health care is some movement away from these centers and toward the periphery. So instead of people going to the downtown medical center they might go to a retail clinic. They might increasingly have their care monitored from home. In its most extreme form, patients may actually become their own providers with respect to many issues."

Integrating new approaches into established organizations: Still, survey respondents stressed the importance of established firms and hospitals in fostering innovation—especially in the areas of disease management, pharmaceuticals, electronic medical records, and basic research.

"We can't just wait for decentralized approaches to come and save us," Huckman says. "At some point we need to go to the large medical centers, group practices, and pharmaceutical firms to figure out how to integrate these new ideas into existing organizations."

Efforts Continue

Improving health care delivery is also the main agenda of the HBS Healthcare Initiative, a multidisciplinary research effort. It is one of several big societal issues specifically studied at the School, where researchers are exploring ways that business management expertise can be harnessed to improve everything from delivering affordable essential services to the poor to making the US more competitive in world markets.

In the future, the Forum on Healthcare Innovation will turn to the five imperatives as a guide for evaluating new ideas and reevaluating existing processes. In the meantime, the group rests assured that the cure for health care does not hinge on a single magic bullet.

"At the end of the day, the big idea is that there's no big idea," Huckman says. "It's about a lot of little things—many of which we already know—that we need to execute consistently."