Article | Harvard Business Review | October 2013

The Strategy That Will Fix Health Care

by Michael E. Porter and Thomas H. Lee

Abstract

In health care, the days of business as usual are over. Around the world, every health care system is struggling with rising costs and uneven quality, despite the hard work of well-intentioned, well-trained clinicians. Health care leaders and policy makers have tried countless incremental fixes—attacking fraud, reducing errors, enforcing practice guidelines, making patients better "consumers," implementing electronic medical records—but none have had much impact. It's time for a fundamentally new strategy. At its core is maximizing value for patients: that is, achieving the best outcomes at the lowest cost. We must move away from a supply-driven health care system organized around what physicians do and toward a patient-centered system organized around what patients need. We must shift the focus from the volume and profitability of services provided—physician visits, hospitalizations, procedures, and tests—to the patient outcomes achieved. And we must replace today's fragmented system, in which every local provider offers a full range of services, with a system in which services for particular medical conditions are concentrated in health-delivery organizations and in the right locations to deliver high-value care. The strategy for moving to a high-value health care delivery system comprises six interdependent components: organizing around patients' medical conditions rather than physicians' medical specialties, measuring costs and outcomes for each patient, developing bundled prices for the full care cycle, integrating care across separate facilities, expanding geographic reach, and building an enabling IT platform. The transformation to value-based health care is well under way. Some organizations, such as the Cleveland Clinic and Germany's Schön Klinik, have undertaken large-scale changes involving multiple components of the value agenda. The result has been striking improvements in outcomes and efficiency, and growth in market share.

Keywords: Organizational Change and Adaptation; Strategy; Value; Customer Focus and Relationships; Health Care and Treatment; Health Industry;

Citation:

Porter, Michael E., and Thomas H. Lee. "The Strategy That Will Fix Health Care." Harvard Business Review 91, no. 10 (October 2013): 50–70.