The entire time I was reading Michael E. Porter and Mark R. Kramer’s paper “Creating Shared Value” in the Harvard Business Review I kept thinking of how much this argument of creating shared value is applicable to the United States health care system. As many of you probably aware healthcare is a booming business, with healthcare spending making up 18.2% of GDP in 2011. However, we are getting little bang for your buck with the United States only 37th in the world in health outcomes. Meanwhile healthcare organizations like UPMC are making $8 billion in profit annually. Porter and Kramer argue that when firms focus on creating social value instead of simply short term financial goals- the total economic pie increases. I along with many much smarter healthcare professionals argue that this is particularly true in healthcare.
One of the fundamental reasons while healthcare is so costly in the United States is healthcare providers make a lot mistakes. These mistakes can be extremely costly and range from forgetting a patient medication dosage to missing clear symptoms. These mistakes cause 98,000 preventable deaths each year. Why you ask are hospitals and health providers not bending over backwards to solve this problem? The short answer is that hospitals get reimbursed based on quality not quantity of care and its not in their best short term financial interest to concentrate on improving quality. However, research has show that hospitals that have focused on improving the quality of care have actually seen reductions in their costs, leading to a situation in which both the hospital and its patients are better off.
One of the primary of methods advocated by the authors for achieving this social value is by redefining productivity in the value chain. Examples are given of organizations like Wal-Mart changing their business practices in ways that helped the environment as well as reduced their own costs, rebuffing the old idea that being environmentally conscious was costly and burdensome to companies. This is extended into energy use, resource use, procurement, and distribution. Healthcare organizations can have similar positive effects by focusing on creating social value. Quality improvement measures, like the Toyota Production Method and Six Sigma, have long been advocated by professional in the field as useful tools for improving quality of patient care but also at improving the efficiency of the organization.
The Toyota Production Method, especially, focuses on how to improve the efficiency of the organization by eliminating waste and streamlining processes. In healthcare this can also be successfully adopted. For example because of lack of communication between healthcare professionals unnecessary and redundant test are often preformed on patients. In addition you see a myriad of different healthcare professionals preforming the same task in different often flawed ways. The Toyota method works by identifying these areas of improvement and creating a simpler standardized process for that activity. This helps eliminate variance and improve outcomes
However, these types of quality initiatives cost money and hospitals are often to short sighted to see the backend and long term benefits from these investments. Hospitals that have implemented them have seen not only high ROIs but also better patients outcomes. For the health system making the culture change from a focus on short term financials to long term success could literally be a case of life or death. The question is how can we make the case to healthcare providers of the necessity of focusing on shared value and how quickly can we do it?