A Publication of WTVP

In the June 2004 issue of the Harvard Business Review, there's a very interesting article, "Redefining Competition in Health Care," by Michael E. Porter and Elizabeth Olmsted Teisberg, who maintain, "The wrong kinds of competition have made a mess of the American health care system. The right kinds of competition can straighten it out."

Porter and Teisberg appropriately point out employers have a lot at stake in how the U.S. health care system performs. They say, "Businesses' health care costs have out-paced inflation in 13 of the last 17 years, reaching more than $6,200 per employee in 2003. Double-digit increases the last three years, projected to continue in 2004, have caught senior management's attention."

The two major premises of the article are that U.S. health care has been struggling under zero-sum competition-the system participants divide value instead of increasing it-rather than positive-sum competition, and to reform in a meaningful manner, U.S. health care employers have to consider and follow through on purchasing health care in a different manner. The authors state, "The most fundamental and unrecognized problem in U.S. health care today is that competition operates at the wrong level. It takes place at the level of health plans, networks, and hospital groups. It should occur in the prevention, diagnosis, and treatment of individual health conditions or co-occurring conditions. It is at this level that true value is created-or destroyed-disease by disease and patient by patient. It is here where huge differences in cost and quality persist. And it is here where competition would drive improvements in efficiency and effectiveness, reduce errors, and spark innovation."

Rather than focusing on short-term reductions in individual payer's costs, the authors suggest employers need to base their health care decisions on value. Porter and Teisberg propose seven major changes to create successful competition in health care:

  • No restrictions to competition and choice for consumers, but include meaningful co-payments and medical savings accounts with high deductibles, all of which give consumers incentives to seek good value.

We at OSF Healthcare System are committed to continuing to work with employers, large and small, to provide the most appropriate health insurance coverage, as well as care and treatment in the most cost effective manner possible so both the employer and its employees receive the best value. To that end, in collaboration with Caterpillar, OSF Saint Francis Medical Center has developed a substantial 6 Sigma program that's identified and executed numerous projects that have resulted in tremendous gains in efficiency and value, as well as cost reduction, during the past three years. IBI