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Value…What is it?

January 20, 2010

I hope to have encouraged many of you to view health care as a Complex Adaptive System. In such a system, multiple independent self-selecting agents interact with each other and the system in ways only partially predictable. The agents and the system coevolve, according to relatively simple rules, with nonlinear outcomes produced at inflection points. The system can not be ordered, but behavior fostered or dampened based upon appropriate attractors. So far so good….how did we get into the mess we now find ourselves in?

Michael Porter (Harvard Business School) and Elizabeth Teisberg (Darden School of Business) have, in my estimation, provided the best explanation of the causes and the solutions in their landmark work, Redefining Health Care: Creating Value Based Competition on Results (2006). We have gotten in this mess through well-intentioned tinkering–treating health care as something complicated, or even simple, instead of complex. The result has been a dysfunctional zero-sum false competition where value is divided, and not created. See: http://www.hbs.edu/rhc/index.html

They define value as “health outcome per dollar spent in providing services over the entire cycle of care for a given condition”. “Outcome” has been described by Avedis Donabedian as the product of “structure” and “process”. It is best thought of as an emergent concept, capable of nonlinear results if effort is applied at the inflection point. Think of the “value” of decreasing childhood obesity vis-a-vis the massive expenditure of resources treating the consequences later on.

Porter and Teisberg do not recommend page after page of regulations–no imposed order. They recommend the creation of “positive-sum competition” through some relatively simple rules and boundaries: transparent pricing and outcome information, simplified billing, nondiscriminatory insurance underwriting, tort reform, national level of minimum standard of coverage for all, and no restriction on choice within the boundaries.

One can debate the merits of these rules, as one can debate the rules for The Birthday Party. Yet this approach will lead to lower cost, encourage innovation, reward higher quality and direct health care activity away from process compliance and towards actual outcome.

Think of “Boids”, the classic computer simulation of flocking and schooling behavior. To the reductionist, it would seem as though massive lines of code would be needed to impose what seems to be very complicated actions on the agents. In reality, the realization that this is complex behavior allows the simulation based upon: 1) avoiding collisions, 2) matching speed and 3) moving towards the center of mass of one’s neighbors.

We are at the precipice, the inflection point, in health care. I can only hope that we will chose the complex answer and not the complicated or simple one.

Subsequent entries will explore the importance of “starting point” and “positive deviance” in improving quality and the Safeway experiment that has actually driven down cost and improved quality.

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