“What businesses are we in?” ask Michael Porter and Thomas Lee of the healthcare industry in their New England Journal of Medicine Perspective article entitled “Why Strategy Matters Now[.”[1] As the entire healthcare spectrum transitions from a fee-for-service (FFS) paradigm to a more risk-based system, Porter and Lee contend that healthcare has entered a new era of strategic thinking and must employ new business approaches. I wholeheartedly agree that we need to start focusing on value in healthcare versus maximizing revenue.

This new era in healthcare is marked for its focus on population health and patient-centric care to drive high value outcomes. Porter and Lee believe that healthcare organizations should adopt new care concepts like the Integrated Practice Unit (IPU). Their IPU concept is based around specific diseases and comorbidities – like diabetes or asthma – rather than the traditional model of being department or provider-specialty centric. This means that provider systems can truly focus on delivering disease and condition specific care across a population to achieve high value care. This concept would bring high quality practice and refinement to some of our sickest and highest utilizers, while also driving preventive care for those who have not converted to a full disease state.

As the healthcare economy evolves in this risk-based direction, the IPU model (or a similar concept – patient-centric care across specific populations) will help break from the FFS “one size fits all” era. It allows providers to focus not only on what they do well, but to provide a care environment for continual learning, discovery and refinement of care models and methodologies for their specific populations. There is also the possibility that IPUs can reduce large amounts of medical waste by standardizing best practices and reducing unnecessary or redundant tests and procedures.

Simultaneously, there is a manifestation resulting from the physician and nurse education models that aligns with this disruption in the traditional healthcare business model. Predominantly, in the late 1980s and 1990s many medical schools switched to systemic-based curricula vs organ and departmental approaches. I know this was the case at Weill Cornell, where I went, and at many of the other medical schools where my colleagues went with whom I have discussed their curricula. From a learning standpoint, our generation of physicians were taught to view the body more as a system, rather than isolated organs. This generation of physicians are now in leadership roles at healthcare entities, ready to bring a more holistic perspective to the practice of medicine and healthcare.

It reminds me of the Apple Computer strategy of focusing on the educational market in the 80s and 90s – seeds planted a decade or two ago that helped create Apple brand loyalty and the foundation for making computing so central to our lives today.

We are in an era of transformation as evidenced by the Affordable Care Act (ACA), the removal of Sustainable Growth Rate (SGR) for Medicare, Centers for Medicare and Medicaid Services (CMS’) rapid focus on risk-based payment models, and private businesses directly contracting for care with health systems in growing numbers (private ACOs, bundled payments, etc.). While we might not know exactly where the future will move healthcare, many signs point to it being risk-based and an era of rapid evolution and adaptation. In my experience with ONC’s Beacon Program and various providers under the CMS Innovation program, creating a clinical care environment that can easily adapt on top of a solid data and IT infrastructure is critical to supporting providers in this new and changing world. Deep intelligence into a provider’s patient population, financial and clinical risk among other information and technical requirements will become central in this healthcare evolution. I’ll tackle that technical aspect in my next blog post. In the meantime, check out Porter and Lee’s piece on the rapidly shifting sands of healthcare business strategy.