strategy+business Winter 2013 : Page 27

essay strategy & leadership tion of fewer post-operative prob-lems. Costs went down (Baystate set a target of $24,600 per procedure and beat that, getting total costs down to $22,900), and Baystate si-multaneously improved its quality ratings among patients. Similarly, Geisinger Health System, a facility in Pennsylvania that is widely recognized as a model for integrated care delivery—it was cited on numerous occasions by President Barack Obama and oth-ers during debates over the Afford-able Care Act (ACA)—launched a bundle program for coronary bypass surgery, which has yielded strong results. Post-op infections fell by 63 percent, and hospital readmis-sion rates decreased by 30 percent. Meanwhile, total costs for bypass experiments and innovations, and more than 450 provider organiza-tions have signed up as part of the demonstration and piloting phase. Although the precise impact of the ACA is still playing out, there is mounting evidence that bundles will be a critical part of any solution for the U.S. healthcare system—a means to deliver a higher-quality patient experience, achieve better re-sults, and reduce costs. The Backstory Join the conversation Bundles didn’t materialize out of thin air. They are the culmination of 30 years of experimentation and innovation. In 1982, Medicare and Medicaid switched from a basic sys-tem, in which the government sim-ply covered the costs of treatment Discuss the biggest ideas in business with the best minds in business … Baystate Medical Center launched a knee-replacement bundle and found that outcomes improved markedly. surgeries dropped 5 percent, and hospital profits improved by nearly $2,000 per case. Geisinger has since expanded its bundles to include hip-replacement surgery. Booz & Company has been studying bundles for several years, and we have a unique per-spective on what works well and what doesn’t ( see “The HEALS Approach to Bundles,” page 30 ). Moreover, we recently completed comprehensive surveys of stake-holders in the U.S. health system, including patients, employers, phy-sicians and hospitals, and insurers. The results show that bundles are generating increasing momentum. The ACA is also fueling demand: It explicitly encourages bundling retroactively, to a system involving something called diagnosis-related groups (DRG). That approach es-tablished fixed payments for the treatment of specific conditions. The basic idea was right, and the DRG system survives to this day, but it has proven to be overly complex and “game-able”: The number of diagno-ses is now in the tens of thousands. In the 1990s, Michael Porter and others argued that hospitals and physicians should move away from “services” and focus on pack-aged clinical “products.” More re-cently, private-sector efforts have involved regional and national hos-pitals working with selected large employers (and their insurers). Walmart, for example, now has a “ …log in using your social identity of choice to comment on s + b ’s award-winning mix of analysis, in-depth commentary, and leading ideas. Sign in with strategy + business is published by the global management consulting firm Booz & Company. ”

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