Every once in a while one reads an article that although addressed to a broad audience—for example, to health care organizations overall—is especially relevant to a smaller group. This usually means that the author(s) have an extraordinary grasp of fundamental issues concerning the health of the type of organization studied.
Such an article appeared earlier this year in the New England Journal of Medicine (2015;372:1681-1684), with the title “Why Strategy Matters Now.”
The authors—Michael E. Porter, PhD, of Harvard Business School, and Thomas H. Lee, MD, of Harvard Medical School—are highly respected experts on the function and challenges facing health care organizations in this time of rapid change, declining reimbursement, and shifting of bargaining power away from providers.
The article speaks to the wide range of health care institutions—academic and non-academic, as well as insurers and professional providers of health care. Included is a helpful chart that clarifies the existing challenges and options for the future, with examples (“Six Strategic Questions for Health Care Organizations”).
‘Rethink the Meaning of Strategy’
The authors point out that most health care organizations have not developed strategic plans, and instead have relied on operational effectiveness and best practices to compete. While those methods are still important, times are changing, with more options for patients to choose from and an increase in cases of reimbursement not covering the cost of care.
Also, employers are increasingly seeking transparency in the quality and cost of care. As Porter and Lee put it: “The time has come for health care organizations to rethink the meaning of strategy. Strategy is about making the choices necessary to distinguish an organization in meeting customers' needs.”
What strikes me is how well the article addresses the changing health care and medical research scene facing today's cancer centers and their ability to survive and grow. The impact of the changes may be direct—e.g., a decline in new patients—or indirect, by financial stress of the hospital, which is often an important source of the center's support for medical research and education.
So, with the authors' help, I will use the article to outline a focus on the future of cancer centers and what may be done to improve their outcome.
The following are the six “essential strategic questions” the article uses to begin to develop a useful strategic plan (rather than one just gathering dust on shelves). I add my own comments to each.
1: What is our fundamental goal?
The organization (hospital system and cancer center) needs clarity on what they are trying to do for whom in order to make important choices about how to compete. Value for patients must be the overarching goal: high quality care at a competitive price. For example, the board of the organization decides to focus mainly on progress in improving outcomes and reducing costs.
And I would add, a structured focus on the quality of care including progress in reducing hospital errors and inefficiencies. The cancer center, not just the hospital and ambulatory clinic, shares the responsibility for the welfare of cancer patients.
More and more centers are hiring experienced oncologists to serve as medical directors to oversee these issues and continue to be current with the changing landscape. In this environment, such a medical director must be involved in the building of increasingly better value.
2: What businesses are we in?
Improving the outcomes of patients with a particular condition over the full cycle of care creates value for the patient. This involves multiple specialties and care sites. Value can be measured and managed only in the terms of a defined need that is being met, so that outcomes can be clearly identified and costs compared.
The risk of focusing on traditional organizational units (departments, divisions, sub specialties) is that value is obscured; with highly heterogeneous patients, outcomes have little meaning and cost comparisons are irrelevant. The choices necessary to deliver value will be overlooked or avoided.
Without clear lines of authority and responsibility centered on the patients with specific cancers, it becomes almost impossible to assess value—medical as well as financial—for the patient. Some cancer centers—usually those that are administratively and financially independent (i.e., free standing) without being part of a university system—are functionally organized largely by the types of cancer rather than by academic discipline; this makes the value proposition much easier to assess.
3: What scope of businesses should we compete in?
Should the scope be narrowed or expanded? In cancer centers there must be a sufficient number of available patients in a particular cancer category to compete in that arena. Patients with very rare tumors tend to be managed in one of a small number of cancer programs that over the years have built that team and know how to treat such patients.
It is foolish both medically and financially for a cancer program to accept patients with rare cancers with only a handful ever to arrive at the door. On the other hand, a center may have the clinical skills for some cancers that also require very expensive equipment, so the center may wish to expand that clinical activity by advertising, and giving lectures, etc.
4: How will we be different in each business?
For each condition they treat, organizations need a unique value proposition. Otherwise they will face growing pressures and be able to compete only by lowering prices—a race to the bottom. For example, a cancer center may choose not to compete for a rare form of cancer or even for one that is more common but for which the center lacks the complex set of skills needed for manage patients efficiently.
Alternatively, the center may decide to compete for cancer patients by creating a tightly organized and integrated practice unit to attract more patients by delivering coordinated care in a lower-cost setting and by negotiating bundled-payment contracts with employers and payers.
5: What synergies can we create across business units and sites?
Value can be created at the delivery-system level if organizations can truly integrate care by consolidating volume, patient condition, and location; they would perform services at the most cost-effective location, and coordinate care across treatment sites.
For example, a cancer center could work with the hospital to concentrate lower-complexity procedures in particular community hospitals. This approach is seen more and more as major hospitals buy and operate smaller community hospitals.
6: What should be our geographic density and scope?
The catchment area must be large enough to have an efficient volume of patients for each category to create higher value. But growth is not a strategy; geographic expansion should be undertaken with a clear path for creating value.
But what about medical research, the core function of an academic cancer center? One could argue that all of the above makes sense, but that those of us who work largely in the cancer center research programs have little involvement or influence on the strategic direction of the cancer care activities—that is true for most university based cancer centers. I understand and agree with that assessment.
However, the future of cancer centers, especially those in universities, depends a great deal on how well the university hospital performs medically and financially. Whether or not the hospital provides a high level of value for the patients at reasonable cost and efficiency, then these issues are the cancer center members' business.
The academics should be engaged at some level in shaping the strategic direction of the university hospital as well as the cancer center; the cancer center and the hospital are joined at the hip and heavily depend on each other to improve and thrive.