Suppose for a moment that you are an administrator in an organization that provides health care and your job is on the line for delivering both savings and improved care. Because you want to be part of the solution to the health-care-cost problem, you have signed contracts with payers that reward your institution or system for reducing the costs of care. These same contracts require you to pay a penalty if the costs of care go up more than inflation. What would be your first, second, and third move?
This is not a hypothetical question. More than 300 hundred administrators of accountable care organizations (ACOs) across the United States are facing it.
My team at Partners HealthCare in Boston is faced with this exciting (and daunting) challenge. Having signed shared-savings contracts with both commercial payers and Medicare, our CEO, Gary Gottlieb, established a Population Health Management unit. A major focus of our work is to achieve shared savings in our contracts. That means controlling costs for the populations cared for by our primary care physicians. Since doctors and hospitals within Partners bill for a majority of the care these patients receive, you could say our success depends on reducing the income of our colleagues. Harvard Business School’s Clayton Christensen has taught us this is not possible — that an organization will not cannibalize itself.
So when we go knocking on...