Quotes from Michael E. Porter

The way to transform health care is to realign competition with value for patients. Value in health care is the health outcome per dollar of cost expended. If all system participants have to compete on value, value will improve dramatically.

At the most basic level, competition in health care must take place where value is actually created.

Value in health care is determined in addressing the patient's particular medical condition over the full cycle of care, from monitoring and prevention to treatment to ongoing disease management.

Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do.

Strategists should be particularly alert to changes in other industries that may make them attractive substitutes when they were not before p.31

Competition in the current system is at the same time too broad, too narrow, and too local.

Looking back, I see now that I accepted as normal the toxic gridlock and learned helplessness our political system teaches.

What was the vision of the founder? What were the products and customers that made the company? Looking backward, one can reexamine the original strategy to see if it is still valid. Can the historical positioning be implemented in a modern way, one consistent with today's technologies and practices? This

Thus a low-cost position protects the firm against all five competitive forces because bargaining can only continue to erode profits until those of the next most efficient competitor are eliminated, and because the less efficient competitors will suffer first in the face of competitive pressures.

Pay-for-performance will only raise costs if providers get higher pay for process compliance but do not have to compete on results.

For example, in intravenous (IV) solutions and kits for use in hospitals, procedures for attaching solutions to patients differ among competitive products and the hardware for hanging the IV bottles are not compatible. Here switching encounters great resistance from nurses responsible for administering the treatment and requires new investments in hardware.

The local bias in health care means that many providers offer services in which they lack the volume and experience to be truly excellent, and that excess capacity and the tendency for supply to create demand are almost guaranteed.

Consumers will only be able to play a bigger role in their care, and make better choices, if providers and health plans realign competition around patient results and disseminate the relevant information and advice.

How to create competition on results throughout the system, and the kinds of information that need to be measured, analyzed, and disseminated, appear as recurring themes throughout this book.

Southwest's strategy involves a whole system of activities, not a collection of parts. Its competitive advantage comes from the way its activities fit and reinforce one another. Fit

Per capita health care cost in the United States surpasses that of most other developed countries. Despite this, U.S. costs are rising at comparable rates.

U.S. consumers report higher dissatisfaction with their health care system than do consumers in other developed nations.

Fit is important because discrete activities often affect one another. A sophisticated sales force, for example, confers a greater advantage when the company's product embodies premium technology and its marketing approach emphasizes customer assistance and support.

Complements can be important when they affect the overall demand for an industry's product. However, like government policy, complements are not a sixth force determining industry profitability since the presence of strong complements is not necessarily bad (or good) for industry profitability. Complements affect profitability through the way they influence the five forces.

A production line with high levels of model variety is more valuable when combined with an inventory and order processing system that minimizes the need for stocking finished goods, a sales process equipped to explain and encourage customization, and an advertising theme that stresses the benefits of product variations that meet a customer's special needs.

Consistency ensures that the competitive advantages of activities cumulate and do not erode or cancel themselves out. It makes the strategy easier to communicate to customers, employees, and shareholders, and improves implementation through single-mindedness in the corporation. Second-order

Moving to value-based competition on results will require significant changes by all system participants, as we have noted. However, the system can, and will, change from within. Each system participant can significantly improve value, and reap the benefits, even if nothing else in the system changes.

The more competitors perceive the prospect of dogged, bitter retaliation to the point of severely hurting everyone's profits, the less likely they are of initiating the chain of events in the first place. This is analogous to the situation in which the robber says, "stick 'em up, I want your money," and the deranged-looking victim says "If you take it, I will explode this bomb and kill us both!

THE U.S. HEALTH CARE SYSTEM is on a dangerous path, with a toxic combination of high costs, uneven quality, frequent errors, and limited access to care.