How Should We Define Value?

Thursday, December 17, 2015 | Larry Sobal

Everyone proclaims that health care is moving from volume to value, but there’s not much consensus on what “value” is.

You’ve probably heard the phrase “volume to value” a few hundred—if not a thousand—times. It’s become such a common part of health care language that I wonder if we even stop to think about what it means. The meaning of “value,” at least as it pertains to health care, is elusive. There is no clear definition of what constitutes “value” among providers, let alone payors and employers, and a “value” outcome can often vary according to such factors as expectations, age, and general health.

What’s interesting is that when we (MedAxiom) are out working with heart programs on their strategic planning or physician compensation or resource assessments, the degree of value-centric thinking can vary widely. For every program trying to focus on tighter attainment of clinical standards or reducing costs or improving patient experience, just as many (if not more) are still focused on volume growth. And, often those organizations struggle to define where volume fits into their value strategy.

If we can’t agree on what value is, how will we know if it is happening or if it will happen at all?

The truth is that many markets are still predominantly paid by fee-for-service reimbursement models with only limited rewards for value.  Plus, despite lots of statements to the contrary, there is not a clear understanding when and how the payor market will become more aggressive in introducing reimbursement methodologies that are significantly different from volume-based models.

Curious, I decided to investigate with a Google search of Health Care Value; there were about 337 million results. Just so you know, I didn’t read all of them, but found some interesting commentaries on the topic.

Michael Porter, a distinguished Harvard Professor and author, defined value as “health outcomes achieved per dollar spent.” Dartmouth, the folks with the great data about variation in health care, defined value as “Quality over cost over time.” Or how about the Agency for Health care Policy and Research, who spoke of value in terms of “bringing together information on the quality of health care, including patient outcomes and health status, with data on the dollar outlays going towards health and focusing on managing the use of the health care system to reduce inappropriate care and to identify and reward the best-performing providers.” The Health Care Financial Management Association defined value as “safe, appropriate, and effective care with enduring results, at reasonable cost employing evidence-based medicine and proven treatments and techniques that take into account the patients’ wishes and preferences.”

I think you can agree that there are some similar themes among these, and for a few of them I had to really stop and think about what they meant.

Finally, I turned to the American College of Cardiology for their thoughts on value. The ACC spoke of value in terms of it “representing health care that has positive results (improved patient outcomes, safety, and satisfaction) at a total cost that is reasonable and affordable.” The ACC further noted that care is of high value if it enhances outcomes, safety, and patient satisfaction at a reasonable cost. This may have been one of the best definitions I found.

Getting back to this volume to value thing, if we can’t agree on what value is, how will we know if it is happening or if it will happen at all?  Is it one of those things, like a great organizational culture, where people say “I’ll know it when I see it”?  More importantly, exactly how do you know when you should shift to a value versus volume strategy?

It is imperative that your heart program reaches its own consensus on a definition of value, where your market is heading, when it will get there, what position your program wants/needs to be in that market, and then choose the most critical goals and strategies you’ll need to fulfill your definition of success.

If you listen to payors, they’ve been touting that the volume to value movement is imminent for some time now. For example, on November 25^th, CMS shared their updated Quality Strategy, which (not surprisingly) outlined the progress made in shifting Medicare payments from (you guessed it) “volume to value.” This report spells out a CMS strategy to tie 30% of traditional Medicare payments to alternative payment models and 85% of all traditional Medicare payments to quality or value – by the end of 2016 – only one year from now. This followed the October 16^th tweet from Humana that “‘We’re moving from volume to value; we’re moving from cost to health" and Aetna’s proclamation that they want to base 75% of all their health care payments to value by the end of the decade. Cigna, Aetna and others also talk about their transitioning payment from volume to value, and I assume they are serious about it, but it’s still hard to put a finger on exactly what that will be.

We have quite a conundrum: there is a lot of payor rhetoric about value and even the emergence of different alternative reimbursement models, but the reality is that most health care reimbursement is still pretty volume-centric.

Where does that leave you in terms of strategic planning?  While the common consensus is that we are moving to something we all seem to agree is a good concept, it’s not exactly clear what it is or how it will be paid for. I’m not trying to be sarcastic or belittle the idea that we need greater value in health care. However, in the absence of clarity, I believe it is imperative that your heart program reaches its own consensus on a definition of value, where your market is heading, when it will get there, what position your program wants/needs to be in that market, and then choose the most critical goals and strategies you’ll need to fulfill your definition of success.

We would love to hear your thoughts on value and how you are approaching this not so clear transition.

 

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Larry Sobal is Executive Vice President of Business Development at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and insurance. As part of his current role, Larry consults, writes and presents on topics relevant to transforming physician practices and health systems.

 

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