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BUSINESS OF
MEDICINE
Understanding value in the
healthcare market
By Lee W. Bewley, PhD, FACHE
Value in healthcare has become a dominant theme in the U.S. care resources should be more effectively matched with value. 3
healthcare market, driven in part by the passage of the Patient Pro- To provide a clearer sense of how healthcare resources might be
tection and Affordable Care Act of 2010 (PPACA). Indeed, given
national expenditures of nearly $3 trillion for healthcare among ap- more effectively managed within a value-based market, a few eco-
proximately 300 million people, many economists might reasonably nomic concepts and principles are reviewed in this article. Addi-
report that the U.S. healthcare system generates more value than tionally, the following model is provided as a framework for
any other market in the world; however, a complete review of the understanding how value generation and resource exchanges are
system also would indicate that more healthcare waste, perhaps as achieved in contemporary markets.
much as 20 percent to 30 percent of total expenditures, is a product
of that same value-generating system in the United States. 1, 2 Michael Porter has provided a substantial basis for understanding
the nature of how value is created and measured in the healthcare
A number of market developments associated with value are at- market. The prime variable of measurement, value, is found by eval-
tributed to the PPACA, including reimbursement processes tied to uating the ratio of healthcare outcomes relative to total healthcare
quality, Accountable Care Organizations (ACOs), and evolved re- costs (financial and economic). In normal human assessment of
lationships between healthcare institutions and providers. Each of benefits and costs, a person or group of people would use value to
these trends is derived from an over-arching principle that health- determine if a service or product was “worth it” in terms of what
was received vs. what was spent. 4
34 San Antonio Medicine • July 2015
