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BUSINESS OF
MEDICINE
determined by the patient’s medical condition, defined as an in- tween episodic visits. From a cost perspective, the total cost of care
terrelated set of medical circumstances that are best addressed in encompasses all spending for the patient — and the patient pop-
an integrated way. For primary and preventive care, value should ulation as a whole — grouped, benchmarked and analyzed by con-
be measured for defined patient groups with similar needs. Patient dition. As the provider mindset shifts to address this model, taking
populations requiring different groupings of primary and preven- the appropriate steps in terms of patient engagement, technology
tive care services might include, for example, healthy children, and workflow are the key first steps to value-based success.”
healthy adults, patients with a single chronic disease, frail elderly
people, and patients with multiple chronic conditions. Another company, Dartmouth-Hitchcock, discusses value-
based care as follows: “…we talk about basing health care on
The current organizational structure and information systems “value, not volume.” What does that mean? In the current fee-
of health care delivery make it challenging to measure (and de- for-service model of reimbursing providers for health care, physi-
liver) value. Thus, most providers fail to do so. Providers tend to cians and organizations have incentives to ‘do” more. The more
measure only what they directly control in a particular interven- tests you order, patients you see, procedures you do, the more
tion and what is easily measured, rather than what matters for money you will make.
outcomes. For example, current measures cover a single depart-
ment (too narrow to be relevant to patients) or outcomes for a One result of this payment based on volume model is enormous
whole hospital, such as infection rates (too broad to be relevant variation in rates of procedures and tests such as imaging and
to patients). Or they measure what is billed, even though current screening. As documented by The Dartmouth Atlas of Health
reimbursement practices are misaligned with value. Similarly, Care, there is a 2.5-fold variation in Medicare spending nationally,
costs are measured for departments or billing units rather than even after adjusting for differences in local prices, age, race and
for the full care cycle over which value is determined. Faulty or- underlying health of the population. This geographic variation in
ganizational structure also helps explain why physicians fail to ac- spending is unwarranted; patients who live in areas where
cept joint responsibility for outcomes, blaming lack of control Medicare spends more per capita are neither sicker than those
over “outside” actors involved in care (even those in the same hos- who live in regions where Medicare spends less, nor do they prefer
pital) and patients’ compliance. more care. Perhaps most surprising, they show no evidence of bet-
ter health outcomes.
Today, health care organizations measure and accumulate costs
around departments, physician specialties, discrete service areas, One way of addressing this variation — and giving patients the
and line items such as drugs and supplies — a reflection of the care they want and need — is to move to a reimbursement system
organization and financing of care. Costs, like outcomes, should that is value-based. Dartmouth-Hitchcock speaks of it as “the
instead be measured around the patient. Measuring the total costs value equation”: Quality over Cost over Time. For patients, this
over a patient’s entire care cycle and weighing them against out- means safe, appropriate, and effective care with lasting results, at
comes will enable truly structural cost reduction, through steps reasonable cost. For providers, it means employing evidence-based
such as reallocation of spending among types of services, elimi- medicine and proven treatments and techniques that take into ac-
nation of non–value-adding services, better use of capacity, short- count the patients’ wishes and preferences.
ening of cycle time, provision of services in the appropriate
settings, and so on. A critical component of understanding value is measurement.
How can we know what works unless we measure our results and
Other Perspectives track them over time? Any patient considering a procedure should
According to a website of “Wellcentive” (a company that has be able to know from their physician what it will cost and what
his or her results will be, with firm data, from cost performing
driven quality improvement, revenue growth, and business trans- that procedure. Without that data, patients lack the tools to make
formation for providers, health systems, employers, and payers informed choices. We would not accept this absence of informa-
transitioning to value-based care) “…Value-based care is the in- tion when we buy a car or dishwasher or any other kind of prod-
tersection of cost and quality. Value-based initiatives shift the care uct or service; why should it be acceptable in health care?
delivery focus from volume to value and redefine financial incen-
tives toward reduced costs. In this model, physicians must think A focus of health reform has been to more closely track value
about the entire patient experience among all care settings and be- measures such as complications, hospital-acquired infections, and
readmissions. For example, hospitals now face financial penalties
if their rate of readmissions is too high.
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