Shifting to value-based models can eliminate waste

By | August 30, 2016

Over the past many years, there has been a belief that there is harm and waste within our healthcare delivery model. The Institute of Medicine supported these views in their landmark publication. Most reformers believe that one of the causes of these issues is the fact that our payment models have been designed to pay for services, based on fee for service, and not tied to value.

What is value?

The definition of value is not clearly understood. Value can be thought of as having three variables that are related to each other.  Mathematically, value can be described as the equation: Value = (Quality + Service)/Cost.  In order to understand how to increase value, we need to delve into the definitions of each of the components.

Quality has historically been viewed as outcomes related to the medical care received and have usually been defined as surrogate metrics such as a blood levels, being on certain medication for a certain disease, or preventive care measures. There are many other determinants of quality that are now being studied and used. These measures are shifting towards measurements of more global outcomes such as admission rates or Health Days. Patient Reported Outcomes are also gaining attention as these measures define quality from the perspective of the patient.

In the past, service has been viewed as patient satisfaction, relating mostly to access, friendliness, and ease of use. True service should be more focused on how well a patient/person feels activated and engaged. Health status improvement is a partnership between those that deliver care and those that receive it. In order for health improvement to occur, there are behavioral and emotional barriers to overcome. How well the health system addresses these issues will become more important. The psychosocial axis of needs is steeped in the behavioral and human sciences.  For example, all believe education around one’s health is important, but how one learns and determines the value of information received will be a driving factor of their engagement. An activated human being is much more likely to see better results as they are truly engaged in their treatment and plan of care.

Cost is defined as the total cost of care required for a person. This cost should include all costs borne by both the payer and the consumer.

The shift toward value

The movement to value is the focus of both governmental and private industry payers of care. Over the past four years there has been a momentous shift in focus and language used around shifting to value-based payments. The goal of HHS to tie 50 percent of “traditional, or fee-for-service Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016” is a monumental statement and puts a stake in the ground. Since 2012, Medicare has introduced: hospital value-based purchasing, Medicare Shared Savings Program, hospital readmission reduction program, hospital acquired condition payment reduction, end stage renal disease incentive program, physician value based modifier program, continuation and expansion of Medicare Advantage, skilled nursing facility value based purchasing, home health value-based purchasing and most recently, mandatory bundles.

Congress has played an important role with the recent repeal of the Sustainable Growth Rate (SGR) formula. The Accountable Care Act has also created a catalyst for movement towards value-based models. Capability Maturity Model Integration (CMMI) continues to design innovations for new models, all focused on the movement to value.

The private sector has also been very active. The Leap Frog initiative was an early mover in this arena. More recently organizations such as the Health Care Transformation Task Force has garnered much attention in gathering private sector participants who all has agreed to have 75 percent of their contracts in value-based models by the beginning of 2020. This Task Force is an industry consortium that brings together patients, payers, providers and purchasers who are working together to hit this goal.

The Triple Aim as motivator

Another shift that has occurred is the focus on the Triple Aim as a unifying strategy. We have had catch sayings before, but the use of the Triple Aim in our language has become profuse. Improving the health of those we serve, improving patient satisfaction, and lowering cost is at the tip of all tongues.

In addition, many of us have added a fourth aim of improved provider satisfaction too. If providers aren’t satisfied in their vocation, value is lost for patients.

These forces combined have caused us to reach the inflection point. The move to value is gaining momentum.