Value in Health Care: Current State and Future Directions is the first report from HFMA's Value Project. The report defines the meaning of value in health care, provides an overview of the current state of value in the healthcare industry, and maps out future directions for value-oriented providers.
Of the many forces transforming our nation's healthcare system, none is more significant than the turn from payment based on volume to payment based on value. Value is driving a fundamental reorientation of the healthcare system around the quality and cost-effectiveness of care, for, as in any industry, value in health care is defined through the relationship of these two factors: the quality of care and the price paid for it.
Over the years, the mechanisms used to finance and measure healthcare delivery have obstructed the ability of patients and other purchasers of care to perceive value, as detailed in the initial sections of this report. A payment system in which a combination of employer contributions and government funding is the dominant payment source means that patients' out-of-pocket expenses typically bear little relationship to the total price of care. Price controls and cost-shifting have created different pricing structures for different purchasers of care. Quality metrics have focused on process-related measures that tell patients little about the functional outcomes they might expect from care.
The move toward value is starting to push these obstructions aside. Patients, employers, government agencies, and health plans increasingly want to know what they can expect to receive for what they pay for care. They are seeking out providers who will give them this information and follow through with cost-effective care. They are, in other words, expecting to get value.
How should providers respond to the demand for value? In interviews with leading provider organizations across the country and surveys of the field, HFMA has identified four capabilities that organizations should develop to prepare for a value-based healthcare system. These include:
- People and culture: The ability to instill a culture of collaboration, creativity, and accountability
- Business intelligence: The ability to collect, analyze, and connect accurate quality and financial data to support organizational decision making
- Performance improvement: The ability to use data to reduce variability in clinical processes and improve the delivery, cost-effectiveness, and outcomes of care
- Contract and risk management: The ability to develop and manage effective care networks and predict and manage different forms of patient-related risk
"The Current State of Value in Health Care," which forms the central section of this report, details essential skills within each of these four capabilities that healthcare organizations should begin to develop now. Organizations that are actively working to improve the value of care offer examples of how to develop and apply these skills. Advocate Physician Partners, for example, provides a non-employment model of physician engagement for the people and culture capability, while Spectrum Health describes how interdisciplinary teams of clinicians and finance staff can collaborate on creating metrics that provide actionable data for business intelligence. Rush University Medical Center shares its approach to identifying variability within clinical processes to drive performance improvement. And Sharp HealthCare describes an innovative risk management program that helps keep capitated patients in network and ensures the continuity of their care.
Later in the report, focus turns to "The Future State of Value in Health Care." This section outlines a series of assumptions that will push the healthcare system in two directions. The first is a trend toward greater provider integration, as accountability for care outcomes spreads across the care continuum. The second is a trend toward greater assumption of risk by providers, as the healthcare system seeks to reduce costs through better management of population health.
The trends toward increased provider integration and greater provider assumption of risk will not necessarily push all healthcare organizations in the same direction. Instead, a range of strategies will likely be available, combining different degrees of integration and risk. Based on models that are emerging today, the report highlights five possible future value strategies that healthcare organizations could pursue, detailing key capabilities, possible benefits, and potential challenges for each.
Throughout the research process for this report, the healthcare organizations HFMA interviewed made reference to the "value journey." This report begins with where our healthcare system is today, follows promising paths that innovative healthcare organizations are pioneering, and describes possible new destinations for healthcare organizations in a value-based future. Like the value journey, HFMA's Value Project is just beginning. This report is a first step along the way.