From the President


Richard L. Clarke, DHA, FHFMA

Healthcare organizations are beginning to embrace the notion of value-the relationship between quality and cost.

Healthcare financial leaders increasingly are being asked to play a major role in measuring and communicating value to key stakeholders. But the definition of value is far from clearly understood within the context of healthcare delivery. In other industries, value can be generally understood from the perspective of the purchasers of products or services. It often is portrayed as an equation: quality divided by price or cost. A good example is automobiles: People know that Mercedes or Cadillac brands are higher quality than Kia or Chevy, and hence can demand a higher price.

Health care is different. There is little transparency on either quality or price, and the major purchaser of the service isn't the person who consumes it (i.e., not the patient, but the employer or health insurance company).

For this reason, HFMA initiated its Value Project, which aims to increase our understanding of what value means, to identify metrics for communicating value to stakeholders and the competencies necessary to increase value, and to clarify the roles and competencies of finance leaders related to value creation. Seventeen healthcare systems joined us in designing this project and are working with our consulting partner, Deloitte, to conduct research and analysis on value in health care. From preliminary results of our research, a few key points are emerging:

  • Value must be defined from various stakeholder perspectives. For example, the definition of quality may differ between the patient perspective (e.g., patient experience, satisfaction) and the purchaser perspective (e.g., clinical quality, productivity impact).
  • Measures of quality (e.g., patient experience, satisfaction, productivity, clinical process, and outcomes) also are not fully developed and accepted, so the numerator of the value equation is not well defined.
  • Likewise, cost is not generally understood or readily available. In health care, the calculation of the cost to deliver services is not as precise as that used in other industries, and it varies significantly among providers, leading to confusion and a lack of transparency.

Even with these challenges, however, it is clear from our research that the environment is changing: Not only are quality and cost data improving, but also payment systems are shifting from payment for volume to payment for outcomes. This shift-tied to value-will require new care delivery models and new financial analytical capabilities. And our research suggests that healthcare organizations have a lot of work to do to survive and thrive in this new value-based payment environment.

From March 30 through April 1, HFMA will pre-sent some of its findings and offer workshops on value at The Leadership Conference in Chicago ( Keynote presenters will provide findings from and next steps for our project, as well as insights into other key issues, and many top systems will demonstrate their approaches to clinical transformation and financial analysis.

Quality, cost, clinical transformation, financial analysis, and payment reform are increasingly important. HFMA's Value Project will help healthcare leaders understand how they all come together. Stay tuned.

Publication Date: Tuesday, February 01, 2011

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