Scott MacStravic, PhD
Health and Human Services Secretary Mike Leavitt has urged employers to support a “value-driven health system” (AHA News Now Oct 12, 2006 (www.ahanews.com). He apparently defines value as the relationship between quality and price, both of which he argues should be clearly measured and reported to all under “transparency” standards that federal agencies will use as the result of an executive order signed by the President in August.
But there are other definitions and measures of value, and a value-driven system would be different depending on which is used to promote and evaluate it. Only a few months ago, for example, the value of medical spending in the country was rated as “reasonable”, based on the definition of value as the years of life gained by the country for the amounts spent for the care while spending increased. [D. Cutler, et al. “The Value of Medical Spending in the United States, 1960-2000” New England Journal of Medicine 355:9 Aug 31, 2006 920-927]
If the long-accepted and commonly-used model developed by Avedis Donabedian over 25 years ago were applied, value (he labeled it “valuation”) would mean the subjective perceptions of value among health care customers, both patients and payers. [A. Donabedian The Definition of Quality and Approaches to Its Assessment Ann Arbor, MI, Health Administration Press 1980] His first three categories of quality metrics, structure, process, and outcome are more familiar because they are objective and more easily used by managers, but the “value” dimension is also important to patient and payer satisfaction.
Moreover, value as what customers think it is, representing something more like their perceived benefit for the cost, is likely to be the source of metrics that will be used in pay-for-performance systems. Since P4P is advocated by almost all health care reform gurus and organizations, this definition of value may soon become the most important, even if nobody agrees on the best definition in the abstract.
Just as “beauty is in the eye of the beholder”, so value is in the eye of the customer. This means that payers involved in P4P systems will surely have different metrics for the value they want measured, reported, and used as the basis for payment bonuses, or even total payments to healthcare providers. And patients are likely to have their own set of metrics when selecting which providers to use, particularly as their ability to choose and burden of paying for choices increases over time.
Perhaps the key implications of a shift to customer-defined value as the basis for payment will be the necessity for providers changing their minds and behaviors about being accountable for results. Physicians and hospitals alike have long resisted, and in some cases refused to be held accountable for patient care outcomes. They have a legitimate case, since they do not control, only influence even the clinical outcomes patients achieve. Patients’ own behaviors, chance developments, and other factors beyond providers’ control have always played a role in healthcare results.
If payers are going to look at outcomes, and more particularly at value when designing their payment systems – if they do so when choosing providers for networks, and publishing performance data that patients and families will use in selecting providers – providers will have no choice but to measure, and presumably manage their performance along the dimensions that payers use for such purposes.
For insurers, the value dimensions used are relatively predictable – their primary focus will be on costs. They will want reactive sickness care delivered at as low a cost as possible, given quality necessities and outcome standards. And they will want proactive health care to deliver as great a reduction in sickness care expenditures as they can bet. Other dimensions may be included, but these will most likely be the kinds of structure, process and outcomes already familiar to providers, including such things as having EMR and CPOE capabilities, adhering to HEDIS care standards, achieving high levels of patient satisfaction, for example. But the value dimension of cost savings will most likely be paramount.
With employers, the same will be largely true, except that cost savings will go beyond reductions in sickness care expenditures to include the “total economic impact” of both sickness and health care expenditures, gauged across productivity and total labor costs, as well as quality, customer satisfaction, market share and revenue effects, to the extent that these can be measured and linked to employee and dependent health. This will create a wholly new and considerable challenge for providers, who have thus far focused all but entirely on their own internal measures of quality, not value dimensions related to their customers’ performance.
And when it comes to patients, the definition and measures of value will be an even greater challenge to both measurement and management. Patients judge value in terms of the impact on their overall health and life quality that reactive sickness and proactive health care have. They apply a widely diverse set of notions about which health/life quality dimensions are affected, and how important each is, as well as a widely diverse set of perceptions about the costs involved to them, not only out-of-pocket expenditures but personal time and efforts spent, inconvenience and discomfort involved, etc.
If healthcare providers are going to really move toward a “value-driven” healthcare system, they will have to look well beyond what they have been using as “quality” measures, and even “cost” measures to improve their understanding of how their customers define and gauge value. And as the value of what they deliver increasingly affects whether they get into provider networks, win the custom of insurers, employers and patients, as well as how much they are paid for delivering their value, providers’ ability to competitively manage the value they deliver will largely determine their success and survival.
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