Cost of Care

Assessing the Value of Care

May 15, 2017 1:09 pm

In the Healthcare Challenge Roundtable, healthcare finance, clinical, and health plan leaders discuss ways to collaborate on solutions to some of the industry’s biggest issues. This month’s topic: value-analysis frameworks.

Amid rising costs and the increasing emphasis on delivering high-quality care at a reasonable price, healthcare organizations require effective processes for assessing the value of drugs and healthcare services. In this edition of the Healthcare Challenge Roundtable, senior provider and health plan leaders examine best practices for gauging value.

Participating are Jimmy Chung, MD, senior director of perioperative services, Providence Health & Services, Seattle; Michael Sherman, MD, senior vice president and chief medical officer, Harvard Pilgrim Health Care, Boston; and Barbara Strain, director of value management, University of Virginia Health System, Charlottesville, Va.

What are the most important questions and criteria to consider when weighing the value of a healthcare service, device, or drug?

Jimmy Chung: First, we should define what we mean by value. When talking about healthcare services, devices, or drugs, value is quality and outcomes divided by cost or margin. The most important aspect of this definition is the outcomes piece because that’s what the patient sees and experiences. Since patients are the primary customers in health care, we must focus on what matters to them—their clinical results, perceptions, and experiences, as well as the safety and accessibility of the drugs or services.

Note that when determining whether something delivers positive patient outcomes, organizations should double-check that what they define as a positive outcome is aligned with the patient’s definition. Perhaps an individual wants to walk again or live long enough to attend his or her granddaughter’s wedding; to the individual, that’s a positive result. At Providence Health & Services, we aim to partner with patients to decide what we’re going to look for when reviewing a drug or service’s potential and how we’re going to ensure that the evidence shows the product or drug has been able to meet those criteria.

Barbara Strain: There is often a misconception that healthcare providers are being asked to use the cheapest drug or product to save money. However, assessing value involves much more than seeking a strong financial return on investment. At University of Virginia, we consider the whole value proposition. This process includes examining everything from patient outcomes to patient safety, staff safety, diversity of services, and throughput across the continuum of care.   

Like with any research project, when measuring value, you must first define the problem you’re trying to solve or the goal you’re trying to reach. For example, does the product allow you to move a test or procedure from an inpatient setting to an outpatient setting? Does it help improve efficiency? Is it going to drive quality? Improve financial viability? Enhance the patient experience? We have adopted a Lean approach to assessing value, where we clearly define the problem we’re trying to address and systematically review viable options to see how we can best meet our goals. Value=Quality/Costs, which proves true in any circumstance. The more organizations focus on improving quality, the more they will find that costs fall away and value improves.

What are some of the most common pitfalls in assessing value?

Strain: One potential pitfall emerges when the information you are reviewing is not up-to-date. Perhaps a study was conducted years ago and is not as relevant now, or maybe it applies only to certain demographics that don’t align with your patients. You want to make sure that you have strong resources to support assessment—whether internal or external—so you can be confident that you fully understand the benefits and how they relate to your patients.

We often have physicians or other subject-matter experts give presentations on specific products, drugs, or services. This permits more back-and-forth discussion that can ensure all questions are addressed while preventing key points from getting lost in translation.

Michael Sherman: With greater attention being paid to not just efficacy but cost as well, there is a growing need for research and expert recommendations that can demonstrate the value of a product or service from the perspective of various stakeholders, including the patient, provider, manufacturer, and payer. As an industry, we are in the early innings of assessing value, and while there are a number of approaches that attack different aspects of the question, they do not necessarily come together holistically.

We at Harvard Pilgrim Health Care are especially cognizant of the fact that much clinical research is done under the best possible circumstances—well-constructed clinical trials conducted by investigators who are experts in their fields and see a large number of patients with a specific condition. New drugs most often are tested against a placebo, and each study participant is followed very closely by a clinical research associate. Unfortunately, that is just not how care is delivered in the real world. Patients may not understand instructions; they may be taking multiple medications; or physicians may be rushed and not fully explain how to properly use a drug or device.

The reality is that mileage does vary outside of the clinical trial environment. So, while well-conducted research studies are certainly necessary, they are only one indicator of value. For that reason, approaches that assess value based on real-world experience are highly beneficial.

Chung: In theory, we would look at double-blind randomized trials with a large sample size, but that’s not always possible or even the best choice. The research also must be reproducible and relevant. For instance, if you’re researching a new implant and it shows less inflammation in rats, that doesn’t necessarily translate into better results for people.

The other thing is that we don’t always have studies available, and so sometimes the best option is a consensus among experts. This may take the form of frameworks, collaborative white papers, and so on. There’s even been some use of social media among physicians to collect feedback, although I wouldn’t condone that on a wide scale. There’s work being done now to validate the quality improvement that can be achieved using social media.

Sherman: Another challenge is that the cost of a drug accrues to the payer immediately, whereas the drug or service may not yield full value for years or even decades. In these cases, one may need to substitute process measures as proxies for long-term outcomes. But with that approach, the cause and effect need to be clearly established.

Chung: Another pitfall occurs when provider organizations focus only on unit cost reduction without considering the total cost of the episode. Hospitals may see savings when they look at per case cost reduction for a particular surgery, but they may be blind to the costs that are incurred outside the hospital walls. Medicare data show that the majority of care costs for a hip replacement surgery, for example, are incurred in the postoperative period after patients leave the acute setting. As hospitals and health systems start participating in more bundled payment models, if they don’t look at what the total cost of the episode is going to be, they probably won’t truly save or reduce healthcare costs in the end.

The key lesson here is to look outside the hospital when judging value and try to be as patient-centric as possible.

What are the keys to ensuring value-assessment approaches don’t become too provider- or payer-focused and overlook patients?

Sherman: Although it is important to understand the value to both payer and provider, we need to always put the patient at the center. While economics are important, ultimately the metrics that we choose to measure and reward through outcomes-based agreements should be the ones that matter to the patient.

I would also emphasize that assessment frameworks are merely one tool for making a treatment decision and that patient input is essential every step of the way. For example, some frameworks allow for weighting and prioritization of various attributes, such as willingness to accept the risk of various adverse events. By ensuring that these weightings reflect the preferences of a specific patient, we can ensure that these approaches are applicable to individual circumstances and are not “cookie-cutter.”

Strain: What we always come back to is, “What’s the best thing for the patient?” Something may cost several thousand dollars more, but if it’s the right thing for the patient, we need to consider it.

We see this in both the operative and procedural environments. Let’s say we’ve been doing a standard procedure over the years because there was no other way to do it. Now robotics or minimally invasive devices are available, and they are more expensive, but the patient has a much better experience. You must keep an open mind to these opportunities. You also should look down the road and consider how many readmissions or other clinical conditions will be avoided if you make the shift.

The bottom line is you should view the whole continuum because in the current healthcare environment, we must keep patients out of the hospital, shift more procedures to the outpatient setting, and then make sure that if people still need to come to the hospital, the experience is as rewarding as possible and leads to the best outcomes.

Chung: When patients have poor outcomes, it costs more for all stakeholders—the patients, hospitals, payers, and so on. So by focusing on how to improve patient outcomes, everyone benefits.

Sometimes this requires thinking outside the box. For instance, an idea that is gaining traction is the perioperative surgical home. This is a model for providing seamless, coordinated care from the moment a decision for surgery is made to the postoperative point where the intended outcomes are met. To encourage positive results, there is substantial upfront work in the form of preoperative assessments. The patient care team is basically prehabilitating the patient from a nutrition, physical ability, and mental health standpoint to put him or her in the best position to successfully tolerate and recover from the surgery.

Traditionally, none of this proactive care has been reimbursed, and nobody has done it unless surgeons decided to do some of it in their own office—but few surgeons have opted for this approach. However, if surgeons, hospitals, physician practices, patients, and payers come together and agree that these things are important to make sure that the patient has a good outcome, then everybody will benefit in the end. This is a patient-centered approach, and although it may seem like it’s going to cost more because you have to dedicate resources—a preoperative clinic and staff, for example—evidence will show that these patients will have better outcomes, which will lower the overall cost of care.

In your experience, how effective do frameworks developed by associations, such as the Institute for Clinical and Economic Review, tend to be?

Sherman: We are so early in the value-assessment life cycle that there is not a lot of objective data about the impact of these frameworks. To get a better sense of their true usefulness, we will need to see greater utilization, and that will take time. That said, they do provide objective information that—along with other types of evidence—may be viewed by a pharmacy and therapeutics (P&T) committee in coming to a decision, and they have the potential to drive a more robust discussion than might otherwise occur.

I chair my organization’s P&T committee and would note that the pharmacists and physicians who serve on it actively welcome information about value to inform specific decisions. That awareness and interest seems to be increasing. I have also heard colleagues at professional meetings express concern when there is slow adoption of drugs shown by ICER to be fairly priced, which further speaks to the growing impact of models such as ICER’s.

I would stress however that value frameworks are only one of many data points that inform P&T decisions. For instance, in choosing between which of two self-administered injectable medications to prefer, the committee will not only review evidence including value assessments but may also pass around the injection devices and consider feedback from patient advocacy groups as to which one is easier to use.

Value assessments have long been used in some other countries to inform what drugs and other therapies will be available. If a potential drug doesn’t meet a stated value threshold, it might not be covered. In response, the manufacturer has the option of adjusting the price to meet the value threshold in order to qualify for coverage. These approaches force stakeholders to engage in hard discussions about the value of a life, which is a subject we have avoided in the United States. So, while value-assessment frameworks are extraordinarily helpful, it is important to understand that there is not an arbitrary value beyond which a drug will not be covered.  

What is the appropriate scope of value measurement for a healthcare organization? For example, should it be done at the individual patient level, the department level, the organizational level, a larger population level, or a combination?

Strain: It is a combination. You may look at the individual patient level, but then you telescope out to the larger patient population. Let’s say you see 3,000 patients with a particular condition. You can affect each of those patients in a certain way. Then you must consider how this impacts the service line, the organization, or the population in your community.

When contemplating these diverse perspectives, you need someone who is trained to understand all the levels of decision making. In addition, you must bring various stakeholders to the table—clinicians, administrators, patients—so you can systematically go through an approach that will get you to the correct combination.

Chung: I think it can be done at all levels, but they serve different purposes—and ultimately the value to the individual should dictate all the other metrics. Face it, you can’t define the value of a service for an organization without first understanding the value of that care for the patient. Otherwise, an organization may end up pushing its own agenda.

For instance, if an organization is considering a robot program because it has the potential to bring in more surgical cases, improve market share, elevate the organization’s reputation, and provide greater access, those are organizational goals. You can’t start there and then push that value onto the patient because then you’re incentivized to create or perform surgeries that may not necessarily have tremendous benefit for the individual. Let’s say you’re looking to use the robot program for hernia repair. From the patient’s standpoint, he or she has a hernia and it needs to be addressed. The individual wants the best way to fix that quickly and inexpensively without having to take off too much time from work. Considering the evidence, the best option is probably a quick outpatient surgery with a small incision under local anesthetic, resulting in minimal patient pain and a rapid return to work. The robot program—while cool—does not markedly improve things for the patient.

In these situations, it’s up to us as healthcare leaders to portray an honest assessment of the value to patients because they may not know. They may do research online and see a lot of ads from hospitals that say, “We have a robot to fix your hernia and our outcomes are great.” They will also notice testimonials from patients that say, “I was able to go back to work the next day and I didn’t take any medications.” This is marketing—not research or evidence. We as physicians, scientists, and patient advocates should refocus our attention on what truly brings value to patients and not superimpose our other intentions onto them.

When done well, how can value assessment promote innovation in health care?

Strain: Our physicians are always seeking ways to innovate. A strong review process allows you to understand and embrace the risks of innovation so you can realize the potential benefits. We can’t be afraid of new opportunities, but we must also exercise caution when implementing them and must rely on data.

Even after you start using a product, drug, or service, you should continue to collect information. It’s important to first establish a baseline—whether that’s length of stay, cost, quality of life, treatment safety, or whatever criteria can accurately reflect your decision. You must agree on that baseline ahead of time and decide on the source that will show variation from the baseline. After a period of time, if you’re not meeting your anticipated goals, you need to be committed to assessing why the product, drug, or treatment didn’t provide the desired outcome. In some cases, you may even need to remove it from use. This may require going back through the whole cycle of improvement and determining what your goals are and whether they’re being met.

Chung: Returning to my initial definition of value as quality and outcomes over cost or margin, those four variables represent distinct opportunities for innovation. We are at the beginning of the value-assessment journey, and the process will surely evolve over time. As we improve, the potential for innovation is great, provided organizations keep patients at the center.

Kathleen Vega is an HFMA contributing writer and editor.

Interviewed for this article: Jimmy Chung, MD, senior director of perioperative services, Providence Health & Services, Seattle; Michael Sherman, MD, senior vice president and chief medical officer, Harvard Pilgrim Health Care, Boston; Barbara Strain, director of value management, University of Virginia Health System, Charlottesville, Va.

Check out previous installments of the Healthcare Challenge Roundtable:

Optimizing the Preauthorization Process

Working Together to Make Alternative Payment Models Succeed


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