Fifty-five years ago, before many of us were born or active in our careers, Paul Ellwood introduced the concept of the health maintenance organization (HMO). What he suggested was simply a nonprofit organization that offered comprehensive care within a designated provider network in exchange for fixed annual payments, ultimately providing better care at a lower cost.
The federal HMO Act, passed in 1973, and the TEFRA Act, passed in 1982, further supported the various HMO payment initiatives. The HMO payor market got greedy, however, and healthcare quality suffered. Ultimately, critics and academics began to pay closer attention to our industry, with the eventual introduction of a new term coined by Michael Porter and Elizabeth Olmsted Teisberg in their book Redefining Healthcare: value-based care (VBC). The Affordable Care Act of 2010, controversial in its genesis and still controversial today, further adopted value-based care, which is now a driving force in the industry in a variety of ways.
Many consider the push from volume to value in healthcare to be a recent phenomenon; however, it’s been at least 55 years since we began moving gradually toward improved quality, safety, and efficiency. Still, there clearly is more work to be done.
We’re all in the middle of this process of trying to implement, adopt, adapt, and better appreciate VBC; however, when we consider Table 1, reviewing the four states of possible industry disruption, healthcare clearly stands out as an outlier, which reinforces the importance of paying further attention to VBC.
The bottom left quadrant of Table 1 shows durable industries that are not prone to disruption. At the top left are the types of industries that remain viable. The top right shows volatile industries that are more prone to disruption, while the industries most vulnerable to disruption are shown at the bottom right.
The healthcare distributors are at the ripest risk of disruption, as is evidenced by the history of our industry. Anticipating the difficulties of implementing VBC is discomforting. The Centers for Medicare and Medicaid Services (CMS) currently aims to have all Medicare beneficiaries and most Medicaid beneficiaries enrolled in accountable care programs by 2030, and the agency is committed to promoting health equity through its various value-based care initiatives.
By definition from CMS, value-based care is designed to focus on five goals:
Provide the best patient experience.
Advance health equity.
Improve patients’ health outcomes.
Deliver healthcare services at a reasonable cost.
Support the well-being of the healthcare workforce.
In considering value in healthcare, it’s possible to consider value in other industry types as well. Value (V) is a mathematically simple equation with quality (Q) divided by cost (C), or V = Q / C. As this relates to value-based care in our industry, higher quality of care and lower cost of care drive a higher value of care. Easy?
Not so fast there! Measurement science is a slow-moving science. We must continue to focus on measurement improvements for both the process and outcome measures and refine our understanding of measurement utilization in healthcare. Recognizing a measurement burden out there, how should we proceed to effectively measure the value of healthcare in the value equation?
MEASURING QUALITY AND COST
How should we measure quality? The National Academy of Medicine has provided a framework that should be utilized as we consider value-based care: 1) effectiveness, 2) efficiency, 3) equity, 4) patient-centeredness, 5) person-centeredness, and 6) safety and timeliness. These six parameters for considering quality should be persistently maintained for the measurement of value.
Measuring cost turns out to be exceedingly difficult. Once more, the federal government is actively driving the issue, and price (cost) transparency initiatives are creating a bit of turbulence.
The Hospital Price Transparency Act (CMS-1786-FC) makes it mandatory for hospitals’ standard charges information to be available for the public, laying the foundation for a patient-driven healthcare system. Compliance in meeting that legislation is not yet high, but other acts at the federal level that are moving through the legislative process are going to continue this drive further.
The Healthcare PRICE Transparency Act (H.R. 410) states specifically that hospitals must publish a list of standard charges in negotiated rates with the insurers, discounts for cash payments, and billing codes. Additionally, this act applies to insurance plans, which must publish in-network and out-of-network charges for covered items, services, and negotiated prices for prescription drugs. A better definition of true costs in healthcare is an elusive target yet to be pursued.
TURNING TO VALUE MEASUREMENT
So, if value equals quality over cost, and we already have complexity in the quality and cost-measurement strategy, we are going to struggle to measure value.
John Toussaint leads the Catalysis group on international engagement efforts to improve organizational efficiency in healthcare. He states, “We are not able to look at this from a global, accurate procurement perspective. What we need to be able to do is build a common set of value metrics or a value metric. And I think it will be a set because there is not one way to measure value. We have to measure it across the patient experience, and the experiences will vary based on the type of disease people have and the care they’re going through. The bottom line is, we have not been able to measure this yet” (personal communication).
Further study of this value equation reveals a wide variety of perspectives on what represents value. It is always good to remember what those perspectives are as we drive through the genesis of VBC models, the adoption of these models, the measurement of these models, and then an evaluation of their success. Five key groups represent this diversity of perspectives on VBC: patients, providers, payors, purchasers, and other industry partners.
Patients, as the receivers of care, can be considered the receivers of value; however, because every patient is unique, their differences affect any value care model. Just as one may think about gender, cultural, social, economic, and geographic factors, one must consider whether they are having an acute episode of a single disease. Are they having an acute episode of a chronic condition? Or do they suffer from non-acute, chronic conditions? How does their immunologic condition factor into all this?
Measuring patients and their outcomes on value is not so simple. When trying to measure patients from the perspective of defining quality, individually there are patient preferences, but families may affect patients’ preferences. Similarly, patients’ ability to intellectualize their healthcare is based on their education and their understanding of what their care is targeting. Patients are usually looking for better disease outcome, better health, better longevity, and a better quality of life. If they must interface with the industry, they want coordinated, efficient care, lower premiums, lower out-of-pocket expenses, and no medical debt.
THE COMPLEXITY OF PROVIDING HEALTHCARE
Medicine typically becomes encapsulated in standards and guidelines of care on a particular process, but those processes are also coupled with practitioners’ experiences and their own preferences. Early-stage practitioners practice differently from later-stage practitioners and may have different guidelines or standards of care.
Other differences may coincide with practice type, geographic area, length of time in the community, cognitive specialty vs. procedure-based specialty, utilization rate for consultants, and use of advanced practice providers. Again, practitioners must consider a host of factors in relation to value, quality, and cost.
Some practitioners don’t necessarily like to be measured, but they accept its importance. What’s the credibility of that outcome data or any of the process measures, and how do the public opinion measures affect how practitioners are perceived? As this all evolves, a variety of practice strategies come into play, concierge medicine being an obvious one.
Participants in the payor system are now the main drivers of healthcare. As drivers, they keep their corporate costs down and their margins up while attempting to demonstrate how well they are providing improved patient care and improved value-based care.
A plethora of VBC models are routinely coming into play, but they have created a related documentation burden. A variety of measurement strategies are required to demonstrate the benefits of any particular model so there is an excess of nonclinical work involved in delivering care based on the variety of VBC models implemented by the payor entities.
As purchasers of healthcare, employers are often the advocates of improved healthcare. While the government uses taxes to pay private and commercial plans for Medicare Advantage and Medicaid, the commercial payors rely on premiums to fund their insurances, and large corporations, along with small or medium-sized companies, are the ones who actually purchase healthcare while also paying corporate taxes. They are the ones affected by what expensive health insurance plans are and what they become. Ultimately, employees and staff are the beneficiaries of the plans chosen by employers. We must recognize that 8-9% of the U.S. population has no insurance and no influence on VBC models or premiums.
So, both the employers and individual patients are the actual purchasers; they are the ones who can best influence where we need to go with VBC in different ways. The Leapfrog Group and various other business groups around the country do a good job of being awareness builders and advocates for better quality, more affordable care. But again, those in smaller, medium-sized businesses and the individuals who don’t have any insurance don’t necessarily influence VBC. The purchasers, the larger business groups, need to be the stronger advocates for better care, lower cost, and better value overall.
In the $4.8 trillion healthcare economy, there are numerous companies in other sectors of the industry. Whether it’s device companies, large and small pharma companies, or life sciences companies, there’s a variety of so-called industry partners. Unfortunately, the focus for them often is to create wealth for their companies.
But it’s not just device and pharma or technology companies. Other sectors include electronic health record companies, the legal system, human resources systems, the professional association world, and lobbying groups, which are creating differing perspectives on VBC. Continuing on this track, the education system has a share, whether it’s the schools for the 45-80 clinical job types that are in the market right now, or the nonclinical.
LOOKING TO THE FUTURE
The variety of perspectives on VBC, including value, quality, and cost, continues to expand. At the end of the day, however, it’s still all about patient-centered (person-centered) care.
The patient-physician relationship remains as the dominant driver above all other clinical disciplines; physicians influence the 45–80 clinical job types and the physicians they work closely with, but it remains that the patient-physician relationship still drives this industry in large measure. So, it’s up to the physicians as leaders and strong participants to create and facilitate healthy VBC environments and set the expectations regarding VBC experiences so we can improve clinical delivery across all clinical relationships.
As in any industry focused on value where there is an exchange of goods or services, it is the delivering agent (i.e., we as physicians) who should provide the means to improve and deliver the optimal customer experience in the face of evolving societal expectations and cultural influences.
My ongoing premise is that at some level, all physicians are leaders. As such, physicians remain as the natural stewards for the future of our industry.
Value-based care is gradually improving, but after 55 years, we are still in a phase of discomfort, and we will have to keep experimenting with a variety of VBC models. There will continue to be different levels of adoption and adaption while we rely on the feedback from all these multiple perspectives. While the pace of measurement science remains tricky, we must also make decisions about how best to implement value-based care models. Let us all not forget how complex these various perspectives are while we work to make the evolution of VBC better with physician leadership. Good data is making it evident that physician-led programs and institutions do better with VBC.
Remember, leading and helping to create significant positive change is our overall intent as physician leaders. AAPL focuses on maximizing the potential of physician-led, interprofessional leadership to help create personal and organizational transformation that benefits patient outcomes, improves workforce wellness, and refines the delivery of healthcare internationally.
Therefore, as physician leaders, we must embrace the complexities of our industry, and we can choose to embrace the opportunities where our individual and collective energies are able to make the beneficial changes our industry needs. We must continue to be innovative and adaptive in our efforts. Let us continue to maximize the opportunities continually open to our profession.
Through this AAPL community, we all can continue seeking deeper levels of professional and personal development, and recognize ways we can each generate constructive influence at all levels. As physician leaders, let us become more engaged, stay engaged, and help others to become engaged. Exploring and creating the opportunities for broader levels of positive transformation in healthcare is within our reach — individually and collectively.