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Value-Based Healthcare

1. What is Value-Based Healthcare?

Health is an intrinsic value and a precondition for pursuing a ‘good life’. Whilst universal healthcare provides equitable health to the population, most healthcare systems have strategies to improve quality of healthcare while reducing costs [1] [2]. 

Though no agreed upon definition, the goal of Value-based Healthcare and generating value evidence is to maximise the ‘value of care for patients’ and reduce the overall cost of healthcare [3]. Porter (2006), in his book “Redefining Healthcare”, states [Figure 1] that this value is achieved by dividing patient-relevant outcomes by the costs per patient across the full cycle of care [4] [5] [6]. 

Figure 1: Value-Based Healthcare (Porter 2014)

In taking this concept of value forward, Porter (2013), suggests a new strategy called the “value agenda”, for moving to a high-value healthcare delivery system; requiring restructuring on how healthcare delivery is organized, measured and reimbursed [6] [7]. This six-component system [8] includes five actions underpinned by a supporting information technology platform [Figure 2]. It leads to value in healthcare by obtaining the best clinical outcomes and patient experience, at the lowest cost [5] [7].

Figure 2: The Value Agenda (Porter, 2014)

Some question the narrow focus of this business approach to healthcare [1] [2] [9]. In Europe the concept of Value-Based Healthcare is broader in ‘The Expert Panel On Effective Ways Of Investing In Health’ (EXPH) and includes patient personal goals and societal contribution [2].

In 2019, the EXPH [Figure 3] suggested a definition for Value-Based Healthcare: “a comprehensive concept built on four value-pillars: appropriate care to achieve patients’ personal goals (personal value), achievement of best outcomes with available resources (technical value), equitable resource distribution across all patient groups (allocative value) and contribution of healthcare to social participation and connectedness (societal value)” [2].

Figure 3: Value-Based Healthcare (European Commission 2019)

2. Why is Value-Based Healthcare Important?

The goal of healthcare services are to create a healthier society. However, healthcare costs continues to soar, showing no signs of slowing, and sometimes outpaces inflation [10] [11]. In value-based healthcare, improving value requires improvement of one or more outcome without raising costs, or lowering costs without compromising outcomes [6]. 

Value-based healthcare offers a radical transformation of healthcare systems. It enables transitioning from volume-based to value-based healthcare delivery and payment systems. Value-Based Healthcare focuses on the ‘quality of care’, rather than the ‘quantity of care’; the overall wellness of the patient and better outcomes are key to being compensated [12]. 

Value-Based Healthcare is important because it [10] [13]:

  • Emphasizes prevention: it rewards Providers for keeping patients as healthy as possible, including implementing preventative strategies to avoid illnesses and chronic conditions.
  • Provides efficiency: healthcare professionals (HCPs) focus more on curing the patient, resulting in fewer tests, fewer doctor visits and fewer prescriptions.  
  • Integrates service delivery: HCPs combine collective resources and expertise with a critical analysis into a single platform giving a big picture of a patient’s care; collaborative healthcare leads to efficiency improvements.
  • Provides collaborative care: implementation of a collaborative approach, contributes to reduced medical errors.
  • Increases patient satisfaction: when HCPs focus on prevention-based strategies and less time on chronic disease management, health issues impacts patients less, resulting in greater patient satisfaction.
  • Reduces payer costs: with an emphasis on prevention and fewer visits, payer costs reduce, lessening the impacts on premium pools and investments. The reduction in exposure and risk, increases the financial health of the payer.
  • Improves Societal Health: focuses on preventative medicine and better management of chronic conditions, while reducing the spend on healthcare, allows spend on other areas of society.

3. Old Models vs. New Models of Reimbursement

Historically, healthcare reimbursement follows a Fee for Service (FFS) model, which is a system of healthcare payment where a provider payments are separate for each service rendered. It drives volume and not value, as payments depend on quantity not quality [10] [14]. The FFS model is one of the major drivers of the high costs of healthcare. It promotes the use of more tests, procedures and treatments, some of which may not be supported by evidence-based medicine [15] [16]. The FFS model also contributes to the decline in primary-care workforce and its inability to meet patients ‘health maintenance’ needs [17].

The transition to value-based healthcare based on patient outcomes (i.e. valued based care vs fee for service), is a strategy that encourages quality rather than quantity. It shifts the focus on care of individuals to services that keep societies healthy, reducing overall costs on healthcare [10] [11] [16].  Providers (HCPs) are financially rewarded for positive patient outcomes, efficient delivery of care, and encouraged to engage with patients, giving them a connected care experience. Value-based healthcare also promotes a coordinated team approach, to improve efficiency and patient satisfaction [11] [13].

4. Benefits of Value-Based Healthcare

The benefits of Value-Based Healthcare are inclusive for patients, providers, payers, suppliers and society [Figure 4] [10] [13]:

  • Patients spend less money to achieve better outcomes: Patient health is collaborative requiring cradle to grave management, with an emphasis on primary health helping patients recover from illness and injuries more quickly. This results in fewer tests, fewer doctor visits and fewer prescriptions in both short and long term, with improved outcomes at a lower cost.  
  • Providers achieve efficiency and greater patient satisfaction: Quality and patient engagement increases when HCPs are focusing on new, prevention-based services, rather than on chronic disease management. In addition, it rewards provides for their efforts to generate higher value per episode of care.
  • Payers reduce risk and control cost: A healthier society with fewer claims, reduces payer risk and improves allocation of payers’ premium investments. Value-based payment also allows payers to increase efficiency by bundling payments that cover the full cycle of care for the patient.
  • Suppliers align prices with patient outcomes: As health expenditure continues to rise, suppliers and manufacturers align their products and services with positive patient outcomes. This is an important value proposition to present to healthcare industry stakeholders. The alignment is likely to become easier for suppliers with the growth of individualised therapies.
  • Healthier societies with reduced overall healthcare spend: Societies with lower costs on managing chronic diseases, also have lower costly hospitalisations and medical emergencies and as a result, less overall spend on healthcare. 
Figure 4: Value-Based Healthcare Benefits by Stakeholder (NEJM Catalyst, 2017)

Summary

Value-based Healthcare is patient-centric, encouraging a coordinated and holistic approach to patient health, improving both quality and efficiency [11]. It focuses on preventative medicine, and better management of chronic conditions, while reducing the overall cost of healthcare [10]. It rewards healthcare providers for positive patient outcomes and efficient delivery of care [11] [12]. 

The transition of reimbursement from a quantity-based model (FFS) to a bundled reimbursement model focusing on quality, aims to benefit all stakeholders [10] [16].  Value-Based Healthcare is inclusive for patients, providers, payers, suppliers and society [10] [13]. At Syenza we accelerate value based healthcare systems through pricing consulting, pharma market access consulting, and healthcare consulting. We support value-based healthcare systems with strategies to increase value by improving patient outcomes with new reimbursement models. Learn more by contacting us for further details.

References

[1] N. Zipfel, P. B. van den Nat, B. J. Rensing, et al., “The implementation of change model adds value to value-based healthcare: a qualitative study,” BMC Health Services Research, pp. 1-12, 2019. 

[2] European Commission, “Defining Value in Value-Based Healthcare,” European Union, Luxembourg, 2019.

[3] Ventura, “What is Value Base Healthcare,” 2013. [Online]. Available: https://www.vintura.com/en/life-science-consulting/value-based-health-care/michael-porters-definition/.

[4] M. E. Porter and E. O. Reisberg, Redefining Health Care: Creating Value-Based Competition on Results, Boston: Harvard Business School Press, 2006. 

[5] M. E. Porter, “Value-Based Health Care Delivery,” in Value-Based Health Care Seminar, Boston, 2014. 

[6] M. E. Porter and T. H. Lee, “The Strategy That Will Fix Health Care,” Harvard Business Review, October 2013. 

[7] Harvard Business School, “Value Based Healthcare: Key Concepts,” 2018. [Online]. Available: https://www.isc.hbs.edu/health-care/value-based-health-care/key-concepts/Pages/default.aspx. [Accessed 16 March 2020].

[8] P. Matley, “Value-Based Care: Why we need it and how to get it?,” Discovery Corporate, 2018 March 2018. [Online]. Available: https://www.discovery.co.za/corporate/value-based-care. [Accessed 16 March 2020].

[9] S. A. Groenewoud, G. P. Western and J. A. Kremer, “Value based competition in health care’s ethical drawbacks and the need for a value-driven approach,” BMC Health Services Research, fol. 19, no. 256, pp. 1-6, 2019. 

[10] D. Gurley, “Value Based Healthcare: What agents should know and share with their clients,” 16 November 2018. [Online]. Available: https://redbirdagents.com/value-based-healthcare-and-why-its-important/. [Accessed 11 March 2020].

[11] The Fox Group, “How does Fee for Service compare to Value Based Reimbursement,” 13 September 2019. [Online]. Available: https://www.foxgrp.com/assessment-benchmarks/fee-for-service-vs-value-based-reimbursement/. [Accessed 12 March 2020].

[12] I. Putera, “Redefining Health: Implication for Value-Based Healthcare Reform,” Cures, fol. 9, no. 3, op. 1-11, 2017. 

[13] NEJM Catalyst, “What is Value-Based Healthcare?,” 1 January 2017. [Online]. Available: https://catalyst.nejm.org/doi/full/10.1056/CAT.17.0558. [Accessed 16 March 2020].

[14] L. Sanicola, “What is Value-Based Care?,” 02 February 2017. [Online]. Available: https://www.huffpost.com/entry/what-is-value-based care_b_58939f9de4b02bbb1816b 892.

[15] J. Tsevan and C. Moraites, “Value-Based Health Care Meets Cost-Effectiveness Analysis,” Ann Intern Med., fol. 169, pp. 329-322, 2018. 

[16] M. Fokker, F. van Nanny and V. Wiersma, “Five Reasons Value-Based Healthcare is Beneficial,” Health management. org, fol. 17, no. 1, pp. 34-36, 2017. 

[17] A. M. Klöckner and C. A. Walcker, “INSIGHT: The Healthcare Industry’s Shift from Fee-for-Service to Value-Based Reimbursement,” Bloomberg Law, 26 September 2018. [Online]. Available: https://news.bloomberglaw.com/health-law-and-business/insight-the-health care-industry-shift-from-fee-for-service-to-value-based-reimbursement. [Accessed 16 March 2020].

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