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  . The promise of value-base healthcare, or care delivered under value-based contracts, is receiving much attention .
Under a Value-based Healthcare model; healthcare services provided by hospitals, laboratories, doctors, nurses and others are reimbursed based on the health-outcomes of their patients and the quality of services rendered .
Though no agreed upon definition, the goal of Value-based Healthcare and generating value evidence is to maximize the ‘value of care for patients’ and reduce the overall cost of healthcare . Porter (2006) states [Figure 1] that health systems may achieve value by dividing patient-relevant outcomes by the costs per patient across the full cycle of care   .
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 the delivery of healthcare, measured and reimbursed  .
This six-component system  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  .
Figure 2: The Value Agenda (Porter, 2014)
Some question the narrow focus of this business approach to healthcare   . 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 .
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)” .
Figure 3: Value-Based Healthcare (European Commission 2019)
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  . 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, which may not be supported by evidence-based medicine  . The FFS model also contributes to the decline in primary-care workforce and its inability to meet patients ‘health maintenance’ needs .
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   . Providers (HCPs) receive financial rewards 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  .
Why is Value-Based Healthcare Important?
The goal of healthcare services is to create a healthier society. However, healthcare costs continue to soar, showing no signs of slowing, and sometimes outpaces inflation  . In value-based healthcare, improving value requires improvement of one or more outcome without raising costs, or lowering costs without compromising outcomes .
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 .
Value-Based Healthcare is important because it  :
- 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.
- Increases patient satisfaction: when HCPs focus on prevention-based strategies and less time on chronic disease management, health issues affect patients less, resulting in greater patient satisfaction.
- Reduces payer costs: with an emphasis on prevention and fewer visits, payer costs reduce, lessening the effects 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.
- Provides collaborative care: implementation of a collaborative approach, contributes to reduced medical errors.
Collaboration in Value-based Healthcare
At the centre of a value-based healthcare system [Figure 3], is a robust multidisciplinary team. They work together with the patient and caregiver to identify and address the individual healthcare needs of each patient.
Stakeholders develop well-structured frameworks to assess the value of medical treatments  . These value assessments should reflect the unique health needs of different stakeholders. They should also include individual patients, who often respond differently to medicines based on factors such as age, genetic variation and comorbidities .
A dedicated, co-located, multidisciplinary team of caregivers designs and delivers a comprehensive solution to those needs. This integrated team measures meaningful health outcomes for each patient and the costs of its services and then learns from that information to drive ongoing improvements in care and efficiency .
Partnerships amongst clinical organisations may also expand as teams gain more expertise and ability to work across more stages of the care cycle or in more locations. Integrated teams work with partners, such as using new technology to share information with patients, supporting rural physicians as they provide care closer to patients’ homes, or offering to support lifestyle changes in a community.
These are natural partnerships, as the shared goals of creating high value and achieving better health outcomes for patients. They align with the interests of patients, family members, employers, health plans, and clinicians, as well as medical technology suppliers whose services may facilitate these relationships .
Figure 4: Strategic Framework for Value-based healthcare implementation (Acad. Med 2020)
A healthy business needs healthy employees, and the most seamless way to achieve positive health outcomes at a low cost is to get strong patient engagement in preventive care. Though preventative care may yield an upfront cost for employers, this cost will be lower than the cost which occurs during a high-acuity encounter. For example, administering vaccines is less costly than treating a patient who becomes seriously ill with the virus . Employers would be more willing to contract directly with providers and pay more per episode of care than they had previously, because faster and fuller recovery reduces other employer costs, such as those associated with absenteeism .
Open communication and sharing of information among care teams, carriers, and patients enhances trust and engagement. It also empowers patients to take better care of themselves between visits, critical elements for the success of prevention strategies and care management programs .
Kaiser Permanente (one of America’s leading healthcare providers) uses “in reach” and “outreach” efforts to strengthen the interaction between the patient and caregivers to achieve the desired outcomes. An example is a program introduced in 2004 in the Northern California region called Prevent Heart Attacks and Strokes Everyday (PHASE). The program uses various interventions including drugs prescriptions, whenever appropriate, and promoting four lifestyle changes. These include tobacco cessation and physical activity, and controlling blood pressure, lipids, and glucose among patients at risk for cardiovascular disease across primary, secondary and tertiary levels.
Finally, as health outcomes improve, evidence of better care creates opportunities for the team to serve more patients through expanded partnerships .
Where does the Patient Fit?
Value-based healthcare is a patient-centric model that saves money and improves outcomes . Porter (2010) defines value around the customer and that the creation of value for patients should determine the rewards for all other actors in the system . Value-based healthcare organizes around patients with shared needs and demonstrating better value in care creates opportunities and improves health outcomes for more people .
A patient-centric model that aligns the patient’s needs with the interests of healthcare provider focuses on an integrated approach to patient care . Problems such as obesity, tobacco and alcohol addiction, or opioid abuse cause most of the health issues in the long-term. A key step towards ensuring a healthier population includes managing these factors through awareness campaigns and through the day-to-day work of the healthcare teams .
In order to be efficiency, value-based healthcare is organized around segments of patients with shared health needs, such as “people with knee pain” or “elderly people with multiple chronic conditions”. Organizing care this way allows clinical teams to anticipate consistent patient needs and provide frequently needed services efficiently. The efficiency afforded by structuring care around patient segments frees clinicians from scrambling to coordinate services that are needed routinely [Figure 5]. The added capacity allows them to personalize services for individual patients who may have somewhat different needs .
Figure 5: Benefits to the patient of value-based healthcare (Research Gate 2019)
Benefits of Value-Based Healthcare
The benefits of Value-Based Healthcare are inclusive for patients, providers, payers, suppliers and society [Figure6]  :
- 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 reimbursement 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 of managing chronic diseases also have lower costly hospitalisations and medical emergencies and, as a result, less overall spend on healthcare.
Figure 6: Value-Based Healthcare Benefits by Stakeholder (NEJM Catalyst, 2017)
Enables and Barriers of Value-based Healthcare
Value-based healthcare is still evolving, and ways of improving the model are ongoing. No country has the ideal environment for value-based healthcare. There are very similar enablers and barriers that exist in different countries , , .
- Strong Government Involvement in change.
A key factor for value-based healthcare implementation seems to be government involvement in care organization. Government, which could ease regulations, should actively support forward looking providers, provide seed funding and reward high-value care.
- Focus on IT Improvement.
Continuous improvement of IT infrastructure, with emerging technologies, providers and governments, is a key enabler of a successful value-based healthcare system. IT systems need to support the information flow consistent with care pathways, as patients often move across primary and speciality care. Ideally, one integrated IT system should cover the full cycle of care.
- Implement a value-based culture among providers.
Government and payers drive the move to value-based healthcare in many healthcare systems. This poses a top-down implementation that many clinicians cannot make sense of. Physician support is critical during the implementation process. Physicians need to see and define the value of transitioning to new models to make implementation a success. Policy makers should proactively engage the medical community early to foster a value-based healthcare culture.
- Financial risk.
In value-based healthcare, providers bear more financial risk. In value-based healthcare, instead of per-visit payment, the service provider is reimbursement for health outcomes, or the set goal achieved. The providers are more accountable for health outcomes and there is uncertainty over revenue generation.
- Policies and regulations.
Healthcare is one of the highly regulated industries and changes in policies and regulations have a direct impact on healthcare stakeholders. Some issues can hinder the implementation of value-based care, such as
- Measurement of health outcomes,
- Ensure the safety of patients’ private health data during its transmission,
- Establishment of new payment models, and
- Accountability of the pharma and biotech companies and the infrastructure provider.
Value-based Healthcare is patient-centric, encouraging a coordinated and integrated approach to patient health, improving both quality and efficiency . It focuses on preventative medicine, and better management of chronic conditions, while reducing the overall cost of healthcare . It rewards healthcare providers for positive patient outcomes and efficient delivery of care  .
A few factors may prove pivotal in accelerating the implementation of value-based care across different health care systems . These include strengthening government involvement in driving change, focusing on continuous IT improvements to ensure the availability of outcome data across the full care cycle, and instituting a value-based healthcare culture among providers.
The transition of reimbursement from a quantity-based model (FFS) to a bundled reimbursement model focusing on quality aims to benefit all stakeholders  . Value-Based Healthcare is inclusive for patients, providers, payers, suppliers and society  .
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.
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