Moving patient outcomes to the center: The case for value-based healthcare

• Greater healthcare spending does not seem to correlate with improved care or health outcomes
• Defining the proper payment scheme is a fundamental principle of successful implementation of a VBHC model
• Diagnostic tests are currently not reimbursed with patient value in mind

Traditionally, healthcare has been delivered and paid for based largely on a “fee-for-service” arrangement, with healthcare providers receiving compensation for services rendered or procedures conducted. Yet, over the last decades, this system that incentivizes providers on the volume and quantity of those services provided, has become unsustainable. 

Costs are rising at an alarming rate.^1,2 The increase in healthcare spend may be attributed to various factors including better healthcare options in emerging markets,³ the use of newer and more expensive technologies,⁴ a growing elderly population⁵ and an increase in complex chronic conditions.⁶

Yet the enormous investments being made are not translating into fundamental improvements in health, and we seem to be at a point of diminishing returns. This is borne out in the statistics, which show that greater healthcare spending does not seem to correlate with improved care or health outcomes.^7,8

In 2006, a book entitled “Redefining Health Care: Creating Value-Based Competition on Results” by Michael Porter and Elizabeth Teisberg addressed this fundamental question vexing the healthcare sector – why, in spite of intense competition and high spending, was the US healthcare system failing?

According to their analysis, improving patient value was not the primary goal of those acting in the healthcare system, who were instead focused on reducing costs – specifically their own, short-term costs.⁹

The proposed alternative: What if, instead of billing merely for time and resources related to excessive non-productive treatment, HCPs were compensated for making sure that the patient’s condition was improved or resolved? This is what we call value-based healthcare, or VBHC. It means:

• The goal of healthcare would shift from treating a condition to solving a patient’s needs
• Payments would be based on positive patient outcomes rather than on the quantity of procedures performed

VBHC represents a fundamental shift in how healthcare is delivered. It is a movement away from asking patients, “What is a matter with you?” to “What matters to you”.¹⁰ Rather, it is a patient-centered approach to delivery focused on improving the health outcomes that matter most to patients across the entire cycle of care, while concurrently optimizing the use of healthcare resources and cost to society.¹¹

The “value” in VBHC is about focusing on improving patient health outcomes throughout the entire patient journey:

• VBHC models would not only benefit patients but also help optimize the cost of healthcare
• By improving patients’ health outcomes, value-based models may help reduce the compounding complexity and disease progression that drive the need for more care
• Over time, this may also reduce spending.

While there are good examples of VBHC being implemented in locations around the world, full implementation in the real-world setting remains challenging. Some of the obstacles include increased financial risk and possible loss of revenue, ill-defined outcomes measures, improved IT system requirements, and policy frameworks that support VBHC.

In their research, Michael Porter and Elizabeth Teisberg developed a strategic, six-step framework for the implementation of VBHC called “the Value Agenda.”¹²  Essentially, this framework recommends that:

• Outcomes, including patient-reported outcomes and experiences, be measured to both determine if value goals are being achieved, and to address any inefficiencies in the system
• Healthcare provision be organized to more effectively and efficiently tend to patients with similar needs while considering the entire patient journey
• Integrated digital solutions ensure data is smoothly and efficiently shared across care teams
• The cost of care must be measured along the entire patient journey, and reimbursement should be aligned with the measurable impact(s) on patient outcome(s), not services provided.

Defining the proper payment scheme is one of the obstacles to, and a fundamental principle of successful implementation of, a VBHC model. In fact, there are several possible reimbursement models that move away from the traditional fee-for-service models towards more outcome-based models aimed to improve care processes, enhance patient experience, and create achievable benchmarks for improved outcomes.¹³ These include:

• Provider-sponsored health plans
• Pay-for-performance
• Shared savings
• Bundled payments

Bundled payments seem poised to remain a commonly used payment method for VBHC¹⁴ because they directly incentivize achieving better patient outcomes at a lower cost.

In vitro diagnostics (IVDs) already play a key role in today’s healthcare system, influencing over 66% of clinical decision-making, while accounting for only about 2% of total healthcare spending.¹⁵ They are a low-risk and relatively low-cost way to generate critical information to inform diagnosis, treatment, and, eventually, outcomes. Yet the discussion of the “value” of diagnostic tests often revolves around their accuracy and their sensitivity. In addition, tests are currently not reimbursed with patient value in mind, but rather on a fee-for-service basis, with little incentive to change the status quo.

Within the context of VBHC, however, they need to be evaluated on the testing strategy used, and on the quality and accuracy of decision-making by healthcare providers as a result of using the test,¹⁶ including the ultimate impact on the health of patients.

What kind of impact can implementing a VBHC model make? How can VBHC help address rising costs that do not consistently equate to better quality care?  And how do all healthcare stakeholders – patients, providers, payers – need to work together to make this shift happen? To help answer this and many more questions, please download our ebook Value-based healthcare: Patient-centric outcomes at the foundation of care. 

This ebook aims to answer the following:

• What are the benefits of VBHC?
• What are the leading economic models in VBHC?
• What is needed to implement VHBC?
• What can we do to prepare for VBHC?