How to Enable, Implement, Measure and Reward the “Value” in Value-Based Care

In 2016 the Center for Medicare and Medicaid Services reached its target of making 30 percent of all CMS payments to providers “value-based.” In 2018, the goal is for half of all payments to be based on value, and 2020 CMS’ goal is for 90 percent of federal payments in health care to be value-based. Typically, private insurers follow CMS’ lead in these matters, and we are already witnessing similar dramatic increases in value-based private insurer payments.

The idea of tying healthcare outcomes to costs—defined as value—was popularized in 2006 by Harvard University Professor Michael Porter and Elizabeth Teisberg in their book Redefining Health Care[1]. Since then, the concept has been a growing focus of advocacy among healthcare policymakers across the United States and globally in countries such as Sweden, Colombia and the UK. These multinational efforts are all aimed at promoting high-level strategies that will result in a system wherein provider payments are made based on value. “Valuable care” is defined as care that results in demonstrably improved health at a lower cost.

Industry pressures associated with demographic shifts, rising drug costs, healthcare spending cuts and complex disease conditions all challenge healthcare’s ability to attain value. These pressures suggest the need for aligning, implementing and sustaining healthcare delivery that is both clinically and financially efficient. Leading policymakers, researchers and experts have identified a promising evidence-driven approach that necessitates focusing on patient outcomes to facilitate healthcare provider attempts to cut costs and enhance the overall well-being of their patient populations.

The key principles of value-based healthcare–a focus on quality, cost and patient outcomes–across the entire care continuum are more important than ever. Aligning all stakeholders so they can capitalize on the value in the value-based healthcare environment means reforming an entrenched system. Instead of separate payments for each consultation or treatment, healthcare organizations must adopt a new approach to payments, tied to episodes of care in systems such as bundled payments or on risk adjusted models of care similar to Medicare Advantage, ACOs or PACE programs.

How can we foster successful efforts towards an effective value-based care system where value is not only defined, but captured in its entirety? The following four priorities are key ingredients to make value-based healthcare a functional reality.
  • Enable value by maximizing access to both primary and secondary preventative care
Maximizing access to and adopting strategies of both primary and secondary preventative care will not only enable, but also expedite, creation of value. Better health outcomes can be achieved by embracing the full potential of preventative services. For example, promoting access and adoption of early screening for cancer in otherwise healthy patients will support early detection and diagnosis that will enable treatment and cure at an early stage of the disease, resulting in improved patient outcomes. Even more important may be an emphasis on secondary prevention, which can dramatically cut the cost of care and save lives in the near term. Secondary preventive care is care provided to ill patients to prevent complications of pre-existing diseases, i.e. targeting the administration of flu vaccines to COPD patients. This strategy has an immediate payback in preventing pneumonitis and its morbidity and mortality at a surprisingly low cost. From a policy standpoint, stronger emphasis on the provision of both primary care as well as treatment to ill patients is critical. Promotion of primary and secondary preventive care by regulators, payers and policymakers will not only bring long-term cost savings but will also provide a higher probability of realizing better health outcomes.
  • Demonstrate value through effectively optimizing the power of “team” in interdisciplinary care provision
Value-based care implementation requires the creation of an environment of collaboration and coordination across all stakeholders in the care continuum. Providers must function as an interdisciplinary team to serve the healthcare needs of patients. However, adopting coordinated, team-based approaches can be challenging, as inpatient and outpatient services have been traditionally organized around individual stakeholders focused on meeting their own specific financial targets rather than enhancing patient outcomes. That’s a central paradigm for performance in the value-based environment.

The introduction of value-based models in the U.S., such as ACOs, shared services, Bundled Payment Models, the mandated hip and joint replacement bundle program and oncology bundles, have begun to promote a collaborative approach to care delivery. For example, oncology bundles not only bring together providers such as radiologists, oncologists, pathologists and surgeons, but also a wide range of stakeholders such as payers, employers and other providers from across the care continuum. All parties are making a team effort to fight cancer and provide high-quality care, demonstrating value to all stakeholders in the healthcare ecosystem. Enhanced communication among all stakeholders along the care continuum will improve and support achieving higher-quality care. Most importantly, providers must communicate across disciplinary and enterprise barriers to ensure the accurate, confidential transfer of patient information from one entity to another. The promotion of electronic health record interoperability is critical to this success of this effort. Such interoperability has been demonstrated to enhance provider communication and significantly reduce medical errors.
  • Implement an overarching approach to measure value
In the changing healthcare ecosystem, we need to take an all-encompassing approach towards measuring value that takes into account all costs and deterrents to providing excellent healthcare. An all-inclusive approach of measuring value will include variables that can help stakeholders capture the full dimension of value, which can then be reported by every healthcare provider for each medical condition. For example, we should consider utilizing care indices which objectively weigh the value of care such as quality-adjusted life-years (QALY). A QALY year is a year of non-debilitated life attributable to the impact of a particular medical treatment such as a vaccine, cancer screening or medication. Such measures may clarify the true cost of care as it relates to the ability of care to save lives. This is one approach to evaluating care efficacy. QALY integrates the biomedical and psycho-social aspects of health. A payment approach focusing on QALY may facilitate reimbursement that is better aligned with value and reward innovative health interventions.
  • Reward value, both intrinsic and extrinsic
Rewarding providers through a system that offers incentives that drive both intrinsic and extrinsic aspects of care and fosters the rapid adoption of pay-for-performance models, such as alternative payment models and bundled payments, can spur financial success and reward outcomes tied to improved patient health. Couple this with regulatory pressures faced by pharmaceutical companies that are required to justify the value of their drugs, and payers and providers who are under cost containment pressures where CMS is reducing Medicare payments by 2 percent. For example, the new CMS proposal for Medicare part B toward value-based payment (to price drugs based on their clinical effectiveness for a particular medical condition) will not only reduce costs, but also reward physicians for educating patients on the proper use of their medications. This may result in a multiplier effect, resulting in improved care and support attaining the full potential of value-based care.

Simultaneously, it can foster collaborative efforts that bring pharmaceutical companies, payers and providers under risk-sharing arrangements – as critical value-delivering partners.

Today, although the rationale for implementing value-based approaches is strengthening across global boundaries, much work remains to be done to generate catalytic effects that have the potential to realign our healthcare ecosystem around value. Understanding the concept of value in these four key areas will support scaling up of multiple innovative payment models that are being tested and implemented in the U.S. and globally.

As technology innovations and new value-based approaches take hold in mature economies such as the U.S., which continues to combat the long-held industry norms around fee for service, much progress can be made ridding the system of non-interoperable relic IT systems and other reliquary remnants. Emerging economies, like Mexico, Indonesia and India, that are rapidly investing in developing their health systems have an opportunity to directly catapult ahead. Building an infrastructure and payment systems that include incentives geared towards value based healthcare can save resources while delivering better care to their citizens.[2]

Going forward, the concept of value serving as the central nucleus of healthcare seems to be the way forward toward a future healthcare system that achieves the triple aim of better health, better healthcare and reduced cost. Emerging economies like Mexico, Indonesia, India, as well as mature economies such as the United States, would benefit from a policy environment focused on promoting public health through prevention, optimizing the power of collaborative teams, appropriate measurement systems that capture diverse topographies of value, and intrinsic and extrinsic reward systems, wherein all stakeholders are focused on value in four key action oriented efforts i.e. Enable, Demonstrate, Measure and Reward.

[1] Michael Porter: “Redefining Health Care: Creating Value-Based Competition on Results”. 2006. In Print
[2] "Value Based Healthcare." Medtronic: Value Based Healthcare. The Economist, Intelligence Unit, n.d. Web. 21 Mar. 2017. Available at