Value – Is It Inconceivable?

“Inconceivable,” says Vezzini repeatedly in the movie The Princess Bride.  “You keep using that word,” replies Iñigo Montoya.  “I don’t think it means what you think it means.”

I use this quote frequently when certain words are used.  Transparency is one of them.  And now I’m beginning to think value is another.

The concept of value is simple: it means you get what you pay for.  Both a burger at Culver’s and a steak at Manny’s can be high value, if the quality of the meal is commensurate with the cost.  We often define value as quality divided by cost.  One can maximize value by increasing quality, decreasing cost, or ideally both.

“Value-based care” is another simple concept.  Traditionally in healthcare, providers are paid according to the volume and complexity of services provided.  Payment is the same regardless of the quality or outcomes of care provided.  If I do a test I get paid the same regardless of whether that test led to a correct diagnosis.  In fact, if I do two tests and reach a wrong conclusion from them, I would be paid more than doing only one of those tests and coming to the right diagnosis.  That would strike most people as silly.  In distinction, value-based care refers to being paid for delivering higher value.  So for example, I would be rewarded for making the correct diagnosis with the fewest tests, because I maintained quality while decreasing cost.  Or I might be rewarded for doing a somewhat more expensive test if it not only led to the right diagnosis but did so more quickly and with fewer complications (since timeliness and safety are also elements of quality).

Value-based care takes numerous forms.  A simple one is “pay for performance,” where a provider gets paid more for achieving certain performance targets.  More complex are various risk-based payment models, where the provider has at least some of the financial risk for care, and therefore has an incentive to maximize value.  For example, “shared savings” means that if a provider can provide the same quality care at a lower cost, the savings are shared between the provider and the payer.

However, like many simple concepts, the execution is more challenging, at least in part because different people throw around the word value to mean different things.  To most insurance companies, “value” exclusively means “cheaper”.  They pay no attention to the numerator of the value equation.  Pay for performance targets, for instance, are rarely about quality, only about cost.  There is little appetite for paying a little more for better outcomes, much less better patient experience or timeliness.  Providers, on the other hand, often want to use the value equation to claim that their quality is better, in order to justify higher costs.  Part of this is cultural: people in the healing professions find it hard to accept that anyone would settle for anything less than the best, even when best is hard to define.  And of course part of it is self-preservation.  After all, to paraphrase the comic strip Pogo, “We have seen the cost, and he is us.”

Which is why I actually prefer a different formula for value, one that doesn’t divide quality by cost, but equates value with quality in all its dimensions.  It is not a trade-off, but rather additive.

Value = quality = effectiveness + safety + experience + equity + efficiency.

This shows that you can’t maximize value unless you have care that is as effective as possible, as safe as possible, as timely and patient-centered as possible, and also as efficient as possible.  We fight over which aspect is more important, but frankly patients and families think they are all important.

I’ve been trying for some time and have gotten nowhere pushing this equation, so I’ll work with the trade-off.  But until payers learn to focus on the quality aspect, and providers on the cost, we’ll keep talking past each other, waving our respective value flags.  And agreement on truly value-based care will remain, well, inconceivable.

2 Responses to Value – Is It Inconceivable?

  1. Dan Berg says:

    Glad to see “safety” as a key factor in your quality formula. Just returned from the Society to Improve Diagnosis in Medicine conference in D.C., where the tension between cost and quality was a consistent underlying theme.

  2. Christopher Peske says:

    When the provider and the insurer are two different entities there are more barriers to creating real value. In the Kaiser Permanente model the provider is the insurer, decreasing the barriers and creating a financial incentive to create value.

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