Value-based healthcare, and the challenges of establishing its benefits
Value-based healthcare, so intuitively appealing yet so difficult to demonstrate.
In the US, most healthcare spend is based on a fee-for-service reimbursement method; providers get paid based on the specific services that they perform. For most providers there are no financial incentives to reduce costs, improve quality, or enhance the patient’s experience. Under a value-based delivery system, providers are incented to do those things. For instance, there can be year-end penalty or bonus based on whether or not the provider meets certain criteria. The criteria may be activity-based (patients have an A1C test) or outcome-based (patients show an improvement in the A1C or their satisfaction levels based on year-end surveys).
Some benefits of value-based healthcare for patients are lower costs and better outcomes. Managing chronic diseases can be costly and time-consuming. Value-based healthcare focuses on the prevention of chronic diseases in the first place. The benefits for providers are higher patient satisfaction rates and better care efficiencies. They can spend less time on chronic disease management. Additionally, quality and patient engagement measures improve when the focus is on value instead of volume. Payers also gain through stronger cost controls and reduced risks, while suppliers have the advantage of an alignment of prices with patient outcomes.
And society should benefit through reduced healthcare spending and better overall health. In the US, a reduction of the fraction of GDP that is currently spent on healthcare (18%) should leave more money to spend on education and other causes.
The new healthcare delivery models stress a team-oriented approach that involves efficient sharing of data so that care can be coordinated and outcomes can be easily measured. To illustrate this point, a landmark study in psychiatry from the National Institute of Mental Health, called the NIMH RAISE-ETP Experiment (Recovery after an Initial Schizophrenia Episode – Early Treatment Program) was taken up. This example is a well-documented attempt to show the benefits of early and coordinated intervention to prevent chronicity in Schizophrenia.
The study showed that the multi-element coordinated approach (as compared to standard of care) resulted in improvement on a quality of life scale (QLS) scale to measure deficit symptoms, in exchange for higher outpatient mental health costs, including higher antipsychotic medication costs. The ICER was $12,081 per unit of improvement (one standard deviation on the QLS scale, regardless of the duration of untreated psychosis before the early treatment program (DUP)). The multi-element coordinated approach had a 94% probability of being more effective than standard of care at an arbitrary value of $40,000 per unit of improvement, regardless of DUP. There was also considerably greater cost-effectiveness among low-DUP patients, suggesting that a reduction of the DUP would be a worthwhile investment.
Value-based care is growing rapidly in the United States. In 2018, only about a third of hospital and doctor spend was value-based, and it is expected to be two-third in just a few years. Moreover, the reimbursement methods are also expected to change with fewer ‘bonus only’ (one-sided) types of agreements and more penalties (two-sided agreements).
President and Founder
30+ years in industry and academia; 24 years in Pharma & CRO in Clinical research, post-marketing and safety; cancer epidemiology; Entrepreneurial experience; Statistics and Actuarial qualification.