Value Based Healthcare with Markov Models
Value based healthcare can only make an impact if it can address complicated concerns such as marginal benefits to healthcare, comparative net health outcomes, and most prominently, whether value-based health care is worth it. The good news is we can use current industry methods such as Markov models and cost effectiveness analysis to make a case for the viability of value-based health care.
Markov models calculate the probability associated with events occurring in sequence based on time elapsed in a given state prior to the transition. It is commonly used by health analysts to evaluate economic models of diseases and the potential impact of new interventions (such as a new imaging technique, or a new treatment) entering the market. Markov models enable us to calculate the proportion of patients who will likely progress through a series of discrete health states given a diagnosed chronic illness and tabulate the costs associated with each disease progression.
The model can also incorporate dynamic transitions that patients will be making towards an improved status when given an intervention that is efficacious, or regress if that intervention is absent from treatment or, for example, if a patient is only receiving some form of standard care. Understanding those transitions is important for estimating and analyzing the cost and outcomes of economic models as it can demonstrate the time and resources it will take for a cohort to receive an innovative product or alternatively, to model a chronic disease for a patient with continuous risks over time (Briggs, 1998).
The use of economic models such as Markov’s can be combined with current cost-effectiveness frameworks that measure direct costs and health benefits to produce an outcome expressed in quality adjusted life years (QALYs). A QALY is calculated by multiplying the utility score of a specific health state with the total time spent in that state. It captures both the morbidity and the mortality of illnesses. The probabilities generated from the Markov model, along with QALYs estimated from cost effectiveness analysis have the advantage of allowing us to compare different interventions by demonstrating the incremental improvement in quality of life gained from an investment in a particular intervention (such as offering new services in a clinic – or withdrawing them, new imaging protocols – or doing without them, new drugs or devices versus standard of care, etc.). Reed’s economic evaluation, for example, relies on comparing the value of the benefits with that of additional resources required. Thus, analysts can combine the cost effectiveness model with a value-based healthcare perspective to recommend a more patient-centered model that goes beyond the traditional standard value when the data justify it (Reed, 2019).
Most US based providers are reimbursed on a fee-for-service arrangement, where the provider is paid for every service delivered. In theory the cost-effectiveness model combined with a value-based healthcare focus could implement a value-based payment system as a replacement for the fee-for-service model, where financial incentives or penalties would be measured based on the quality and cost of care delivered rather than the volume (Buxton, 2006).
Implemented with care, the combination of an effective economic model such as Markov model and cost-effectiveness analysis with a value-based healthcare focus would allow policy makers to deliver a high value healthcare system that caters the multidimensional outcomes of patients at the most efficient cost possible (Tsevat, 2018).
Briggs, A., & Sculpher, M. (1998). An Introduction to Markov Modelling for Economic Evaluation. PharmacoEconomics, 13(4), 397–409. doi:10.2165/00019053-199813040-00003
Buxton, M. (2006). Economic Evaluation and Decision Making in the UK. Pharmacoeconomics, 24(11), 1134-1142.
Me, P. (2013). The strategy that will fix health care. HBR, 24.
NEJM Catalyst. (2017, January 1). What Is Value-Based Healthcare? Retrieved July 29, 2021
NEJM Catalyst. (2017). What Is Value-Based Healthcare? Retrieved from NEJM Catalyst: https://catalyst.nejm.org/doi/full/10.1056/CAT.17.0558
Putera I. (2017). Redefining Health: Implication for Value-Based Healthcare Reform. Cureus, 9(3), e1067. https://doi.org/10.7759/cureus.1067
Reed S.D., Dubois R.W., Johnson F.R., Caro J.J., Phelps C.E. (2019). Novel approaches to value assessment beyond the cost-effectiveness framework. Value Health; 22: S18-S23
Tsevat J, Moriates C. (2018). Value-Based Health Care Meets Cost-Effectiveness Analysis. Ann Intern Med. 2018 Sep 4;169(5):329-332. doi: 10.7326/M18-0342. PMID: 30083766.
20+ years of healthcare and data sciences experience including BI, ML, Policy Analysis, HTA, Value Dossiers, Predictive modeling, meta-analysis, and Budget Impact; experience with many claims and EHR databases; strong background in health policy and economics.