Friday, May 27, 2011

The Need for a Value-Pricing Model in Healthcare

We must reduce overall healthcare costs and improve quality, which would increase value to consumers (patients/clients), improve their quality of life, and increase access.

The metric for Value is Quality divided by overall Cost. Quality is the effectiveness of (a) treating illness/dysfunction treatment (as measured by risk-adjusted clinical outcomes, such as changes in a patient’s signs and symptoms); (b) preventing illness/dysfunction (wellness); and (c) stabilizing chronic conditions (disease management). Overall costs—including the cost of meds, tests, treatments and equipment/devices—rises because of inefficiency, waste, errors/malfunction resulting in additional care, excessive tests and procedures, over-prescribing, excessive risk, failure to select good lower cost alternatives, administrative & operational overhead (including malpractice insurance), etc.

From a consumer’s perspective, therefore, greater value care is more cost-effective care.
I contend that we should all be focusing how to increase healthcare value by:

  • Rewarding providers and manufacturers who deliver higher-value services and products
  • Enabling physicians and other practitioners to deliver high-value care through health IT, care coordination, ongoing clinician-researcher collaboration to build and evolve value-enhancing evidence-based guidelines, etc.
  • Enabling consumers to distinguish between high- and low-value services and products
  • Reducing providers’ economic burdens by lowering medical school costs through subsidies and malpractice insurance rates for high-value providers.
This is the essence of a “Value-Pricing” (Pay for Value) model of healthcare; it is a sensible alternative to the insane open-ended fee-for-service (pay for volume) model and the restrictive salary-only model.

The policy wonks, healthcare providers, researchers, payers and consumers ought to be debating how to make Value-Pricing a reality since it is the only rational way to achieve the ultimate goal presented above. All other conversations simply miss the point!

Related posts:

Healthcare Reform "Value Promotion & Reward" Strategy
Healthcare Reform Models Focusing on Value to Consumers - Part 1
Healthcare Reform Models Focusing on Value to Consumers – Part 2
Healthcare Reform Models Focusing on Value to Consumers – Part 3
Four Interlocking Issues about Fixing American Healthcare
Patient-Centered Life-Cycle (PCLC) Value Chain--Process Reform: Pay for Value