Seeking the Value in Value-Based Care

Zachary Hafner

It’s funny how certain buzzwords and phrases catch on in health care. We’ve seen HMO come and go, ACO start strong then fade, and population health struggle to become mainstream. Nowadays, it’s all about value-based care. Ask any industry insider what that means, and you’re likely to get a response full of more buzz terms: low cost, high quality, great outcomes, favorable experience. But what is value-based care really, and is it truly something different?

Zachary Hafner

Based on the buzzwords alone, the vision isn’t too visionary. It describes a set of objectives that most industries have been focused on for decades. The intrigue comes from how we fit the pieces together. Value-based care is, objectively, high-quality health care that consistently delivers the best outcomes both clinically and experientially, for the lowest possible and practical total all-in cost of care. In support of this, value-based payment models that shift accountability for achieving the desired results to those who participate in delivering the care are necessary to both fund the investments and incent the needed behaviors.

Now that we have a working definition, can we point to examples of value-based care in action? The answer is a resounding yes. There is tremendous value experimentation taking place throughout American health care, and some of the results are truly impressive. Health care organizations have very quickly homed in on two key populations—Medicare beneficiaries and employees of self-funded companies. In both segments, the economic case for moving to value is clear. With employees, any cost reductions or productivity gains accrue directly back to the employer. With Medicare, the value-based payment models are well defined, and the cost savings opportunities well documented. Here are two examples among many:

  • The Pacific Business Group on Health partnered with Boeing to implement a care management initiative called the Intensive Outpatient Care Program. By targeting medically complex cases within the employee population, the program successfully reduced care costs for these individuals by 21% while also reducing depression symptoms by 33%.
  • ChenMed, a Medicare Advantage provider, reports that the amount of face-to-face time its physicians spend with patients is more than nine times the national average. This population’s rates of emergency room visits are more than 33% lower than the national average among Medicare beneficiaries, with 28% fewer hospital admissions and 25% fewer inpatient days.

With compelling results like these, you might expect the shift to value to be the industry’s top priority. Instead, health care’s evolution from volume to value is going more slowly than expected. Turns out, it is hard to move forward with so many obstacles in the way; in health care, they come from the “stickiness” of the legacy system. For many health care organizations, making moves that reinforce the current model are a safer near-term bet than gambling on disrupting the status quo in pursuit of the value model. Provider consolidation is one example. Last year had the highest level of health care provider consolidation in U.S. history. The providers want the narrative to be that the new combinations yield cost synergies and opportunities to improve customer service. However, experience shows that in many cases, such consolidation results in higher prices for consumers with little improvement in outcomes. Consider also that the number of health plans on the individual and small group exchanges is waning. These exchange products are key mechanisms for expanding coverage and reducing costs. Plans cite an inability to generate profits on these products as their reason for backing out.

It’s hard to be optimistic about a volume-to-value transformation amid developments like these.

But perhaps the answer lies not in how we describe value, but in how we measure our progress. The market forces pushing health care to evolve from volume to value are intensifying. At the same time, the culture change, capabilities, assets, methods, and mindset required to redefine the health care paradigm are staggering.

Unlike corporate initiatives, we simply can’t get there thinking quarter to quarter. But we will get there. We may just have to take the long view and start thinking generation to generation.

Zachary Hafner is a National Partner with Optum’s strategy consulting practice.

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