The optimism and challenges for putting the 'value' in value-based care

Everybody’s talking about value-based care, but what does that mean? The Centers for Medicare & Medicaid Services has already met its goal of converting 30% of fee-for-service Medicare payment to value-based payment models and it hopes to bring this up to 50% of payments by 2018.

Yet who defines value and how is it measured? Healthcare Dive turned to experts in the provider community for the answer.

Defining value

When it comes to defining value in healthcare, one source described it as a “sweet spot” between achieving optimal quality and doing so at a reasonable cost.

“Value-based care is care that meets a patient’s needs — and only what they need — in a safe and effective manner at the lowest possible cost,” says Nancy Foster, vice president for quality and patient safety policy at the American Hospital Association. “This philosophy works hand-in-glove with the field’s mission to improve the care of the patients they serve directly and the overall health of communities across the country.”

Jerry Penso, chief medical and quality officer at the American Medical Group Association, adds that the care provided is “efficient and effective through a systems that delivers high performance. "Inappropriate care or wasteful services are not administered, so the patient experiences care that is safe, timely and congruent with their needs,” Penso says.

What translates to value also depends on one’s perspective, he notes. “From a patient’s perspective, value might include compassionate, convenient care that results in better functioning and decreased suffering while minimizing out-of-pocket expenses. From an employer/purchaser perspective, it might include a healthier, more productive workplace at an affordable cost. And from society’s perspective, value might include overall population and community well-being, ranging from biological to psychological to social indicators of health,” he says.

The Healthcare Financial Management Association (HFMA) launched the Value Project in 2010 to help guide the transition from a volume-based payment system to one focused on value. They define value as the relationship between the quality of care received and the total cost of care to the purchaser.

On the quality side, that includes four essential pieces:

  • Access to affordable care;
  • Respect for the patient;
  • Safety; and
  • Good outcomes.

On the cost side, it could mean paying more for an individual service at a hospital that has lower rates of complications, says James Landman, director of healthcare finance policy at HFMA.

“Really, you’re looking to either improve the quality of care without increasing the total cost of that care or maintaining the quality and reducing the overall cost of care to the purchaser, or improving both quality and affordability,” Landman tells Healthcare Dive.

HFMA emphasizes total cost of care to the purchaser to stress to its members that value must ultimately be realized the end user — the patient or employer who is paying for that care.


Under the old regime of fee-for-service medicine, doctors thought they knew value when they saw it, but they didn’t actually have the evidence to back up that perception. Value-based medicine, by contrast, requires metrics to measure quality of care and compare it across providers, health systems and insurers, for example.

Organizations also need to be able measure cost, which can be trickier since there are many possible constructs for measuring cost. Do you look at total cost of care or just what’s delivered through the healthcare system? Do you take into account the cost to the patient? To a business? If a person is unable to work or can only work on a limited basis, do you factor in that cost?

The best way to determine value is to look at the total cost of care, and it encourages others to do so too, according to HFMA.

Getting on board

Implementing value-based programs requires a significant restructuring of the healthcare system, with more emphasis on prevention and keeping patients out of the hospital. Providers need to understand their patient populations and where the high utilization is coming from, which patient are driving utilization and what interventions are effective in reducing unnecessary utilization of emergency care, Landman says. “It requires a significant shifting of resources and a much stronger primary care and care-management focus.”

Still, he believes providers are embracing the transition as something that is both inevitable and necessary to improve care and control healthcare costs. The question is how much financial risk a provider is willing to take on for their patient population.

Some of the new payment models, such as Pioneer Accountable Care Organizations and the Hospital Readmission Reduction Program, are helping to show this approach can be a win-win for providers and patients, he says.

Banking policy on a word

While there’s general agreement on what constitutes value, wrapping care delivery and industry strategies around a word can be challenging, experts say. For one thing, providers don’t have a fully open or interoperable network in which to share data, and any information sharing must protect the privacy of the individual. And as providers move to more and more electronic mechanisms for storing and communicating information, they also lack common data standards for assessing that information. Without a way to compare apples to apples, it can be very difficult to calculate value.

Yet another challenge is the push for patient-reported outcomes. Their self-evaluation of their care can have a huge impact on the kinds of services they seek, where they go to get those services, their understanding of their options and their ability to follow through on a program of care.

With the current push for value in healthcare, Landman worries the term could become diluted. “The big challenge is keeping the focus on both the quality piece and the total cost of care piece,” he says.

“The biggest challenge to industry right now is we’re still living in a world of multiple payment models where provider organizations are still receiving a very large percentage of their payments through the old fee-for-service system, which doesn’t necessarily incentivize value."

Filed Under: Payer Hospital Administration Policy & Regulation Practice Management
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