Health Care's Value Proposition

After we get everyone enrolled in a health home. And the silos of the old provider world are merged into organizations that can account for care. And budgets that are global emerge, heralding the return of capitated care. Then we will finally get around to the real work of providing health care services that are valuable to those that purchase them. And then, and only then, will we do something that is really new.

Thanks to Michael Porter and others, the idea of value based purchasing has been kicked around for a decade or longer as a way to change the US health care system. Some of its elements are contained in the purchaser driven movement that sparked interests in health saving accounts and high deductible insurance. But it is also found in concierge physician care, medical tourism, your out of pocket visit to the massage therapist or acupuncturist, the majority of orthodontic care, and the two bed unlicensed skilled nursing facility my family runs for two aging members of our clan, where the rates, outcomes and satisfaction (take that triple aim) perform far better than anything on the offer from the long-term care competitors in the area.

The idea of a valued based purchase is pretty simple. It involves a buyer-individual, aggregated purchaser or agent for either - that balances an equation of quality, access, and consumer satisfaction against price that drives a decision to make a purchase. It is of course at the heart of all market decisions and can be a powerful mover for improvement and efficient use of resources as it brings individual preferences into play, harnessing them to allocate the various inputs in the most harmonious ways.

Health care has been immune from much of this social and economic disciplining over the past sixth years or so. In effect we turned on the public and even private sources to buy health care and failed to put in place either a policy governance structure (what most other developed nation’s have in place) or efficient market mechanisms. Many people mistakenly believe that the highly protected, regulated, and sheltered health care world has been a competitive market. They are of course wrong; it has been like fishing in a barrel, or more aptly, a trough. So, no wonder that without public policy or private market controls, we buy a reasonably average health care system for about one-third more than any other nation. Which does not sound all that bad until you do the math and figure that is about $680 billion dollars that we waste every year.

But even this is the wrong argument for driving toward a value-based system of care services. The genius of the American economy is its exceptional inventiveness and entrepreneurial action, we abhor a problem that could be fixed faster, better, cheaper. The fact is, if we could radically move toward value driven innovations, we might even have some new things to sell the world. The Accountable Care Act is driving us toward this future, but the mechanisms are too often those of an old statist bureaucracy, not the fever pitch of a high tech start-up. As a society and economy, this is a race we have to win if we are to have a shot at a sustainable public budget, a better health care system for everyone and a just society.

Here are a few things everyone in health care leadership should think about.

First understand what value based purchasing means and how your part of the operation is in danger if it comes about. This stark analysis should scare just about everyone in the system because the gap or arbitrage between how it is done and how it could be done is enormous (about $680B worth). Once we fully understand what disintermediation is about, someone removing the middle-man, then there will be a loud and resounding chorus of those whistling by the graveyard, because most every part of the system of health care has spent the past half century justifying its unique position in the health care economy; very little of this rationale with anything that looks like consumer preference data.

Secondly, do not make the mistake of taking on the whole challenge at once; bring an improved value process to some part of the existing set of services that are offered or, even better, spin off something that you know has value because someone wants to purchase it. It will be important to make sure that value is demonstrated as close to the end customer as possible. And as this is an experiment, it will be essential to plan to assess what has been learned, how it can be applied to other problems, and shared throughout the organization. It is also the case that the experiments that start this change will not be for everyone nor should they be. If it really is a value we will need to segment the market more than we currently do.

Finally, do not worry about who is going to pay for this. I hear this sentiment a lot. “I would like to add more value, but someone will have to pay for it.” This is a serious misunderstanding of what a value based approach to care service is about. If you have really done the work to understand the customer needs wants and desires, which includes finding the customer, and creating a service that has value, then the customer will respond with a purchase and you do not even need an exotic evaluation, you just look at the sale.

This is a new way, a revolutionary way, to think about health care and how it is organized, engaged by consumers and financed. There is much to learn and much to change. But it is an exciting horizon for us all to move toward.