Value In Health Care- Can It Be Defined?

The marketing concept of "value" is being thrown around a lot in health care today. In the traditional sense, value is simply the difference between the real or perceived benefits one receives compared to the cost. When the cost exceeds the benefit- there is no value. It's really pretty simple.


Our health care system has had a tough time defining its "value proposition" in many areas. And, as we compare our health care costs with some of the basic statistics used to measure our results and the benefits we receive- we may determine we have a questionable value proposition indeed.

A new study by CVS Caremark determined that "reducing health care costs" is the number one measure of success for employers when facing the ongoing challenges of providing health care benefits to employees. It's not limiting the amount of increase (like we heard about a few weeks ago), it's reducing health care costs.

Employers are looking at all options to get a handle on the health care cost crisis. They are looking at ways to determine the value they receive from all of the dollars that they spend. And, it hasn't been an easy road because the concept of "value" while always implied, has never been a focal point of our current system.

The concept of "evidence-based benefit plans" or "value based benefits" are new methods health plans and employers are attempting to use to incent individuals to comply with care management plans or utilize the right providers. Quite simply, the concept is designed to reduce any financial barriers (through reduced copayments) for patients to access the care that has proven to be the most beneficial.

The University of Michigan initiated a study in 2006 to determine if the removal of financial barriers to patients would result in an uptick in adherence to care management plans and a more efficient use of resources for diabetic patients. This was really the first effort to measure the impact a change in the benefit structure could have on the utlization patterns, outcomes, costs, and the value gained for this high-risk population. While the results are not final, we would hope the study would help the health care industry to define the "value" these targeted services provide for the system and for the individual patient/consumer.

Dan Ariely (Professor of Behavioral Economics at MIT) wrote a fascinating book on how we (as individuals) make our decisions based upon sometimes irrational behavior. Yes, money has some influence to incent us in one way or another, but there are other "predictably irrational" influences at hand. As our health care system stuggles to determine its value, let's hope that the financial benefit designs are not the only methods we use to get people to do the right things.

It's about education, open communication, and transparency- when all three of these come together, we will have a better sense of value for our health care system- and for ourselves.

Promise or Politics?

It's amazing who you can bring together when you all have a common purpose. Our belief in the potential for collaboration in health care has been restored.

Today the strangest of bedfellows delivered a letter to President Obama endorsing a common position of "reducing the rate of growth in health care by 1.5% per year over the next 10 years". The American Medical Association, American Hospital Association, Pharmaceutical Research and Manufacturers of America, America's Health Insurance Plans, and the Service Employees International Union, all enemies at one time or another in the past, are now the best of friends and endorsing a common idea to help achieve health care reform in our country. The group received some great p.r. from many sides and are now positioned as "solid supporters of the health reform effort". Nobody wants to be the bad guy on this one.

Now, we don't want to be critical of a sincere effort. But, this one looks more like public relations and political positioning than a justified effort. But, we'll give it the benefit of the doubt for now. We'll look more at the details.

The organizations intend to achieve their goal by simplifying administrative costs, making hospitals more efficient, reducing hospitalizations, managing chronic diseases more effectively, and improving health-care information technology. Aren't these the things we should be doing anyway with the system we have? We really don't understand what's going to be different. Maybe its in the details and we're missing it.

While the potential savings being talked about is significant ($2 trillion over 10 years), we need to keep in mind that what is being proposed is only a reduction in the rate of increase that is expected- not any real reductions. Even optimistically, our health care expenses will increase to 18% of GDP by 2019 compared to the 16% we're at today. We don't understand how this is going to solve our issue. But, again, maybe its in the details and we're missing it.

But wait, there are no details- it's only a concept.

Don't get us wrong. These organizations are all going to be required to take part in any major reform efforts and it is a huge deal that they came together to write a letter like this in the first place. But, we have a hunch that (especially with the status of our economy) we're going to require more- much more than was presented today. Hopefully, it's a message that will remain intact when the tough decisions have to be made.

It was a great political move to get out in front on this one. But, as Len Nichols, Director of the New American Foundation is quoted as saying- "The heavy lifting is still on how to write down how to make it happen". And, it's when the heavy lifting starts, that the true colors start to show- especially in health care.

The organizations need to move beyond concept- and get to heavy lifting if they are going to stay out front. We've had enough of the concept stuff.