What is value in healthcare?

Rethinking how to measure success for our healthcare systems

Last week, I gave a talk to members of the Leader’s Board, which brings together leaders from major healthcare systems across the U.S.  This meeting in particular focused on something called “value-based care,” a model which rewards providers for quality outcomes, patient experience, and cost efficiency rather than simply payments for services performed.[1]  This kind of care delivery system has been growing since the 2010s, spurred by new Medicare incentives sharing cost-savings between CMS and providers.  But to organize healthcare around value, we must wrestle with “What is value in healthcare?”

From an economic standpoint, value is simply the benefit you receive from a good or service.  The tricky part of this definition is that value varies by “you”- the preferences and priorities of the recipient, and healthcare has a wide variety of stakeholders.

From a patient’s perspective, is value a longer life expectancy?  Recently, attention has shifted from lifespan, the total number of years of life, towards healthspan- the number of years spent in good health.  High-value care should aim not just to increase how long we live, but how long we can do what we love and maintain independence.

Our mission- get rid of the red! As more Americans reach 100, how can we grow our healthspans at the same pace as our life expectancy?

In 1980, healthcare was 9 percent of GDP; by 2024, it has climbed to over 17 percent.[2] Reducing costs is another key driver of value, but what are all the costs?  From an economic perspective, costs are more than just hospital balance sheets.  Economists have invisible hands; we can also see ‘invisible’ costs! 

What are these ‘invisible’ costs?  Inefficient care creates unnecessary or wasteful spending.  Poor care coordination or low impact treatments both inflate costs and worsen health outcomes.  For example, a recent JAMA study estimated accountable care coordination, such as programs managing patients after emergency department visits, could save 29.6-38.2 billion to healthcare systems.  More efficient care prevents future acute emergencies and staves off chronic conditions, such as heart disease and diabetes, both in the top 10 causes of death in the U.S.[3]

Rising costs lead to rising prices, but prices can be invisible too. I’ve previously discussed healthcare’s failings in price transparency- the ability to view prices for services and shop for better prices.  Improving tranparency would cut costs, but also improve quality by aligning the true costs of care with its benefits. 

Another invisible price? Time.  Patients “pay” in time searching for providers, waiting for care, and in recovery.  Within healthcare systems, allocating providers’ time to high impact areas also improves value.  For example, intensive care units were so overwhelmed during COVID-19 that providers such as cardiologists had to be switched into ICU units.  While cardiologists are undeniably competent providers, they are trained to have the highest impact in their own domain.  Diverting of provider time partially contributed to increased heart disease mortality through delayed and cancelled appointments.[4]

Finally, invisible in accounting statements, but not to patients: healthcare is confusing!  “Health literacy” measures ability to read and understand prescriptions, relate lifestyle to health outcomes, or understand insurance and provider statements.  In the US map below, green represents the highest areas of health literacy, while red shows the lowest. The ability of patients to understand and thus direct their own care varies widely, even within states.

The Leader’s Board members are taking on these invisible costs. Programs such as nurse navigators direct patients towards more efficient care paths by scheduling follow-up primary care visits after emergency department care. These nurses and pharmacy tech also reach out to patients to maximize the impact of care already prescribed, preventing future complications and reducing confusion.  Finally, they use multidisciplinary teams including social and community health workers to improve the impact of provider’s time by matching medical problems to medical services but social problems with social services.

Value-based care isn’t just a shift in payment for health systems; it’s a fundamental rethinking of how to measure success in healthcare.  By confronting these ‘invisible’ but real, costs, these systems are imagining a more effective and efficient healthcare landscape and hope to redefine what it means to deliver truly valuable healthcare.

If you’re interested in creating a more preventive-care focused system, check out my series asking Why isn’t our current healthcare system creating health?

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[1] To understand the disadvantages of traditional payment systems, where payment only happens for services performed, check out how Medicare traditionally pays providers and How Insurance is like Costco.

[2] “National Health Expenditures; Aggregate and Per Capita Amounts, Annual Percent Change and Percent Distribution: Calendar Years 1960-2022.” National Health Expenditure Accounts (NHEA), Centers for Medicare & Medicaid Services, Table 1.

[3] Centers for Disease Control, National Center for Health Statistics, “Leading Causes of Death, 2022.”

[4] Wadhera, R, Shen, C, Gondi, S. et al. Cardiovascular Deaths During the COVID-19 Pandemic in the United States. JACC. 2021 Jan, 77 (2) 159–169.