Value-Based Payment: The Rush is On!

The most opportune time to jump off a bandwagon is just before the next person jumping on tips it over. If the accelerating movement toward value-based payment (VBP) models in healthcare could be metaphorically thought of as a bandwagon, then its passenger weight increased dramatically this week with two major announcements.

First, on Monday HHS Secretary Slyvia Burwell announced that within four years half of all Medicare spending will be VPB oriented (e.g., bundled payments, ACOs, capitation models). Then yesterday several of the country’s largest healthcare systems and insurers announced the creation of a Health Care Transformation Task Force whose stated goal is to shift 75% of their business to VBP type contracts by 2020 (as in 5 years).

I have been an acknowledged student and disciple of Michael Porter’s work on value in healthcare and have written about that subject here in the past. Porter and colleague Elizabeth Teisberg wrote the seminal work, Redefining Healthcare, which buttresses much of the practical theory that has been espoused in support of VBP. In my study, however, I came to believe the underlying structural challenges of our current delivery system would take a great deal of time and effort to overcome before value could work the magic as intended. And so when I read these two announcements I had to wonder whether fools are rushing in where angels fear to tread.

In other words, it’s not the direction of the bandwagon I find concerning but the pace of acceleration. There is so much unknown and so much to be learned regarding the organizational dynamics of healthcare delivery that putting deadlines on the pace of that knowledge-building is pure folly. To illustrate, let’s just look at Porter’s strategic agenda for creating a value-based healthcare delivery system and consider each in context of what we are witnessing today.

1. Organize care into integrated patient units around patient medical conditions.
Porter has travelled the world lecturing and observing healthcare delivery systems in other countries. He provides examples of structural reorganization for patient conditions (e.g., the West German Headache Center) that have achieved substantial improvements in patient outcomes at lower cost. The concept isn’t entirely new (e.g., MD Anderson Cancer Center reorganized its outpatient care services in the early 90s under the auspices of an IPU), but still rather rare and so not very well understood.

2. Measure outcomes and cost for every patient.
Another way of saying this is be able to measure cost and quality/satisfaction at the patient level. This is without a doubt the most difficult and controversial aspect of Porter’s agenda.
In June of last year I wrote a post that addresses the inherent subjectivity of patient outcomes and its impact on the value equation. If this cannot be worked out in a manner and fashion that achieves broad understanding and acceptance across patients, providers and insurers – well, see bandwagon discussion above.

3. Reimburse through bundled prices for care cycles.
When Porter talks of bundling his focus is on tying the bundle definition to the value achieved on behalf of the patient – e.g., the patient’s experience, impact on family, lifestyle functionality, etc. What I hear about mostly are efforts to define, articulate and divide up processes and procedures related to a diagnosis and/or condition, put some probability bookends around that understanding and then compare projected average payment to cost. The ability of value to be successful as a catalyst for aligning incentives has already been lost because the focus is on process – not the patient.

4. Integrate care delivery across separate facilities
The many challenges of integrated clinical care notwithstanding, improved performance through specialization is really the key concept here. Research has shown that volume in a particular medical condition is positively correlated with patient value. This runs counter to the notion that all healthcare is local. While every day we culturally become more comfortable with this notion – e.g., international medical tourism – there are still substantial social and political obstacles to overcome.

5. Expand areas of excellence across geography
We are seeing systems like the Cleveland Clinic, Geisinger and the Mayo Clinic exporting their knowledge and expertise across geographies. But the expansion has been primarily revenue-driven (relatively more patients with the financial ability to afford services). If value is to be the driver of alignment, then eventually those organizations will also have to demonstrate how knowledge exporting not only improves outcomes at the local level but also lowers costs (much harder to achieve).

6. Build an enabling information technology platform
Hoo boy, right? The challenge here, of course as I have written before, is properly utilizing IT to facilitate and enhance the productive value of human processes. If the underlying organizational structure and processes aren’t in alignment with the goals and objectives manifested through the five agenda items above, then all we will be doing is automating a system that we said we wanted to change.

I realize some of these concepts are above my pay grade, and I continue to believe the value concept – Patient Outcomes/Cost – is the key fundamental principle of structural system reorganization. But when I step back and compare the payment and care delivery models being pursued in the name of “value” against the strategic agenda that Porter laid out I worry greatly that we are not willing or prepared to take the time or effort to understand and address fundamental areas of concern.

It’s like building a pyramid. The more time you take to create a solid and expansive foundation, the higher you will ultimately be able to build. As much as I have supported the value driving structural change paradigm I would encourage all industry stakeholders and participants to be both pragmatic and cautious in advancing on VBP models. Take the time to observe, learn and adjust – and don’t let your timeline be driven by outside sources with no vested interest in your organization – or your patients!

  ~ Sparky

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