Amit Kapoor, M.D.
Healthcare Value & Associated Costs
Excerpt from Kapoor’s Korner:
A series of blog posts by Dr. Kapoor about the latest trends/topics/viewpoints in Nephrology and healthcare by Dr. Amit Kapoor.
Although not a novel concept, recently the discussion in healthcare, either in a journal article, the nightly news, a medical conference, or even during hospital rounds, inevitably shifts toward the word “value”. With strong bipartisan approval, the US Centers for Medicare and Medicaid Services (CMS) has enacted the Medicare Access and CHIP Reauthorization Act of 2015 into law. This is a policy designed to achieve two endpoints: transform the way physicians deliver health services and reform payment to providers and health systems. The core premise is a model designed to shift payments from traditional fee for service to a financial risk-bearing coordinated care process. This incentivizes practitioners toward merit-based (MIPS) and alternative based payment models (APMS). The goal is improving the quality of care and reduce cost, in essence, provide value-based care.
Yet how do we define value? While in most service sectors, value for the consumer is easy to define, buying a t.v., a car, a house, etc. We desire the product that functions at its optimum capabilities for the longest duration at the lowest possible cost to us, the user.
In healthcare, quality, outcome, and cost, however, are not as transparent, with different interpretations to different stakeholders. Demand is inelastic. There is no mechanism to “shop for the best deal” or wait for a “better deal.” Costs are unknown until after services are provided and wrong choices can have dire consequences. As an example, if we define quality as reaching defined Hba1c levels for our diabetic patients (which may satisfy providers and insurers), but does that mean real value to the patient? To the consumer, value is defined as preventing vision loss (retinopathy) or numbness (neuropathy) and not suffering a stroke, a heart attack or kidney failure as a consequence of their diabetes. Value must be defined from the patient’s perspective. The focus must not be on process outcomes, such as lab data points, but functional outcomes. Care must be provided to the patient with several defined endpoints.
- How will care impact mortality?
- How will care impact quality of life?
- Will care be provided in a timely and safe manner?
- What method of care will have the least potential for setbacks?
- Will care be sustainable?
The Institute of Medicine defines six attributes need for patient-focused value care:
- Effective (satisfies my need)
- Patient-centered (can I the care I need)
- Timely (with technological advances-care can be had anywhere, anytime)
- Equitable (account for social, economic, demographic barriers and co-morbid conditions)
The second part of the equation deals with accurate costs in healthcare. Healthcare is currently 17.8 % of GDP, with a cost of $3.2 trillion, or $9,990 per person. Healthcare spending grew 5.8% in 2015, with continued increased expected. Traditional costs of care have been tied to charges for care provided. This has been the focus of cost containment, with reduced provider reimbursements. These are a result of directly measured processes in the supply chain, such as cost of medication prescribed, length of stay, medical supplies used, and direct labor costs. However, with the increase in out-of-pocket patient cost, through high deductible, HSA plans, higher premiums and co-pays, all costs must be accounted for, including, IT, administrative, corporate, and R&D. This must be done for the duration of the condition, not on an episodic, fragmented basis. By identifying each activity involved the care for a given disease state, and the cost and time involved, areas of waste and duplication can be identified. This will standardize care processes and eliminate unneeded tasks. The outcome of this, will be reduced cost for care given.
Therefore, when we define value, what we are aiming to achieve is less healthcare, better health and lower cost.