Continuing the series on the PCLC Value Chain strategy [ click here for the first post in the series ], this post focuses on a second clinical process in need of reform, that is, the transformation to "value-based competition."
Current Competition Models are Misdirected Healthcare market forces in America over the past decade have transitioned from managed care and capitation to integrated delivery (integration of health insurance with provider systems) to a vision in which providers compete to improve care quality and control costs, and consumers choose the best providers.
There is now debate on whether competition should be redirected by:
Redirecting Competition Redirecting competition in this way focuses on delivering better outcomes and reducing costs. Methods offered as ingredients for changing the current system of competition include:
New Care Delivery Models There several care delivery models care, which focus on the establishment of collaborative, multidisciplinary teams of providers who deliver more coordinated care to their patients. These models include:
Value-Based Competition The cornerstone of value-based competition is for providers who demonstrate better results to gain competitive advantage for higher profits/income. That is, clinicians whose patients remain healthier longer, recover more quickly, and avoid complications--and who achieve these positive outcomes at a least cost--would receive more referrals, a higher payment rate, and/or other financial rewards.
Let me first define what I mean by "value." Value is measured by dividing the quality of care delivered by its cost, i.e., V = Q / C:
There is already some movement in this direction. For example:
"Seeing low fees for family doctors as a weak link in the nation's health care system, some big employers and health insurers are seeking new ways to pay doctors to reward high-quality medical care. An influential medical standards group plans to present a new model today [11/7/07] for helping employers and insurers to identify the best primary care doctors and to steer patients their way. Those doctors, in turn, would be paid for more services than are currently reimbursed under typical health plan payments for office visits.A related model promoting value-based competition on results involves having providers form "integrated practice units" (IPUs) that pull together the talent and facilities required to deliver coordinated care over the entire care cycle (i.e., each episode of care) for each patient. These IPUs would include all providers treating a patient and all services delivered by these teams, from diagnosis to treatment to rehabilitation and long term management, and even prevention. The IPUs focus on particular health condition for which they have expertise enabling them to demonstrate superb clinical results and efficiencies. Both risk-adjusted outcomes and costs would be measured over the full cycle of care; not for discrete interventions or procedures. Teams who have better outcomes at lower costs, i.e., deliver greater value, have a competitive advantage and receive more referrals, as well as financial incentives. These comparisons would be made at regional, national, and even world level, not only locally within their own healthcare system; patients would be given incentives to travel to the best providers. Successful IPUs would, therefore, gain ever greater experience treating particular conditions and would develop ever greater expertise and efficiencies, thereby continually improving the quality and lowering the cost of care delivered.
While coordinating care within multidisciplinary teams and rewarding cost-effective care are critical to improving our healthcare system, the IPU model has several shortcomings, including:
For reasons such as these, I suggest that large, multi-specialty group practices (i.e., the integrated delivery and selective diversification systems described above) are better able than IPUs to provide high-value coordinated care to the average patients with multiple problems. And they should include patient-centered medical homes, which I discussed in my previous post.Furthermore, we must focus on defining better measures of care value, which should go well beyond the quality metrics used today that are predominantly "process measures," not measures of clinical outcome (the results of care). For more about this issue, see this post.
In my next post, I examine how to transform current "pay for performance" into "pay for value" models that reward providers and insurers who offer high-value to patients/consumers.