HWF’s Steve Gardner speaks to Simon Swift, Managing Director of Methods Analytics, about developing an outcomes-based system
Value-based healthcare, at its most basic definition, centres on paying for outcomes, the value delivered as opposed to paying for activity. At present, most of the health systems around the world operate on an activity-based model – systems are providers which respond when a demand arises, and it presents itself to them; but this cultivates some poor attitudes.
“What such systems drive is a behaviour within provider organisations to increase activity and decrease cost, which often isn’t the most beneficial for the patient,” says Simon.
However, payment within a value-based system operates entirely differently. Rather than the focus being on the quantity of care which can be provided efficiently, the focus rests on delivering the value to the patient and system.
Say for instance, a provider wants to pay for an operation such as a hip replacement, instead of the focus being on minimising the cost, and ensuring the activity is delivered, a value-based payer model incentivises the achievement of high-quality care through the promise of reimbursement for a successful and high quality outcome.
“It could be a binary model, such as: we will only pay if readmission rate is below this percentage, one year infection rate is below that percentage, patient satisfaction is above that score, etc.,” says Simon.
“What is more likely is a base fee will be paid for treatment, and then if you achieve these outcome thresholds, there’s a kicker in the contract. What you’re doing is you’re incentivising increase in value by defining what value means and building it into contractual mechanisms.”
Problems faced by value-based models
The issues with value-based healthcare are, however, deep-rooted. Over the years there has been much hyperbole and noise thrown around the term, but as we are yet to see large examples of value based healthcare in use, so can it actually work in practice? Or, is it simply a good idea which cannot be instilled in practice?
The main problem, Simon states, lies in one key aspect of all business – trust.
“What makes a value-based contract successful is that the payer has to believe in and trust that the data they are being presented by the provider is meaningful and measured reliably. The providers need to be able to surface that data and share enough of it with the payer, so that trust is developed,” says Simon.
“We have worked to design a model which enables trust, because if you can get a provider and a payer to agree on the same principles of value and the define outcomes, the rest of it is simply about ensuring that the connections between the two are as strong as possible.”
With a transparent information model sitting between the payer and the provider for a value-based outcome, both parties in the agreement can rest assured that firstly, they aren’t being misled about the quality of care, and secondly, they are able to achieve the targets which are being set to achieve the required standard of care.
“It’s really quite simple at the base level. The payer states their outcome goals for the work – what they want to incentivise, what they want the outcome to be for the patient or cohort – and obviously how much they will pay. The provider then presents their plan for fulfillment, and we help them to understand what data to measure and what thresholds to set,” says Simon.
“The way we’ve done this is as an escrow service. We receive, and work on, the raw data that is generated by the provider. As a trusted third party, we implement the maths that produces the contract values, the KPIs, the threshold metrics, and we surface enough of the data to the payer that protects governance while ensuring trust and, of course, the provider can see all the data as it is their data.”
Value based healthcare in practice
Obviously, one of the questions which springs to mind with this model again rests on payment. For instance, if a provider is treating a long-term condition where impact may take months or years, how do you set the payment if the targets are less visible?
Simon tells us that in order for this to be remedied, they have been working towards a modification of the model used by the Accountable Care Organisations within the US.
“Here in the UK, a payer is effectively given ownership of the health of a group of people, normally a geography; but effectively they are given the ownership of the health of a group of people, and they are given the budget to spend on services.
“But, the way I’ve seen this work in America is they give the provider the budget and outcome targets, and if it costs them more than that budget to deliver the outcomes, that’s tough – but if it costs them less, they own the upside. So, they’re incentivised to improve the health of that group.”
However, it’s not quite as simple as that. To make this system work, organisations have to ensure that there’s lots of detail in the definition and measurement of outcomes, what they mean by the health of such groups, and make sure it is done carefully.
Yet, this is not the only model for a value-based provision of healthcare.
“To look at another way to do it, which is probably more likely to gain traction, let’s use an example,” Simon explains. “Say we want to instill this model for a group of people with COPD – a long term condition. Firstly, we need to do some underlying baseline assessments. How many are there? What does their care currently cost? What are their current health outcomes?
“Then, we can build some prediction into that. What is the course of the condition going to be over the next one year, three years, five years? From that, what do we think it’s going to cost for this group over the next five years? And what do we think of the outcomes that are going to be achieved? Then you can put in place a contract to say ‘for this group of people, we will pay this much money as a baseline, a retainer to deliver the service might be paid up front, and then we will pay this much more if the outcomes expected are exceeded.’”
“On top of that, you can build in a number of additional higher level outcomes thresholds over time, which increase or decrease the value of the contract, they can be incentives or penalties. I tend to believe in a model based on incentives, but that’s between the provider and the payer.”
It’s a big leap to make the transition, but as we have seen recently, healthcare has to change with the times. The next challenge is to find a way to deliver better health within large but ultimately finite budgets, and value-based healthcare could well be the way forward.
Contact: simon.swift@methods.co.uk