Rewarding value in healthcare

by Jason Helgerson

28 June 2017

Health systems around the world need to find a path to better outcomes that don’t break the bank.

Money.  There is never enough.  Never enough in healthcare, social care or even in our family budgets.  I sometimes think we humans are hard-wired to always feel a sense of scarcity.  In some ways, this helps motivate us to improve and succeed.  While scarcity can be the mother of ingenuity, it is also the father of stress and, unfortunately, suffering.

As an outside observer, it’s hard for me not to see the scarcity experienced in the NHS.  Healthcare spending hovers around 10% of GDP, which is less than some major European countries and much less than America.  I marvel at what is achieved in terms of population health across the UK given the funding scarcity.  You should all be proud of what you accomplish despite a relative lack of resources.

We also feel scarcity in the US, although it has a different cause.  After years of double digit growth in healthcare spending, taxpayers, business and consumers are finally no longer willing to pay the bills.  As a result, the healthcare system here is feeling stress like it has never felt before. If we don’t respond well, the direct result will be true human suffering.

What should be our response?  Do we simply ask providers to do more for less?  Attempt to stretch every dollar/pound a little further each year and squeeze out every little efficiency?  That strategy could work for a bit, but it won’t work in the long run.  Both Britain and America need to choose a different more revolutionary path -- and that path leads to value.

The problem in healthcare is that we don’t link payments to outcomes.  This is the case in both America and Britain.  We traditionally pay for units of service and assume that providers will do what is best for patients.  This approach to finance puts providers at the center of the system --not patients.  We shouldn’t be surprised when patient needs and interests are downplayed.

A system based on rewarding value puts the patient in the centre. Providers succeed or fail based on patient and population health outcomes.  While it is essential to get the incentives right, we must also get the mechanics right.  We must offer financial flexibility to providers so they can redesign the healthcare system to better meet patient needs.  We must allow providers to break free from the chains of unit-based finance.

Ultimately, I am suggesting that we grant providers greater flexibility in exchange for true accountability based on patient/population health outcomes.  Flexibility can and must take multiple forms: capitation, bundled payment, shared savings for example. In addition to changing payments, we must also encourage integration with providers that serve common patient populations working together and being held collectively accountable. 

Getting the financial incentives right is, frankly, the easy part.  What’s hard is getting providers to work together and to think and act differently. You can have the best healthcare finance system in the world, but if things don’t change at the point of care you won’t see better results and you may possibly see serious financial problems. 

The good news is the move to value is a global revolution.  Organisations in countries around the world – including some in the UK and US – are trying new and innovative approaches to improving health in the face of new financial incentives.  Many of these efforts have been studied and interventions can now be replicated.  One such example is Montefiore Health System here in New York. It figured out that it was cheaper to install apartment air conditioners than it was to pay for accident and emergency visits for patients with chronic obstructive pulmonary disease (COPD).  This is just one of many ways that the move to value in healthcare can be achieved in practical ways.

I believe we are at a critical crossroads in healthcare in both America and Britain.  Down one path is a slow erosion in quality and access by continuing our long-standing approach to healthcare finance.  The other path involves focusing on value, flexibility and accountability.  This alternative could lead to major improvement in outcomes for real people in nations around the world.  There are examples in both countries of health systems taking the right path and working to deliver services integrated around patients. But we need to build and expand on these and accelerate the adoption of value-based healthcare.

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