Value: a practical test

by Mark Orchard

07 June 2017

How can the NHS harness the power of clinicians and accountants to deliver value?

The general election has triggered a welcome debate about the appropriate level of funding for health and social care going forward. Inevitably this discussion has centred around the immediate future – what funding the different parties would make available over the lifetime of the next Parliament. But increasingly we need to lift our eyes to the horizon and start laying the foundations for the next 30 years.

Deciding the right level of funding is only part of the challenge. Just as important is understanding how demand will change in coming years and what levels of efficiency and productivity improvement the service can realistically be expected to achieve.

Most in the finance community would suggest the NHS is getting closer to exhausting much of the potential for traditional incremental efficiency improvements – the idea that we can do the same things we are currently doing for less money. Instead, delivering sustainable services will increasingly require new ways of working and different pathways of care. So for example, supporting patients using intelligent technology or in the community – providing an improved service based on risk management, and avoiding (often expensive) acute hospital admissions downstream.

Given the current financial context, it is vital that the NHS is not only as efficient as possible but is also visibly seen to be so – how else can it ask for more taxpayer funding? This needs forensic understanding of current processes, being able to easily demonstrate beyond public doubt why things are done the way they are, and eliminating unwarranted variation in practice.

There is a growing consensus around managing healthcare on the basis of delivering value. So not delivering more or better care regardless of cost. And not managing cost without any regard for the impact on clinical care. But instead making decisions that deliver better value, measured both in terms of quality and cost.

The theory of value-based management – underpinned by work from professors Michael Porter and Robert Kaplan at Harvard Business School – is coherent and hard to argue against. But the real challenge comes with putting it into practice.

That’s exactly what the HFMA Healthcare Costing for Value Institute set out to do with a value challenge pilot which was published in May 2017. The work – involving three acute trusts – exposed the significant challenges in moving beyond the value theory. But ultimately it also demonstrated that it is possible to link costs to outcome data in a clinically meaningful way.

The ‘value equation’ at the heart of value-based management (that is, value = outcomes/cost) gives us two challenges. First we need to be able to define and compare outcomes. That means identifying the outcomes that really matter to patients, in terms of clinical effectiveness, patient experience and safety. These outcomes also need to be collected in a consistent way. Second we need to ensure that costs are accurately calculated for the services involved.

At the moment we fall short of these two basics, but that mustn’t put us off.

There is some good work being undertaken internationally to establish agreed sets of outcomes for different conditions. A number of NHS bodies have started to adopt some of the outcome sets developed by the International Consortium for Health Outcomes Measurement as key metrics for collection.

But until such time that agreed and consistently-defined outcome data is routinely collected, making comparisons across organisational boundaries or even pathways within a single organisation, will be challenging. This was certainly the case for the pilot.

Cost data also remains an issue. We found inconsistent approaches across the three trusts – for example in the way they allocated theatre costs to patients. The Costing Transformation Programme is already addressing much of this inconsistency in costing methodology. There has been good progress, but we are not there yet and we are further away in the vital areas of community and mental health services.

Despite these challenges, the pilot came back with a very clear message that this type of value analysis is both do-able and worthwhile.

It is not simple. Getting the robust data foundations in place will not happen overnight. It will be time consuming and may need some investment. But the act of clinical and financial colleagues working more closely together will bring benefits even while these foundations are being established.

The eventual goal of a deep understanding of the links between outcomes and costs, and using this information to refine and transform patient pathways, must be worth the effort. One thing is certain, if we don’t start the journey and commit to it properly, we will never get there.

Mark Orchard is speaking at the NHS Confederation Conference on Thursday 15 June.