Continuing with excerpts from recent interviews with our experts, Marian Jennings and Nate Kaufman talked about moving from volume to value, and what that means to them.
Interviewer: What is Value?
Nate Kaufman: Value relates to the fact that the benefits being provided are worth the cost. The question that a healthcare provider needs to ask when they’re referring to value is, “How are we going to be sustainably differently better?” Or, “How are we going to be worth the cost?”
If healthcare services are not worth the cost or not sustainably differently better, they are all the same. And if they are all the same, they are just a commodity. All that matters is price.
There are four benefits in healthcare: appropriateness, outcomes, service and access. And then, of course, there’s cost. To be a high value provider, essentially one has to make sure that wherever a patient receives care, that care will be appropriate. The outcomes will be optimal. The service will be consistent and excellent, and most importantly, the patient can get in to see the provider when they need to see them. And that all this will be packaged in such a way that it will be done at the best possible cost. That’s a high value provider.
At this point, very few healthcare delivery systems have been able to organize themselves in such a way that they can present a high value delivery system to the market and differentiate themselves from others.
Value means different things to different components of the healthcare system. For example: for a purchaser of healthcare, two critical elements are appropriateness and outcomes. For the patient, who can’t judge appropriateness and outcomes, the primary area of value are service and, most importantly, access. Access drives patient choice in healthcare. Now, of course, cost is an important component, but for the most part, access is the primary driver of market share today when it comes to patient choice.
Marian Jennings: Value is a ratio or a relationship between quality as measured by the consumer compared to or divided by the cost as measured by the consumer. So why did I add that language, “by the consumer?” The consumer can be the patient, the consumer can be the insurance company or the consumer can be your physicians. As we move into the future, it will be increasingly important to focus not just on volume— that is, how many patients come through our system—but whether we can demonstrate a distinctive value proposition.
For patients, we actually know what matters to them. On the quality side, they define quality as number affordability timely access to services, clinical expertise, convenience and the ability to communicate with clinicians electronically (this will become increasingly important over time).
So, if we think about value from a consumer perspective, they are looking at affordability, as part of quality in the numerator, and then they’re looking at cost in the denominator as part of the ratio. So we can drive value up by offering more of the attributes they’re looking for or we can drive it up by reducing cost, which helps us both with the affordability question and with the overall ratio.
Interviewer: What are your thoughts about moving from volume to value?
Nate Kaufman: I don’t believe we are moving from volume to value, I think that is a gross misconception. I do believe value is important but I believe the reason it’s important is because value will drive volume, and volume will drive revenue income and market share. I think we will always be rewarded in some form or fashion by the volume of care we provide. But it is value that will drive that volume to our organizations and our providers.
Marian Jennings: When thinking about volume and value, there is a preconceived notion that more volume drives greater value. That can be the case, but it’s certainly not always the case . . . counting on scale to deliver value just because you’re bigger is not really objectively borne out. That doesn’t mean it can’t be borne out. It doesn’t mean that over time larger organizations can’t drive best practices in a way that actually improve value, but just thinking if we merge and get bigger, we will have more value to the people in our market is probably unrealistic.
The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.
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