What is "Value" in Healthcare?
“Value” in healthcare has become the source of a particular pattern of morbidity.
It’s the vague word that is a vogue word, fuzz at the extreme end of monotonous repetition, more conceptual duct tape holding the PowerPoints together than it is novel economic direction. Like the conjoined twins “digital” and “transformation” riding double on the slow-horse of meaning, it’s the vapor trail of virtue sold to make the sell consistent with The Strategy That Will Fix Healthcare..
It is less a vision for framing and formulating market innovation, but root cause for stagnation and strategic atrophy, as boring and unsurprising as “patient centricity."
Quoting Lionel Robbins of the London School of Economics, who in 1932 quipped this nugget: “We all talk about the same things, but we have not yet agreed what it is we are talking about.”
Two years ago, in what can arguably be described as an industry first at recognizing the need to resolve the ‘narrative problem’ in healthcare, Humana – a for-profit American health insurance company with revenue of $77 billion in 2020 -- convened some of the healthcare industry’s greatest minds to build a consensus on the definitions of oft-used but nebulous concepts such as ‘value-based care’ and ‘population health’.
There was just one problem: The experts couldn’t figure it out, either.
Although the participants apparently found some common ground on what “value-based payment” is, they couldn't agree when it came to “value-based care.”
The 18 panelists — which included representatives from Humana, the Robert Wood Johnson Foundation, the Geisinger Health System, the University of Pennsylvania and Centene Corporation (but notably did not include representatives from the pharmaceutical or medical device markets) — agreed, for instance, that value-based care should apply to both individuals and populations and would be determined by measuring cost.
But they were divided about whether ‘patient experiences’ should be highlighted, how to cohere markets on a standard for outcomes or whether there should be a duration factor in calculating value. “I was actually a little surprised,” Meredith Williams, M.D., market president for Humana based in Louisville, Kentucky, told FierceHealthcare at the time. “I thought there would be more consensus. It was a very revealing process to all involved.” (Read FierceHealthcare’s coverage of the conference here).
Mentions of 'Value-Based' Care on Earnings Calls. 2008-2020
Around the same time, Merck encountered a similar static drift working with Optum, part of United Healthcare, the largest health insurance company in the United States with revenue of $287 billion in 2021, on a project to define “outcomes that matter to patients” and then, presumably, advance shared business goals around improving said outcomes.
They collaborated on a “Learning Laboratory” to explore different outcomes-based risk-sharing agreements for drugs Merck was developing to prevent Alzheimer’s disease and clostridium difficile (C-diff) infection, an acute bacterial condition that can be treated in either inpatient or outpatient settings.
The narrative problem — the role of language itself — again surfaced as the obstacle:
“Throughout our work together [with Optum], we realized there were a variety of gaps between our languages, methods, and value drivers,” said Susan Shiff, Senior Vice President of Merck and head of the company’s Center for Observational and Real World (CORE) organization at the time. “Our work is not remotely close to done. But we’re closing in on the first — and, perhaps, most important — goal: mutual understanding.”
They published their struggle with ‘value alignment’ shortly afterward in Health Affairs, available here (Defining Value—The Foundation Of Outcomes-Based Risk-Sharing Agreements).
To examine this tension and encourage “light bulb moments” about how best to define value in a way that is, well, valuable, Advisory Board, acquired in 2017 by UnitedHealth Group and a private equity firm in a $2.58 billion deal, hosted its second biennial Cross-Industry Value Summit on November 7-8, 2021 (the first occurred in 2019, around the same time as Humana’s conference and Merck’s collaboration with Optum). The “exclusive gathering” convened 30 leaders from across the health care economy, including payers, providers, life sciences, tech, advocacy, and other thought leaders.
“The annual Cross-Industry Value Summit (affectionately known as CIVS) convenes leaders from across the health care industry for a series of candid, interactive discussions designed to unpack and examine what “medical value” means — and how that differs based on a stakeholder’s vantage point,” wrote a research analyst at the Advisory Board in a summary promoting the event for the company’s website.
“While most health care leaders agree that value is some version of benefit over cost, the details get complicated quickly. Are we talking about clinical or financial benefit? Cost to whom? Benefit for whom? Over what time horizon? The answers often depend on who you ask.”
All “value-based care models” are fundamentally “anti-inpatient,” says Sachin H. Jain, chief executive of the SCAN Group, in a recent Twitter post. “Done right, they deliver intensive outpatient care to obviate hospitalizations and deliver care in lower cost sites of service (i.e. the home). Done wrong they are about coding and utilization management.”
“This notion explains why so much so-called “value-based” care by health systems whose primary business is inpatient hospital care is so far from it. Just ask any hospital system “ACO” or “value-based” care leader how successful the system wants her/him to be.”
Thus proving the maxim: any large system is going to be operating most of the time in failure mode.
Healthcare is impaled on the twin horns of an economic dilemma: revenue and growth have been designed, and are now calcified, around administrative platforms bound within the context of care (and earnings) delivered in the clinical setting. We need a new grammar for “strategy”: our definitions no longer fit people’s lived experiences. Look no further than the American Hospital Association’s definition of “population health management” : “the process of improving clinical health outcomes of a defined group of individuals through improved care coordination and patient engagement supported by appropriate financial and care models.”
It’s the sound of one hand clapping. Missing from the AHA’s narrow vision are the words from which to reorient the economics of its market to enable “new financial models” positioned with an outcomes-first mindset: “caregiver” and “community” and “home”.
The difficulty of finding a new language for the business of healthcare….a non-fragmentary worldview….to encompass complex societal trade-offs, and to order them in a sensible and agreeable fashion, sits at the heart of the discursive war keeping healthcare “models” in the United States locked in misunderstanding and structural stalemate.
We are struggling to decide how to decide.
Solving the Breakthrough Problem
The definition of a “system” is anything that talks to itself.
It makes no sense to talk of “value in healthcare” or “building [new] integrated care systems” without simultaneously integrating the pharmaceutical and/or medical device markets into the design vision.
But yet we consistently deal in fragments.
To wit the 5 Critical Priorities for the U.S. Health Care System, an article in the December 2021 Harvard Business Review by Marc Harrison, president and CEO of Salt Lake City-based Intermountain Healthcare. It concludes with an aspiration that only exposes the meta-problem in healthcare: a sort of creeping sameness in our storylines:
“Without a faster shift to value-based care, the cost of health care in the United States will continue to rise. That is not sustainable for both provider institutions and patients. For many Americans, health care is already unaffordable and difficult to access. Those problem will only worsen if costs are not brought under control.
The pandemic has made the path that U.S. health care must take crystal clear. The question is whether provider organizations and private and public insurers not already on this path understand that it is the only way to realize a system that delivers better care — care that does a better job of keeping patients healthy — and is financially sound.”
We’ve normalized cliche.
There’s the illusion of imagining that there is a thing called “healthcare” that is separate from the pharmaceutical and medical device markets, which combined is around $2 trillion worldwide. It’s as if there’s some sort of partition between the two industry systems, a kind of thought that treats the components of health as inherently divided. The reality is that “healthcare” is a ‘nested market’ — everything has “value” in some way or another.
Writing in Health Affairs this week (see Value Assessment’s “Leaky Bucket” Problem Needs To Be Addressed), Kimberly Westrich and Robert W. Dubois of the National Pharmaceutical Council, struggle to square the ‘value alignment’ circle:
“Any discussion about how to allocate the value from such new therapies between society’s competing interests — in adequate returns to manufacturers to encourage future investment on one hand and in lower prices to ensure sustainable levels of spending by payers and patients on the other— means taking a step back and confronting fundamental [definitions] about value, value measurement, and the implications of “leakage” in value measurement.”
Better, I think, to understand “value” as a flow, not an end state.
“Market access innovation” follows the Amazon model of aggregation and progressive integration of markets: ‘brand-as-service’ business models and new industry ecosystems where ‘intrasystem goals’ come first.
For the pharmaceutical industry, this is new space of opportunity to lead with new system vision, to elevate health economics and outcomes research to a starring role, as a new science of synthesis enabling new economic thinking and new markets, a biological orientation to strategy (more like systems biology, the study of biological systems whose behavior cannot be reduced to the linear sum of their parts’ functions).
“Value creation” is never static or complete, but an unending process of movement and unfoldment, where opportunity runs in several directions at once. Said differently, “value” in healthcare (+ life sciences) is really about ‘value in use’ — value in motion — and the process to produce socially useful change.
It’s time for the invisible mind behind the invisible hand to start working with a wider frame.
New commercial logic starts by seeing healthcare + life sciences as a single organism, as one economic system where the ‘production of health’ (not “price” of a piece to health analyzed in isolation from its environment) is positioned at the conceptual center for ‘modern strategy’ powered by creative leadership: a different set of ideas, concepts, and statistics that aggregate actual people and things, real networks of production and reproduction.
More simply:
“Healthcare” needs new words to think new thoughts. Until we find them, the head-scratching continues.
🤘
/ jgs
John G. Singer is Executive Director of Blue Spoon Consulting, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry ecosystems.