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National Healthcare Innovation Summit Shines Spotlight on the Value Equation

May 15, 2014

The first of the two-day National Healthcare Innovation Summit began and ended trying to answer one question: What constitutes value? Morning keynote speaker Ian Morrison boiled it down to this equation:

Value = (Cost + Quality + Security)/Cost

However, afternoon speakers struggled to limit the discussion to these variables, wanting to include many others, such as the ability of a health system to pay for innovation, the need to sustain continued innovation, underlying risk of a patient population, health outcomes, and total costs of overall care.

Panel moderator Cliff Goodman, Lewin Group, focused on the delivery system—payer, provider, employer, and the biopharmaceutical industry— in a discussion of what variables must be included in this equation. Cost, many panelists agreed, seemed unavoidable.

Dolores Mitchell of the Group Insurance Commission of the Commonwealth of Massachusetts noted that in an era of shrinking healthcare budgets “costs counts.” Representing employers, Eric Parmenter, Evolent Health, stated that “cost is the biggest driver of why employers care about value.”

It isn’t necessarily the cost of an episode of care that matters, however, but the cost of care for an employer’s entire population.  Quality was also held as a common element of value among panelists. But Daniel Nigrin, Boston Children’s Hospital, was quick to point out that quality measures for adult care only scratch the surface of sophistication in relating the care delivered by one provider to another and comparing care between institutions. Unfortunately, quality measures for pediatric care are even further behind.

BIO’s head of health policy, Sara Radcliffe, raised an even more fundamental aspect of value. Incentives to innovate underscore the value judgment of innovation itself, and the ability to seek adequate reimbursement--e.g., for a cure for a serious disease that works quickly for most patients and with fewer side-effects that other available treatments—will drive future investment in the biopharmaceutical industry and more specifically, research and development in unmet medical needs.

The current system sets up a paradox for curative therapies and those that target small patient populations, like treatments for rare diseases and personalized medicine therapies.

As Parmenter described, payers with high-turnover and younger patients in their insured populations may measure value over shorter time frames (e.g., 6 months to 1 year) than payers with lower turnover and older patients.

In the former scenario, the payer (in Parmenter’s case, the employer) does not necessarily benefit from the downstream benefits of a therapy that impacts longer-term costs like the need for surgical intervention or hospitalization. This may affect their view of value. 

Similarly, incentives that drive where patients are treated can impact how the value of certain services is assessed. For example, all panelists agreed with the need to sustain high-quality children’s hospitals in communities and with the idea that these hospitals are likely to incur higher costs because of the complexity of the cases they treat.

However, Mitchell wondered whether such facilities should be treating broken arms and influenza cases that could be treated at lower intensity facilities (e.g., prompt care, community health clinics) even if these are high-quality services. In fact, matching patients with the appropriate site of care is just the type of innovation in healthcare delivery that employer clients of Parmenter’s Evolent Health are employing to decrease overall costs and increasing value.

But if we cannot agree on the variables that constitute value in innovation, how will we solve the value equation? Dr. Goodman suggested that we can start with identifying some of the under-realized sources of value that already exist in the health care system. When pressed, each panelist contributed to a growing list of underutilized sources of value: biomarkers, coordination, patient reporting, and leadership in each stakeholder group all made the list.

While panelists did not come to consensus on what variables must be included in an assessment of value, it was clear that a simple equation is definitely not enough.