What is value-based healthcare? Two experts explain

"Let's get healthcare to focus on results and not on activities. It's as simple as that really."

Meni Styliadou is explaining the concept of value-based healthcare, which means delivering the best health outcomes to patients in a financially sustainable way.

Styliadou is the founder & co-lead of the Health Outcomes Observatory and Vice-President of Health Data Partnerships, Data Science Institute, at pharmaceuticals company Takeda.

She joined Catherine MacLean, Chief Value Medical Officer at the Hospital for Special Surgery in New York, to speak to the Radio Davos podcast about how to accelerate value-based healthcare systems globally.

In 2019, the World Economic Forum launched the Global Coalition for Value in Healthcare at the Annual Meeting in Davos. It exists as a global platform to share learnings, develop best practices and guide the development of value-based health system transformation.

As healthcare systems around the world struggle to meet patient needs with limited funds, Styliadou and MacLean explain – in this edited version of their interview – where value-based healthcare is working well and what needs to happen to accelerate it.

MacLean: People make value-based decisions every single day. When you buy gasoline or petrol for your car, when you buy something at the grocery store, you're making value-based decisions and we should be doing the same thing in healthcare.

It's more difficult from a consumer standpoint because it's hard to understand the quality. I think we're getting better at being more transparent about the quality of one provider, one hospital versus another, one doctor versus another, for example. In the US, there's now legislation that says we should be transparent about the costs.

Value-based healthcare is focused on improving health in the long term. You can't just think about the cost of the procedure, you need to think about the cost of the episode. For example, the hospital that's a little bit more expensive maybe has a very low readmission rate.

We've done studies looking at some of the very complex procedures that we do and have demonstrated a $40,000 difference in one-year episode costs. There's also a much lower use of emergency rooms, and lower use of readmissions for other reasons.

Quality is very tightly related to cost.

Styliadou: If we were to live in a world of value-based healthcare, a patient would never have to ask themselves: 'Was that needed? Was this doctor really interested in giving me the best possible care or did they just want more revenue from another treatment?'

In some countries, healthcare professionals are paid on the basis of the services they provide, the 'fee-for-service' model, which is very prevalent in the US and several European countries.

In other countries, they follow the NHS model of the UK, where the doctors are not being paid because of the service they provide, but they have a fixed salary. In that case, the patients worry: 'Will they have any time for me because they have no incentives to see me at all?'

In an outcome-based world, the patient would feel more like we feel in other parts of society, as a customer who knows that the service providers' incentives are aligned to patients' incentives.

It's an alignment of incentives between healthcare providers, healthcare systems and patients' needs.

On a large scale, the OECD says we spend 20% of our healthcare costs on unnecessary interventions. But there's also the cost on the individual. If you have difficulty getting access to the interventions or the doctors you need, your overall outcomes in healthcare are not optimal.

MacLean: If you have a complication, you come back to the hospital, and depending on the payment model, chances are the hospital is going to charge you more money for that complication.

Whereas in a value-based type of a payment model, there's an amount of money that gets paid that's going to cover that complication. So there are incentives for providers to think more holistically about the care that the patient has.

MacLean: The CMS, the Centers for Medicare & Medicaid Services, which pays for Medicare in the US, has a number of different value-based programmes that it's testing out. We participated in one called CJR, Comprehensive Care for Joint Replacement.

We were incented to have a fixed price over a 90-day episode. During that episode, at the end of the day, if the patient was less expensive than that target price, we'd get the money back. If the patient was more expensive, we'd have to pay CMS the money back.

The money we got back, we could put into different programmes, such as virtual physical therapy. We had higher patient satisfaction, better outcomes and a lower cost of care. We were able to use the money in a different, more effective way, that was much more patient-centred.

MacLean: A big challenge is the payment model. And there's an administrative cost to track the patient across that entire episode of care.

I think the the health system worldwide is fragmented. If you think about the patient getting a hip or knee replacement, you've got different people doing their part. The surgeon is in the operating room, but after the patient leaves, it's really not the surgeon's responsibility. They are the captain of that ship and they want the best outcomes, but they're not down in the weeds on how exactly the physical therapy is delivered, for example.

If you've got a system in place, you're thinking about all these pieces. In our programme, we put together a whole health optimization programme before the patient has surgery. We looked at the data and saw the things patients get readmitted for.

If their diabetes isn't under perfect control, we get it under perfect control. Because there's a higher risk of infections if blood sugars are not under control, for example.

It's taking that holistic approach. But there is a cost to manage that whole programme and I think our payment systems are not currently set up to do that.

Styliadou: It's huge change of the system and the way hospitals operate, the way healthcare professionals are being rewarded.

These very big changes tend to happen only when governments decide to do it – and governments decide to do these big changes when there is a big opportunity or a big threat of some sort. In that case, we may actually be reaching that tipping point because, as a society, we are seeing that we are ageing, the healthcare expenditure continues rising, and as a society, we can't quite afford the same type of healthcare.

Such a big change often requires some type of crisis, or some type of huge innovation. In the case of healthcare, I actually believe that we have a bit of both.

The crisis is emerging everywhere. On the other hand, we also have the technology. Innovation will come through digital technologies. So a lot of the things that we couldn't do earlier, now we can do them. We can actually monitor, for example, the patient outcomes through digital means.

MacLean: It's something that people across the world are looking at. As part of the World Economic Forum's Global Coalition that we participate in, I've had the opportunity to speak with colleagues across the world. In Europe in particular, there's a great interest in value-based care.

Styliadou: One way is to talk to governments, but that does not always work.

The patients, however, have no say in all this. We are very, very passive in the healthcare system. So what if we use these digital technologies to give patients the tools to start measuring their outcomes, but in a way that will be listened to?

It will only be listened to if it's standardized. If you write 'I'm very tired', it doesn't mean anything to a scientist. But if you say that I have a level of fatigue that doesn't allow me to do my daily shopping or get out of my house, and it's being measured, it means something to a scientist.

If we give patients digital tools to start measuring outcomes in a standardized way, this creates a common language between patients and physicians, but it also creates transparency of outcomes and gives the patients the possibility to actually measure what they can report - the patient-reported outcomes.

But this also gives them the possibility to see when it works, when it doesn't, where it works better, and where it works least well.

To make this work, you need to work with the physicians and doctors. We started a consortium three years ago with a number of top academic hospitals across Europe. I'm very pleased to say we are now implementing this proposal. These hospitals are now utilizing these patient-reported outcomes in their communications with the patients in Germany, Austria, Netherlands and Spain.

There's more and more interest, for example, in Germany with other hospitals to engage in this patient-centred way of communicating.

Leveraging digital solutions here is really, really important. There are a lot of technology solutions that, if appropriately adjusted, can really help create this patient-generated data that can help the conversation.