Next Things First

“Value is the watchword in today’s economy, and health care cannot be the exception.” – Hal Andrews, CEO of Data Advantage

Back in December, we featured a guest post by Hal, where he wrote:

VBP [value-based purchasing], in some form, is headed to a hospital near you. Hospitals have always ultimately adapted to changes in the financing of healthcare, but usually reluctantly and slowly. Value can, and will, be defined for healthcare, and CMS is leading the charge. History suggests that private payers will not be far behind. If you don’t know your value proposition today in comparison to your peers, time is not on your side. If you don’t join the discussion of how value should be defined, others will fill that void.

That post continues to see quite a bit of traffic. … Google searches for “value-based purchasing” remain high. And the information available on value of care also continues to build: According to the latest edition of the Hospital Value Index™, a study that looks at quality, affordability and efficiency, and patient satisfaction at more than 3,000 hospitals, the value of care offered to hospital patients can vary by as much as 40 percent across the United States. (Data Advantage developed the Hospital Value Index™.)

Just a couple of the study findings:

• The median Hospital Value Index™ score declined more than 8.5 percent since June 2008.

• Hospitals in the Northeast (also known as CMS Region I) have hospital value scores some 40 percent better than those in the Southwest (CMS Region IX). The sharp contrast between Regions highlights the complexity of measuring value. For example, some hospitals provide similar quality at a lower cost, while others provide higher quality at a similar cost.

More here (PDF).

In the announcement, Hal noted: “We found that the delivery of high value care is widely divergent across the country, among regions, and even among markets. Measuring value in healthcare is more complex than measuring solely quality or cost and represents a significant challenge for every stakeholder who wants to improve healthcare.” We talked with Hal to get a little more perspective on what all this means.

1) Explain to someone who doesn’t know anything about how health care works (say, someone who just goes to the doctor when he gets sick) why your findings are important?

In some ways, consumers and employers have operated under the assumption that “priceless quality” in health care was OK. As consumers increasingly become responsible for shouldering more of the cost of healthcare, we believe that value will become as important in health care as it is in other buying decisions.

Obviously, for matters of life and death, a value analysis will place more emphasis on quality than price; at the same time, for basic health care, like blood tests or X-rays, we believe that understanding the relationship between quality, price (what is charged), cost (what is paid) and patient satisfaction will become more important.

2) I’m a little confused. The data shows that quality scores “significantly” declined since June 2008, but “patient safety, patient satisfaction, and affordability and efficiency scores showed improvement across virtually all hospitals.” How does that work?

The Index is a composite number that moves depending on the number and weight of variables. The most recent Index included information about mortality that was not available in the first Index, and including mortality in our calculation of quality offset gains in other elements of quality.

3) How can hospitals, and health care in general, take this data and use it to spur innovation in care? Given the news that came out recently about 50 percent of hospitals being unprofitable in 3Q 2008, there’s little cash on hand to pay for staff or facility improvements or IT or anything. Give one example of what a hospital CEO might do to improve her hospital’s value rating, now that she’s seen this variation in value.

Any unprofitable business should perform an internal and external analysis of its performance. Benchmarking is the starting point in this analysis – a hospital should analyze what service lines are unprofitable (internal) and then compare that to its peer group (external) to understand where the opportunities for improvement are. In anticipation of CMS’s proposed Value-Based Purchasing, every hospital should have a clear understanding of how it compares to the benchmarks that CMS will use.

4) How does all this fit in with the current political landscape, with the idea of larger health care reform in general?

CMS first proposed Value-Based Purchasing in the fall of 2007, at the peak of the stock market. Even then, it was clear that “priceless quality” was not sustainable. In the current economic environment in which value is the watchword, healthcare can no longer be the exception.

5) Will having this kind of information at their fingertips drive people to, well, drive to other areas of the country to get care?

We have found wide variance in value across the country, within regions, and within individual markets. Value is different to everyone, and we would hope that people would use the information to make decisions that fit their own personal needs.

Posted by CharlotteGee