A Simple and Transparent Value Index for Northern Virginia Hospitals

There is a lot of talk and discussion about the word “value” in healthcare today.  While the future of healthcare reform today is unclear, one thing that is certain: healthcare is expensive and there is a lot of variability in cost. We need to reduce costs, and do all we can to ensure that patients are able to obtain the best care at the lowest price.  Here in Northern Virginia, some groups are already working toward this goal. Ortho Virginia is participating in a bundled payment arrangement, Privia Medical Group is part of the Medicare Shared Savings Program, and Kaiser Permanente is a fully capitated model of care. Each is a major presence at Virginia Hospital Center and we think a big part of the reason is the value proposition that our Hospital provides. 

But how do we define value? I like to use a definition from Robert Nesse, M.D., the Senior Director of Health Care Payment Reform at the Mayo Clinic.  He defines value as:

What is interesting is that we can actually define and estimate these things and define value in Northern Virginia. We’ll start with how to measure each of the variables:

Quality: CMS Star Ratings—incorporates 57 various quality metrics into one overall rating.

Service: HCAHPS—the standard survey all patients are sent around the country, which measures a hospital’s level of service. For this purpose, we’ll use the percent of patients that rated a hospital either 9 or 10. 

Safety: Leapfrog Safety Grade—self- explanatory.

Cost Over Time: Getting consistent “cost over time” metrics are difficult, but we can use Virginia Health Information’s severity-adjusted cost-per-case to help us determine this. 

Here’s how Northern Virginia hospitals perform in these four areas:

Now let’s take it one step further though and calculate a value index. I used Dr. Nesse’s formula and multiplied the numerator by 100 to come up with an index that would fall between around 1 and 5. In addition, I used 100 point scales for the CMS Star Rating and for the Leapfrog Group Safety Grade.  So,  100 points for 5 stars or an “A”, 80 points for 4 stars or a “B,” and so on.  We’ve now calculated a value index for Northern Virginia Hospitals:

It’s amazing that top value hospitals provide as much as 80% more value to their patients than bottom performers. There can even be as much as 50% more value among hospitals within the same health system!

I hope healthcare consumers (both patients and companies) find this helpful.  Common wisdom says it’s difficult to quantify value in healthcare. But sometimes, it’s easier than we think!