Value in Healthcare: The Danger of a Narrow Definition of Value

One of the World Economic Forum projects is called Value in Healthcare, part of the Forum’s Shaping the Future of Health and Healthcare initiative. It notes, “many informed observers doubt that society is getting the full value of the annual USD 6.5 trillion spent worldwide on healthcare” and adds that, “it is estimated that 30–50% of this spend is “wasted”” and optimisation is, “prevented by the misalignment of incentives, interests, strategies and behaviours of parties engaged in healthcare delivery”. So, you will already have a sense of what the Forum’s project is focusing on, waste reduction and performance optimisation.

It uses the term Value-Based Health Care (VBHC), which it defines as “delivering the best health outcomes for a given cost”. It talks of “dysfunction”, “disparities in the quality of care delivered”, “unsustainable costs”, “patient and physician frustration” and an “increasingly complicated system” as some of the problems that VBHC can fix. But notes, “despite the huge potential of VBHC, implementation remains in its infancy and the debate on the topic is highly fragmented”.

The project is therefore seeking to, “overcome multiple competing definitions”, develop “a comprehensive and a widely accepted framework” for joint action and establish “a platform for coordination on major policy issues”. This all sounds very sensible, but is it? It really depends on how you define value, and how you answer the question value for who?

As part of the project an Insight Report on Value in Healthcare was produced in association with Boston Consulting Group (BCG) and published in January 2018. It is subtitled, “Mobilizing cooperation for health system transformation”. There is much to commend in the report, and it does answer the question value for who, stating the focus is “better value to patients”. But the statement needs to be questioned as I will explain.

In her forward to the report Cheryl Martin, a member of the World Economic Forum (WEF) board explains that the objective of the project is “the recalibration of global healthcare systems towards value — that is, delivering outcomes that matter to patients at a sustainable cost”. And the “sustainable cost” part of that quote suggests tax payers, not only patients, are among the stakeholders being considered as beneficiaries of value. This broader consideration would be sensible, and I will argue the broadening out should extend to other stakeholders including those working in the profession, the professional bodies, the families and employers of patients and society as a whole. They all need to be considered worthy recipients of “better value”.

In many ways the report raises more questions than it answers. Whilst few would argue with the goal of “better value to patients”, improved “patient outcomes” and the need for “sustainable health systems”, is it not necessary to define what these goals mean from the perspective of the patient, and that of each other stakeholders? I’m not suggesting that the process will be easy. It will be very hard. But it seems like the only way to ensure the whole can be designed as a congruent and collaborative value creation focused system.

My other concern with the project, having read the reports and other publications, is that the only “value” the initiative seems to be focusing on is financial — “value for money” — and this would not surprise me since it was Michael Porter introduced the term Value-Based Healthcare in his book “A Strategy for Health Care Reform — Toward a Value-Based System” (July 2009). Like most economists he defines value narrowly in material and financial terms. A measure for value is likely to be something like cost per patient outcome (In one presentation he compares the cost of a total knee replacement at various surgeries and medical centres in regions of the US).

This enables costs comparisons that facilitate competition between providers of procedures in a market for healthcare services. And it is competition in a free market that he believes will deliver the best outcomes. But this is debatable, and even he admits the problems of the American healthcare system are far greater than those in Sweden, for example.

There is nothing wrong in measuring value for money, provided we do not pretend it is the best measure of a patient-centred approach. It is valuable as an approach to satisfying the information needs of the management of a provider (private or public), a private patient, their insurance provider, the tax payer etc. But a patient is interested in the best health outcome, not necessarily the best value for money outcome.

I would therefore question whether Values-Based Healthcare is “patient-centred” in the sense that is inferred. It is not focused on what patients really value, nor does it account for a broader definition of value, or value from the perspective a wider group of stakeholders. That said, there is no reason it could not be expanded to include a broader definition. Doing so would re-define how value is measured. And such accounting would open our eyes to the true value of healthcare. The data would also provide evidence to support the more important kinds of transformation in provision of healthcare that are required if we are to establish a truly value-based and patient-centred healthcare system. One shift would be greater emphasis on prevention rather than treatment —perhaps the most patient-centred policy that could be adopted.

To emphasise, a broader definition of value, as seen through the eyes of a much wider group of stakeholders, would result in a very different view of value in healthcare, and might lead to the “Health System Transformation” that the WEF is seeking. But a narrow definition will limit the focus to little more than the kind of performance improvement initiative that large businesses and organisations have attempted, with very mixed results, over the past half-century.

Value-Based Healthcare, as it is currently conceived, seems to be the product of industrial-era thinking. Although most public health systems were born in the industrial-era and are organised like factories for the production of healthcare outcomes, it would be a mistake to continue to apply the management theories and practices of industry, since they are no longer relevant even in most business sectors.

Typically, private firms claim to focus on “customer value” creation but are really focused on maximising shareholder value, and are obsessed with performance, efficiency and cost control (“the bottom-line”), as the easiest way to manage and manipulate the figures to meet market expectations and influence stock value. Growing the “top-line”, creating real value, is harder, takes longer and is far more risky.

The equivalent in healthcare would be to pretend to be focused on “patient value” whilst being focused on value for money by obsessing about performance, efficiency and cost control as a way to satisfy insurance providers or government treasuries.

All the hype suggests new technologies will be a game changer in healthcare, and they will be. But if Value-Based Healthcare is focused on value for money achieved through greater performance, efficiency and cost control the real opportunity will be missed. This can be demonstrated by the application of new technologies in other sectors such as banking.

Most banks applied technology to cut costs as a way to improve margins. They focused on the bottom line, not value creation, and are now paying the price. More recently new challenger banks focused on value creation have developed entirely new business models that were not possible before the new technology became available. These challenges are disrupting banking, and other challenges are disrupting other industries. The winners are going to be those that are truly customer value obsessed, whilst not losing site of the need to also manage the bottom-line.

The healthcare system transformation that is needed can be driven by new technologies that simultaneously increase value and reduce cost, but only if all aspects of value are fully understood, not limited to value for money thinking. However, there is a huge risk. As the costs of the current system spiral out of control the opportunity to add value will be lost to the focus on managing the bottom line and value for money.

If the bottom-line becomes the focus false economies will be made, as they are in private businesses. Investments that don’t produce fast returns are forsaken and the health of organisation suffers. This is well evidenced by former McKinsey & Company consultant Colin Price in Beyond Performance.

As an alternative, Valueism is the term I coined to describe business focused on value creation. And the lessons it offers apply to all other organisations in all other sectors since the purpose of them all should be value creation. It respects the fact costs must also be managed and performance is important, but the focus is value creation.

Valueism argues that value creation requires collaboration in the process of co-creating value, and the WEF initiative recognises this to be true. But achieving collaboration among all stakeholders for the purpose of value creation requires a deep understanding of the way each defines value — the value to be created must include value to them for being a part of the process.

When this is overlooked many problems occur. For example, many healthcare systems suffer a staffing crisis. In the UK many vacancies are left unfilled, doctors retire early due to stress, nurses leave to work in other countries, absenteeism is high and staff morale is low. Nurses also complain of low pay and long hours, but their biggest concern is not feeling valued. All these issues are likely to be overlooked by simple measures of performance and value for money. And, this has an impact on both the value to patients and the cost of treatment.

In conclusion, the intentions of the WEF in seeking to increase value in healthcare are no doubt very well intended. And the initiative could well deliver some significant improvements. But transformational improvements of the kind that are possible will require a broad definition of value and a much more holistic picture of the system and stakeholders, and what they value, for the full potential to be realised. Disruption is inevitable as healthcare evolves beyond the industrial era factory model, but the vocational values of the professionals in the system must be retained and strengthened.

It is those values that will ensure change is focused on value creation, rather than the singular search for value for money which will fail to realise the truly transformational potential of all the new technologies. Perhaps the biggest of these is the potential to shift the focus to wellness that prevents the need for treatment, and to assist in the better management of conditions to avoid further and more complex treatment and care. This “Person-Centred” view of healthcare, rather than a “Patient-centred” view which keeps the focus on treatment.

To link to the 70th anniversary of the NHS the Royal Free Hospital Trust Charity in the UK commissioned a major study to look at the future of public healthcare. It provides a 10–15 year vision for person-centred healthcare in a technology enabled 21st Century. Being authored by two of my associates, I am certain it will contain a useful provocation to inform initiatives like that of the WEF, provided they are truly interested in what it means to deliver a transformation in the value of healthcare systems to patients and all other stakeholders. The report is due to be published in the next few weeks. Email me to request a copy