How Do Organizations in Healthcare Measure the Value Proposition?

In today's healthcare landscape, organizations face the challenge of measuring both quality and cost to demonstrate their value. Join Dr. Carlos Arias as he explores the essential components of the value equation.

In today’s healthcare landscape, organizations face the challenge of measuring both quality and cost to demonstrate their value. Join Dr. Carlos Arias as he explores the essential components of the value equation and how healthcare organizations can achieve a balanced approach.

Both the numerator (Quality) and denominator (Cost) must be measured to demonstrate value. We achieve Quality through Effectiveness, Patient-Centered Care, Safety, Efficiency, Equitability, and Compliance. 

Both quality and cost present major challenges for healthcare organizations

Cost: Healthcare reimbursement programs have experienced continuous and tremendous changes in the past years. When Medicare was created all services were paid as fees for service, which led to substantial increases in the cost of care because providers had little incentive to reduce or avoid unnecessary expenditures. Diagnosis-related group (DRG) implementation happened years later – as a method for decreasing government expenses. Under the DRG payment system, hospitals are paid a fixed amount for each diagnosis (DRG).

After this implementation, and getting some reduction in expenses, the government initiated another payment model: Capitation. Capitation payment can be defined as paying a fixed amount per individual being treated for a well-defined group of services. So, for example, a primary care provider might receive a capitation payment of $ 50 to $100 per member per month to provide an individual’s entire primary care physician services, including office visits, tests, and other services. Once that model came into play, the payers wanted their risk reduced and implemented “risk contracts.”  These contracts created a situation whereby if a beneficiary patient needs more than just the standard level of care, and no proper utilization best practices or guidelines exist for the issues, or they are not followed, the provider may lose money on that individual due to over utilization. Luckily, the provider costs are spread across a population of individuals so that providers or organizations such as Independent Physicians Association (IPA) or Managed Care Organization (MSO) consider the entire population that is capitated, rather than just an individual, and calculate if the total payments can offset the total costs.

It is a very complex topic that physicians face today – overutilization of resources, readmissions, inappropriate use of resources, duplication of tests, lack of care coordination, and a myriad of other issues are causing an increase in the cost of these programs – while Medicare decreases the payments to physicians year after year. 

Our organization faces these challenges and has decreased costs by increasing infrastructure in Human Resources and technology across the entire organization to deliver a higher quality of care despite the “cost crisis” in healthcare. Our model has demonstrated its effectiveness in this environment.

Quality: The degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge is the definition I would like to use to describe this value. The concept of P4P has become an industry standard and likely will persist into the future, as will the 5 Stars Rating programs. These programs have not been around long – Stars rating is a newborn—but while the outcomes are not defined yet, they have had an intense start.

Infrastructure enhancement, education, training, improving technology, monitoring of and detailed, current information on each patient are critical factors to increase the quality of care.

The following values integrate with and further define modern Quality care:

Effectiveness: I must emphasize the importance of using evidence-based and best-practice guidelines to provide high-quality care. Incorporating the most current valid research evidence into decision-making and combining this with patient experience is essential to ensuring that care is delivered correctly. Decreasing resource waste through adequate staffing, assessment, and utilization of modern technology, processes, and systems is also crucial. This type of assessment and implementation has played a pivotal role in my success as a healthcare administrator.

Patient-Centered Care: It is the expression of a higher state of compassion, empathy, values, competencies, and relationship demanded by the most important and diverse clients in customer history: our patients. Prompt assistance is vital to decreasing any harm (delays in healthcare can be catastrophic, including fatal losses). Interventions and processes that avoid delay and denials are critical operational opportunities that operators, financial administrators, and executives in healthcare must monitor very closely.  The barriers to accomplishing a plan of care must be studied in detail and resolved. Poorly chosen language may contribute to heightened rates of unnecessary admissions, drug-related side effects, prolonged hospital stays, and increased waiting times. Inadequate access to physicians or healthcare providers will increase unnecessary admissions, re-admissions, an increase in utilization of healthcare resources, and unnecessary ER visits. Overall, we are looking at increased costs and decreased quality of care. Companies must look systematically at their operations and create a cultural approach that satisfies the needs of their patients. The patient-centered medical home approach is a positive example of a cultural change in the healthcare industry that improves system inefficiencies.

Safety: Safety is about preventing incorrect interventions, failure of a procedure or process, and shortcomings in achieving a goal on a patient plan of care. Safe care ensures correct diagnoses, avoidance of unnecessary risks, and that patients are informed about and engaged with the nature and attendant risks of diagnostic and therapeutic interventions. Understanding the patient culture and effectively communicating with patients enhances the accuracy of the medical attention process. This includes but is not limited to the provider-patient relationship, diagnoses, testing, and pharmacological and non-pharmacological treatments, ensuring holistic wellness.

Efficiency: Performance monitoring and optimization partnered with reducing waste is the right way to be efficient, reduce costs, and increase quality.  

Equitability: Provide care despite gender, ethnicity, socioeconomic status, geographical location, insurance company, or patient benefits (payer blind concept). Identifying, constructing, and stratifying indicators should be transferred to quality improvement activities. Using Population Management as a tool to drive a better delivery system and propagation of Specific Case, Disease, and Complex Case Management programs will lead our organization to be effective in delivering care to all.

Compliance:  The goal of the Program is to “promote the prevention of, detection, and resolution of potential violations of the multitude of laws and regulations that affect the work in all aspects of the business.” We utilized the Department of Health and Human Services Office of Inspector General (“OIG”) Compliance Program Guidance for Hospitals, the OIG’s Compliance Program for Individual and Small Group Physician Practices, and Federal Sentencing Guidelines (collectively referred to as “Guidance”) as a foundation. A comprehensive compliance program incorporates the following seven elements as recommended by the Guidance:  

(1) High-level oversight 

(2) Integration of compliance into policies and procedures 

(3) Open lines of communication

(4) Training and education 

(5) Monitoring and auditing 

(6) Response to detected errors 

(7) Consistent enforcement of standards

Every compliance program should include written policies and procedures that address specific risk areas in the practice. These policies and procedures should be reviewed and updated annually to align with current practice operations. The culture of the company should adopt compliance as its internal DNA.

The designation of a specific Compliance Officer (CO) with the appropriate experience, authority, and resources is critical to the success of a compliance program. A supporting compliance committee should be responsible for assisting the CO in assessing a practice’s regulatory, compliance, and legal environment; developing standards of conduct and policies and procedures to promote compliance; developing a system to identify, report and respond to identified issues; and designing a system of controls to carry out the practice’s compliance-related obligations.

By considering cost and quality measures per the values delineated above, I believe an organization can address the value proposition in a more targeted manner and leverage it to shape its identity. “Selling” any company can be complex – but health insurance companies and payers do examine the quality value proposition. When the aspects of the value proposition are not balanced, it can lead to dissatisfaction and loss of business. Healthcare customers want and need quality care – therefore, quality should be the overall criteria for defining a Healthcare organization.

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