US healthcare spending continues to both lead the world (in terms of national and per-capita spend) and grow at a rate faster than the overall economy, and yet US healthcare outcomes, and even overall life expectancy, lag the rest of the developed world. This has led many to ask whether we’re really getting value-for-money in healthcare spending.
This problem, and its likely solution, are not new. In 2006, Michael E. Porter and Elizabeth Olmsted Teisberg published their groundbreaking book, “Redefining Health Care: Creating Value-based Competition on Results." Since that time, getting greater value from our healthcare dollar and achieving "value-based healthcare" has been a goal for many working to transform the industry. The idea is simple and yet compelling — to shift the industry’s incentives from a focus on number of billable encounters or procedures performed to a system that incentivizes and delivers valuable healthcare outcomes. This desired shift, variably described as volume to value, quantity to quality, or process to outcome, is broadly seen as the antidote to a system that had become otherwise bloated, unwieldy, and inefficient.
So, more than a decade after the oft-cited publication, how are we doing? My view from the trenches is that we still have a long way to go. At one of the companies I help to lead, Reflexion Health, we’ve created an innovative solution (read: tech-enabled service) for allowing patients to recover from surgery or injury in the comfort of their own home. We focused our initial efforts on patients recovering from hip and knee replacements — there are about one million of these each year, and post-acute care following such procedures have been identified as an area in need of cost-effective innovation. By pairing engaging avatar technology (VERA™) with an integrated 3-D imaging system and smart algorithms that perform skeletal reconstruction, pose detection and motion analysis, we’ve created a relatively low-cost technology kit that educates, coaches, demonstrates, measures, monitors, and records patients and their movements in service of their at-home, clinician prescribed physical therapy. Pairing this technology kit with a professional PT telemedicine service has enabled patients to perform their prescribed therapy in their own homes, and on their own schedules, saving time, steps and money.
This last bit is important, and it is not marketing spin. A large, professionally conducted, prospective, randomized controlled trial randomly assigned patients to receive either standard of care (office-based PT with instructions for a home exercise program) or virtual physical therapy (home-based, virtual PT with tech-enabled service model) found that clinical measures of recovery that were as good or better with the virtual approach, while costs were nearly $3000 lower per patient. What’s more, patients loved the convenience of avoiding travel, parking, and copays, resulting in a Net Promoter Score for VERA that’s better than Apple products or Amazon services.
VERA would then appear to be a poster child for a value-based healthcare solution as it provides patients with a more convenient and less expensive means of recovering from surgery while also saving the healthcare system thousands of dollars per patient. But, while VERA's adoption rates have been positive, they have not yet been uniform or easy, but our experience with commercial roll-out has provided many (hopefully) valuable insights into our healthcare system's slow and steady transformation to one that is more value-based.
Value-based payment systems aren't here yet. Despite all of the headlines, the majority of physician groups and hospitals in our target market (and in healthcare in general) remain fee-for-service entities. In addition, essentially all of the physical therapy groups we encounter are completely fee-for-service. While we have the highest level of evidence that using VERA saves money, it remains the case that in healthcare as in any other business setting, one man's pork is another man's bacon, and avoiding billable care, even when providing a more convenient solution for patients, isn't going to be readily adopted if it reduces practice income. Period.
What’s the Solution? We need to accelerate adoption of both public and private bundled-care payment paradigms and/or at-risk contracting. Aligned incentives are potent drivers of change.
Change is hard — even change for the better. VERA is being adopted in integrated care delivery networks, capitated systems, or in those practices working under bundled payment or otherwise at-risk contracts. These systems have an incentive for change, but even so, the uptake can be slower than anticipated. Changing workflow from the familiar to the new takes change management that's notoriously very challenging in healthcare.
What’s the Solution? Minimize the complexity of workflows to save providers time and the cost-of-thinking, in addition to providing aligned financial incentives.
Value is like beauty — it's a matter of perspective. What are we really talking about with the term "value' in value-based healthcare? Is it quality-outcome-per-cost as many suggest, or is it more nuanced than that — something that takes into account the patients' or providers’ or payers' values? In the blocking and tackling of commercial adoption, all the stakeholders' values come into play. Provider confidence and familiarity, payers' administrative requirements, and patient expectations all matter, sometimes more-so than the relative efficiency of the healthcare solution.
What’s the Solution? Each participant needs to receive more value than what’s being extracted. In our case, saving the patient time and travel and copays is good, providing financial upside for the clinical practice is good, and providing unprecedented adherence and objective metrics to the payer is good … and doing it all for a lower cost is very good.
All incentives matter, though incentives to decision-makers can matter more. Our system isn't broken — it gets exactly what it incentivizes. And decisions to adopt (or not) a new technology can hinge on the narrow incentives of the decision-maker as opposed to any broader incentive (e.g., reducing the overall cost of care, improving population outcomes, etc).
What’s the Solution? For this or any other potential solution to be adopted, it greatly helps if it’s seen as being in the interest of the specific decision-maker, in addition to being a net positive change for the rest of the stakeholders.
Where do we go from here?
Bundled-payments and at-risk contracts, as examples of value-based payment strategies, are steps in the right direction in incentivizing value-based healthcare. And one bright spot in the change to value-based payments is that, when appropriately configured, they can steeply incentivize treating clinicians to innovate and reorganize systems of care to be most efficient and effective for themselves and the patients they treat, quickly adopting those innovations that provide unequivocal value.
The bottom line? If we want to fully unleash the power of the innovation community in creating solutions that enable value-based care, we need to accelerate the dissemination of value-based payments more broadly.
About the Author:
As the president and chief executive officer of Reflexion Health and Digital Health Corp, Dr. Joseph (Joe) Smith’s expertise and passion lies in exploring the intersection of medicine and technology. His background includes serving as the founding chief medical and science officer at the West Health Institute, president of the West Health Policy Center in Washington, D.C., and manager of the West Health Investment Fund. He has also held executive positions at J&J, Boston Scientific, and Guidant Corp. served as a practicing cardiologist for close to 20 years. Dr. Smith holds bachelor’s degree from Johns Hopkins, a PhD from MIT, and an MD from Harvard Medical School.