Who Defines 'Value' in Healthcare?


Tue Mar 29 13:00:00 CDT 2016

Almost every topic in healthcare today is covered from the "value" angle. The entire U.S. healthcare system is transitioning to a value-based system; physicians will be paid on "value" instead of volume; and hospitals and other healthcare providers will be judged on the "value" they provide.


But what is the definition of "value"? This is a question that is, consciously or not, being examined by everyone affected by the healthcare industry today. 


Renowned health economist Michael Porter from the Harvard Business School has defined healthcare value as "health outcomes achieved per dollar spent." That simple definition makes perfect sense, but also prompts dozens of complicated questions for those who seek to achieve it. 


From the supply chain's perspective, the old way of determining value was product quality and price. The new way is more focused on the patient -- how a product advances patient safety and affects desired outcomes, for example. Another question is, from whose perspective will value be ultimately defined -- the payer, the provider or the patient? Patients are often focused on their quality of life, not on the quality of care provided, or the cost it took to get them there. Will "value" mean something different for each individual patient?


Healthcare policy expert David Blumenthal asks this question in his fantastic blog post on healthcare value. He writes that a universal definition is fundamentally necessary for the industry to move forward -- otherwise, it will be pulled in several directions vying to achieve different definitions of value. To note:


"To turn the promise of value measurement into the reality of better care at lower cost, a few short-term actions seem prudent. First, the nation needs a plan to turn the concept of value into practical indicators. Since government, the private sector, consumers and voters all have a vital stake in health system improvement, they should all participate in a process of perfecting and implementing value measures, preferably under the leadership of a respected, disinterested institution."


Blumenthal suggests the Institute of Medicine as the deciding body. Historically, the FDA has decided value for medical devices and pharma. 


Regardless of who decides or how it is decided, the consensus seems to be that a decision just needs to be made.

What are your thoughts on "value" as it relates to healthcare? Do you agree with Blumenthal? Share your comments below.