Harvard Business Review

Value-Based Health Care: Reconciling Mission and Margin

Featuring Robert S. Kaplan, moderated by Steven Prokesch

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'The unit of analysis for creating and measuring value is the treatment of a patient’s medical condition over a complete cycle of care.'

Recent health care reform efforts have focused on the demand side — improving patients’ access to care in an inefficient, fragmented system. But there is enormous potential for improving health care by focusing on the supply side — improving provider’s ability to deliver better value through better patient outcomes and lower costs. Historically, measures of both outcomes and costs have been lacking, but that is changing. The International Consortium for Health Outcomes Measurement (ICOHM) is developing outcomes standards for multiple medical conditions, with outcomes defined in terms that matter to patients. Time-driven activity-based costing (TDABC) enables providers to have accurate patient-level costing information. In combination, outcomes measures and accurate cost data, along with reimbursement models such as bundled payments, can transform health care to a more value-based system.