I have worked in healthcare my whole career. The fact that I had to proactively seek out the principles of value-based healthcare by flying across the pond and sliding along the icy streets of Harvard Business School for one week of learning sums up the challenge we have.

Infusing value into healthcare delivery is seen as a niche area of healthcare. The path less trodden. It is like the set of ingredients sitting on your countertop that all the evidence suggests you should use for a healthier, more cost-effective and ultimately more satisfying meal. Instead, your hands instinctively gravitate to your phone and you order a takeaway. The easier path.

Talking of takeaways, there were many during my course, and I do not just mean the 1am pizza run after evenings spent debating the challenges of implementing value-based healthcare. The takeaway I want to focus on here is how intertwined the value-based healthcare and innovation agendas are.

The key takeaway I want to focus on here is how intertwined value-based healthcare and innovation agendas are.

At its heart, value is about optimising outcomes at the lowest possible cost. The status quo in healthcare very rarely, if ever, achieves this. Something needs to change in order to shift the focus meaningfully onto outcomes. That is the fundamental reason why innovation can inspire value-based care – it forces change in the way healthcare is delivered in some shape or form. At this juncture it is important to clarify that by innovation I do not simply mean the seductive software technologies that always seem to grab the headlines. I also mean innovations in processes, care pathways, payment models and beyond.

To flesh out the link between innovation and value-based care further there are three specific areas I will focus on.

  1. Understanding Cost

Given that one key part of the value equation is cost, it is imperative that healthcare organisations understand the cost of providing care. The surprising reality is that very few organisations have determined the true costs of the individual services and treatments they provide. Instead, they estimate costs by applying a charge-to-cost ratio derived from knowing the costs at a specialty or hospital-wide level. Applying the principles of Time Driven Activity Based Costing (or TDABC – what happens when healthcare geeks do marketing speak…) allows healthcare organisations to determine their costs at a more granular level. This involves creating process maps for a given service to identify the various people and equipment required to deliver the said service, and then allocating time expended per person/piece of equipment. Then you calculate the cost per minute of utilising each person/piece of equipment.

So what the Dickens does all this mean for innovation I hear you asking. Well, many processes in healthcare are inefficient. Once you have mapped out processes in granular detail, you have identified problems and opportunities, which are the starting points for the best innovations. For example, Memorial Sloan Kettering Hospital in New York has used TDABC to shift from doctor-led to physician assistant-led bone marrow biopsy clinics. This has led to cost-savings and freed up doctors for more “top of license” tasks.

2. Bundled Payments

Bundled payments are another important strategy to facilitate value-based care. This basically means that healthcare providers are paid a fixed fee to deliver a bundle of care that typically includes diagnosis, initial treatment and any readmissions required for a given condition. Crucially, this means that providers are not reimbursed per service offered, but instead rewarded for delivering holistic bundles of care that keep costs down, and therefore maximise their profit. This incentivises innovative approaches to care delivery, which are currently being hindered as many innovative offerings in healthcare do not have a reimbursement code attached to them. For example, Care1st Health Plan (part of WellCare) has launched a bundled payment in partnership with Maricopa Health System in Arizona for Hepatitis C treatment. This has given Maricopa physicians the latitude to address social determinants of health as part of the treatment plan (which would not previously have been reimbursed), such as access to case managers and a ‘Community Connections’ helpline. This innovative bundle of care was only launched in July 2019, so time will tell what impact it has.

3. Measuring Outcomes

Finally, in order to be rewarded based on outcomes, organisations have to measure them. Simple enough right, but it ain’t really happening. This is a massive challenge in healthcare, and is where the much vaunted digital health technologies can really help. These innovations make the collection of outcomes data, especially patient-reported outcomes data, much easier. For example, Aneurin Bevan University Health Board (which, by the way, is a beacon of value-based care in the UK) has partnered with the health tech company DrDoctor to electronically track PROMs (patient-reported outcome measures) for a variety of care pathways. This has increased patient survey completion rates from 40% to over 80%, and optimised patient follow-up, leading to better care outcomes and cost-savings.

The correct internally generated and externally sourced innovations can have a significant positive impact on delivering the shift towards value-based care. By having both these agendas intertwined, we will also be able to more easily root out innovations that lack evidence of impact.

Innovators must have a solid grasp of the principles of value-based care to succeed, and that is where I hope this article helps. The road ahead will be bumpy (this is healthcare after all), but I strongly believe (with some innovative turbo-boosts to help us get there) we are en route to the right destination .

Innovators must have a solid grasp of the principles of value-based care to succeed

Details of Value-Based Health Care Delivery course here.

About The Author


Vishaal graduated from UCL Medical School in 2011 and completed Foundation Training at the William Harvey Hospital and King’s College Hospital in London. He then worked at a start-up healthcare consultancy, Mansfield Advisors, for two years, and then as a strategy consultant at OC&C. Vishaal currently works at Ada Health.

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