Health Care Purchasers Should Focus on Value, Not Price

As I read articles in the press or online these days, I cannot help but to notice how frequently health care related conversations end up focusing on "price" alone - specifically the price of health insurance premiums. We all know that health care has become too expensive, and that the situation is worsening with each passing day. Since we are talking about health care in the first place, shouldn't we utilize the same diagnostic strategy a good physician would use in identifying his patients' medical conditions, to then adopt a proven treatment protocol to cure that condition?

This means looking beyond the symptoms (e.g., high prices) to isolate the specific conditions creating the malaise. In health care this means looking at the very nature of the U.S. health care system. When you examine the system at this level you will quickly and easily notice that we have over time unwittingly created a system that has created misplaced competition and skewed incentives for almost all system participants. In the end, this unhealthy competition and these incentives are inflationary. It has created an environment in which the current winner is determined by who has most effectively shifted costs to the other competing interests in the system.

Instead of encouraging cost-shifting across system participants, we should be focused on creating attitudes, cultures, systems, and processes centered on creating value. Value in the context of health care is when hospitals and physicians provide the highest quality risk-adjusted outcomes throughout the entire cycle of care resulting in the lowest possible overall cost. Until we all work together to build a system that focuses all of our time, energy, and money on the creation of this type of value, it won't matter whether or not guaranteed issue laws for small (or large) employers exist in your state - the underlying system will still be inflationary, and the symptoms will persist.

A value-based health care system will encourage all system participants to expect, even demand, the absolute highest risk-adjusted quality care at the lowest market-driven cost. In order for this to happen employers must insist that all health care providers give their plan members up-front pricing and risk-adjusted quality data to make informed decisions. Because health care is a highly complex and
emotional issue, employers and their health plan partners should work as patient advocates to help their members understand their medical conditions and all their treatment options. In this way, they can help plan members and their loved ones navigate the system at what is surely an emotionally trying and confusing time in their lives.

I would say that legislators addressing this issue are wise and should be applauded for wanting to do something about an issue that is so important to all of us and that so many other politicians are unwilling to touch - for fear of potential political fallout.

The fact remains however, that for those legislators or anyone else's efforts to ultimately result in lower health care costs this conversation needs to take a dramatic shift. The discussion of price needs to be shifted to a discussion of value. The value-creating tools available to hospitals, physicians, health plans, insurers, and employers are numerous and easy to find if you are looking for them.

Personally I hold all health care professionals in the highest regard, they dedicate their lives to
making ours better. They stand beside us at our most frightening and vulnerable moments. They however are in business to maximize profits just like the rest of us. In order to help them see that quality and its resulting value improvement is a better way to maximize profits, employers and other health care purchasers should stop treating health care like a commodity. In fact it varies greatly in its quality and cost and should have never been purchased on price in the first place. Purchasers should demand that all health care system participants, especially system intermediaries such as health insurance companies, managed care networks, and others stop creating systems and processes that promote the misplaced competition and skewed incentives creating the problem in the first place. Once this is accomplished, consumer tools like Health Savings Accounts and Health Reimbursement Arrangements will finally have the effect they were intended to have.

No matter who you are, you can help our country move in the direction of value-based health care by regularly asking your health care professionals, health insurers, and employers to embrace quality and cost transparency, simplified administration, and electronic records and ordering. The collective voice and consumers expectations make a meaningful difference in our free-market system. I encourage you to play a part in that process.