Do You Want a Healthcare House of Straw or Bricks?

June 22, 2015 / By Kristine Daynes

Anyone who has renovated a home while living in it should relate to the challenges of shifting to value-based payment. It is takes time, money and grit to redesign a house and maintain any sort of normalcy for the occupants. The transition from fee-for-service reimbursement to value-based payment isn’t a tidy process either. As with home renovation, having a blue-print and a project plan makes it manageable.

As you develop your blueprint and project plan, or as you recharge a stalled project, here are some suggestions to help your architect and general contractor. Whether you want to build programs for population health or accountable care, experiment with new payment models, or forge community partnerships to improve market competitiveness, you can begin by choosing the right value-based metrics and analytics for your plan. The measures you choose today will affect the sustainability and stability of your program for years to come.

Introduce Value

Value-based payment changes the basic metric from a visit (or units of care) to the patient or a patient population. The concept of measuring healthcare as it affects a single patient seems quite simple. In practice, it has spawned a universe of new measures that has become quite complex. It doesn’t need to be so complicated.

The most useful metrics for value-based payment:

• Are objective, derived from standardized data sets and risk-adjusted
• Allow continuous measurement, even as payment models and clinical practice changes
• Represent the results of care—outcomes—not the process of delivery care
• Link clinical outcomes with costs
• Can be correlated with patient experience
• Help clinicians and managers understand where and how to improve quality

Although contracts and regulations may oblige your organization to track and report redundant or “weak” measures, you don’t have to use them to manage your own internal programs. Choose a limited number of key performance indicators suitable for your project

Define Quality

The concept of quality management has been around for decades, and the field has produced a clear way to measure it. Value equals quality divided by cost. So the trick to measuring healthcare quality is in measuring discrete, relevant aspects of quality against the total cost of providing care.

This can be done by assembling a core set of metrics that represent critical aspects of quality. Key quality measures might include:

• Health or functional status
• Changes in health risk
• Mortality rates
• Access to preventive care
• Continuity of care
• Chronic and follow-up visits
• Readmission and complication rates
• Hospital, imaging, and ED utilization rates
• Composite measures

Measure Cost of Care

Cost in healthcare proves nearly as difficult to measure as quality. The most accessible cost metrics are Medicare (or other payer) rates and hospital charges, but they don’t represent the full costs including testing, medications, anesthesia, and follow-up visits. What you really need to measure is total cost of care: the reimbursement costs across all providers and settings contributing to an episode of care or associated with an individual patient. Another useful type of cost measure is utilization rates for hospital and ED visits.

Ultimately, providers need to know their own costs for providing care—the labor, materials, equipment, and overhead allocated to each service. This measure of efficiency will help them know whether they can be profitable under new payment models and competitive within their market.

A Solid Framework

The right measures will help your value-based programs be functional, accommodating, and sound, just like a well-built house. Of course metrics are only one set of materials that go into building a value-based program. A solid program also needs to reduce variation, achieve sustainability, provide transparency, align payment incentives, and redesign delivery of care, among other things. These requirements are much easier to achieve when the right metrics support the framework.

Kristine Daynes is marketing manager for payer and regulatory markets at 3M Health Information Systems.

Want more tools to help you on your way to value-based payment?  Check out these eguides about building effective models of accountable care,  population health management, and the next evolution in healthcare value measurement.