Value chain refers to the entire production process from the input to the output (raw materials to final product). Each link adds some value to the consumer. Value chain offers some framework for understanding decision-making in health care sector. Determination of the appropriate health care services has always increased trust between physician and patient. Health care market is generally characterized by a lack of transparency and a shortage of information among all the agents along the value chain.
Health care Value Chain
Even today in 21st century medical technology is delivered with 19th century organization structures, management practices, measurement, and pricing. The wide universal coverage and access to care are essential. But the existing systems are not enough. The main issue in health care is the value of health care delivered.
IDN's or Integrated delivery Networks were created. The process was to integrate hospital systems into the health insurance business. Then in the next stage they integrated with the ambulatory care business. Then they integrated downstream toward the patient. But the processes were unsuccessful. Hospitals began to improve their financial position by partnering with upstream value chain players.
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In the second phase; hospitals merged with one another or joined systems; merged to form super group purchasing organizations. The Distributors merged to build mega warehouses and achieve economies of scale. Third stage was hospitals had merged to develop greater bargaining leverage with employers. In the next stage, B2B models using Web technology were seen as the solution to all of the problems and inefficiencies. These procedures had implications for reducing overhead and administrative costs, the development of electronic commerce, transacting business, and improve data available for decision making. (Burns n.d.), (Lawton R. Burns n.d.)
Creating Value Based Healthcare System
Significant improvement in value will require fundamental restructuring of health care delivery, not incremental improvements. Process improvements, care pathways, lean production, safety initiatives, disease management and other overlays to the current structure are beneficial but not sufficient.
Aligning Competition with Value
Competition for patients/subscribers is a powerful force to encourage restructuring of care and continuous improvement in value. Today's competition in health care is not aligned with value. The financial success of system participants is not equal to patient success. Creating positive-sum competition on value is a central challenge in health care reform in every country
Principles of Value- Based Health Care Delivery
The prime goal in health care must be value for patients, not access, equity, volume, convenience, or cost containment
Value=Health outcomes/Costs of delivering the outcomes
Outcomes are the full set of patient health outcomes over the care cycle. Costs are the total costs of care for the patient's condition, not just the cost of a single provider or a single service. Quality improvement is the key driver of cost containment and higher value, where quality is health outcomes.
Health Outcomes are Prevention, Early detection, Right diagnosis, Right treatment to the right patient, Early and timely treatment, Treatment earlier in the causal chain of disease, Rapid cycle time of diagnosis and treatment, Less invasive treatment methods, Fewer complications, Fewer mistakes and repeats in treatment, Faster recovery, More complete recovery, Less disability, Fewer relapses or acute episodes, Slower disease progression, Less need for long term care, and Less care induced illness. Better health is the goal, not more treatment. Better health is inherently less expensive than poor health.
Value- Based Health Care Delivery - The Strategic Agenda
Organize into Integrated Practice Units around the Patient's Medical Condition (IPUs)
Including primary and preventive care for distinct patient populations
E.g.: Migraine Care in Germany
Existing model is in RHS -Here they are organized by Speciality and Discrete Services.
New Model is in LHS- Here they are organized into integrated Practice units.
Measure Outcomes and Cost for Every Patient
Outcome Measures Hierarchy
Most providers track charges not costs. Most providers track cost by billing category, not for medical conditions. Most providers cannot accumulate total costs for particular patients. Most providers use arbitrary or average allocation of shared resources, not patient specific allocations.
Always on Time
Marked to Standard
Cost should be measured for each patient, aggregated across the full cycle of care. Cost should be measured for each medical condition (which includes common co-occurring conditions), not for all services. The cost of each activity or input attributed to a patient should reflect that patient's use of resources (e.g. time, facilities, service), not average allocations. The only way to properly measure cost per patient is to track the time devoted to each patient by providers, facilities, support services, and other shared costs.
Move to Bundled Prices for Care Cycles
Bundled Payment is total package price for the care cycle for a medical condition. It includes responsibility for avoidable complications and the medical condition capitation.Bundled price should be severity adjusted.
Bundled reimbursement motivates value improvement, care cycle optimization, and spending to save. Experts decide the value of individual services and products within the bundle, rather than outside parties. Outcome measurement and reporting at the medical condition level is needed for any reimbursement system to ultimately succeed.
Integrate Care Delivery across Separate Facilities
Deliver services in the appropriate facility, not every facility. Excellent providers can manage care delivery across multiple facilities in multiple geographic areas
Levels of System Integration
Rationalize service lines/ IPUs across facilities to improve volume, avoid duplication, play to strength, and concentrate excellence
Offer specific services at the appropriate facility E.g. acuity level, cost level, need for convenience. Refer patients to the appropriate unit
Clinically integrate care across facilities, within an IPU structure. IPUs extend across facilities. Consistent protocols, consultations with experts. Integrating across the full care cycle. Linking preventative/primary care units to specialty IPUs. Connecting ancillary service units to IPUs. E.g. home care, rehabilitation, behavioural health, social work, addiction treatment
Grow by Expanding Excellent IPUs across Geography
This is a model of geographic expansion.
Create an Enabling Information Technology Platform
Utilize information technology to enable restructuring of care delivery and measuring results, rather than treating it as a solution itself. Common data definitions. Combine all types of data (e.g. notes, images) for each patient over time. Data encompasses the full care cycle, including referring entities. Allowing access and communication among all involved parties, including patients. Structured"data vs. free text. Templates for medical conditions to enhance the user interface. Architecture that allows easy extraction of outcome, process, andcost measures. Interoperability standards enabling communication among different provider systems
Illustrative Implications for HIV/AIDS Care
Targeted prevention for at-risk individuals creates more value than across the board efforts. Early diagnosis helps in forestalling disease progression. Intensive evaluation and treatment at the time of the diagnosis can forestall disease progression. Improving compliance with first stage drug therapy lowers drug resistance and the need to move to more costly second line therapies.
Screening is most effective when integrated into a primary health care system. Providing maternal and child health care services is integral to the HIV/AIDS care cycle by substantially reducing the incidence of new cases of HIV. Community health workers can not only improve compliance with ARV therapy but can simultaneously address other conditions.
Community health workers can have a major role in overcoming transportation and other barriers to access and compliance with care. Providing nutrition support can be important to success in ARV therapy. Integrating HIV screening and treatment into routine primary care facilities can help address the social stigma of seeking care for HIV/AIDS. Gender dynamics limit the use of some prevention options in certain settings. Management of social and economic barriers is critical to the treatment and prevention of HIV/AIDS. (Porter 2010)
Levels of System Integration
Value=Health outcomes/Costs of delivering the outcomes
Short biographical notes on all contributors
Michael Eugene Porter is the Professor at Harvard Business School. He is an authority on company strategy and the competitiveness of nations and regions. He chairs Harvard Business School's program dedicated for newly appointed CEOs of very large corporations.
Lawton R. Burns, Robert A. DeGraaff, Patricia M. Danzon, John R. Kimberly, William L. Kissick, and Mark V. Pauly are Professors of Wharton School. They together have published a book on Study of the Health Care Value Chain.
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Figure 1.Organize into Integrated Practice Units around the Patient's Medical Condition (IPUs)
Figure 2. Outcome Measures Hierarchy
Figure 3. Move to Bundled Prices for Care Cycles
Figure 4. Grow by Expanding Excellent IPUs across Geography