Value vs. Volume: Can We Pay for Quality?

Janice Simmons, for HealthLeaders Magazine , December 8, 2009
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"Our idea of outcomes is that we believe that good-quality healthcare produces lower healthcare costs by avoiding complications, avoiding acute care in the emergency rooms," Maturi says. "The level of payment will be driven by the outcomes that are achieved."

The clinic will be reimbursed the same amount for each patient—no matter if it sees the patient 15 times a month or twice a year. So this will mean using more creative—and less expensive— ways to interact with patients, such as e-mail, group visits, or home visits. And if Premera decides the clinic providers are doing an excellent job treating various patients, they will receive bonuses.

The clinic is to be paid "based on what we're doing, how happy the patients are, how healthy the patients are, and hopefully how well we're doing," Fathi says.

In terms of monitoring outcomes, a set of interim performance metrics for chronic conditions has been established to reflect cost savings, Maturi says. For instance, it may take up to two years or more for a diabetic patient to consistently maintain blood pressure or achieve a certain hemoglobin A1c (HbA1c) level.

When looking at the value of care that hospitals provide, quality can be viewed as one component, says Hal Andrews, CEO of Nashville-based Data Advantage, a privately held health information company. The company has created the Hospital Value Index, which ranks hospitals using publicly available data on quality, affordability, efficiency, and patient satisfaction performance data.

When the company analyzed more than 4,500 hospitals across the country recently, 747 were identified as providing "best in value" care. The company noted that if all hospitals across the country performed at the average benchmark for the "best in value" hospitals, about 9.3% of costs, or approximately $60 billion, could be eliminated from annual hospital spending.

"What's interesting when you run studies of this kind is that the hospitals are not always who you think they might be. They're not always the big brand. They're often a community hospital that's serving a smaller rural or even a suburban market," said John Morrow, a senior advisor with Data Advantage.

The Centers for Medicare & Medicaid Services did recommend the use of value-based purchasing in 2007, in which hospitals would be reimbursed based on the overall value that they deliver. However, the agency has not officially established what value-based purchasing will look like, Andrews says.

As legislators consider healthcare reform, it will become important to recognize and reward those hospitals that deliver outstanding value, Morrow said. But the idea of value has to be more clearly defined—with hospitals examining areas where they need to improve care.

"I think that the first thing that hospital leaders have to do is start thinking about what are the national benchmarks—and not just about what the guy across the street is doing," Andrews said.

Janice Simmons is senior editor for quality for HealthLeaders Media. Se may be contacted at

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