It is time for a value driven outcome-based pricing model in Healthcare!
It is quite a paradox that citizens of one of the most developed nations of the world find healthcare almost out of their reach, sans insurance and sometimes even if they have insurance. For an average American family, healthcare costs have been devouring a larger share of their budget. In spite of health coverage, these costs are expected to soar higher.
Apart from patients, care providers are also feeling the pressure. While much is being done in a number of qualitative aspect of care delivery, there is an increased push on openness about the pricing of the healthcare services. Creating transparency about healthcare costs and pricing is expected to pave the way for lowering them. It is believed that such openness will push care providers to be more price-conscious and employers and insurance companies will, hopefully, restructure health coverage plans to suit the people’s needs and their budgets. Such change however needs an overhauling of the entire system. Healthcare costs are an amalgamation of several factors put together. Also, the current system of healthcare delivery is quite complicated in itself. Consequentially, accurate cost measurement is a major challenge.
An important factor that can bring about the change is the way we look at healthcare costs. Robert S. Kaplan and Michael E. Porter, in their paper published in Harvard Business Review, have highlighted the need to change the current systems of cost calculations. The duo strongly advocated for a need to shift from cost per service used model, to value driven outcome-based model.
The current cost-per-service model focusses on billing the patients based on the various services used from various departments. In the prevailing model while the care provider may be delivering more number of services, the actual value being delivered to the patient may not really change. Value, on the other hand, is measured on the basis of patient outcome achieved per dollar spent. The outcome-based-value model identifies the costs of all the resources needed to reach a certain outcome for the patient. The new system will look at Increase in the value of healthcare which would translate into better health care outcomes. More often than not, better outcomes would often go hand in hand with care-cycle cost. The focus would hence shift to better diagnostics, early detection, avoiding treatment delays.
The proposed system will be able to capture all the costs required to achieve the desired outcome. When that gets done, it will allow providers or payers to address essentially any queries on cost. The cost measure process would then include identifying the medical condition, defining the care delivery value chain, developing process map, gaining estimates for each process, estimating the cost of patient care resources, and eventually the total cost of patient care.
With more intuitive technology, this can be a game changing revolutionary shift that will not only bring down costs but can shift the way we look at healthcare today. The approach will be proactive instead of the reactive one we currently pursue.
A sign of an evolving industry is its ability to provide quality services or products at minimal costs. Greater transparency will not only create win-win opportunities but will also pull participation from all stakeholders to create quality healthcare services at affordable costs.