As payers and providers in the U.S. health care system shift from fee for service to value-based approaches that pay providers for quality, they are turning to two models: One is procedure- and DRG-based bundled payments that pay one price for all the care related to treating a condition. The other is population-based “global” or “capitated” payments” such as accountable care organizations in which a provider is paid a fixed amount to cover all of a patient’s health needs for a specified period of time. The Center for Orthopedic Research and Education (or CORE Institute) — a group of musculoskeletal, neurologic, and rehabilitative physicians in Arizona and Michigan that includes orthopedic, spine, and pain-management physicians and a number of other types of clinicians — is pioneering an approach that represents a middle ground. It addresses a central criticism of bundled payments: that the approach doesn’t prevent unnecessary care.
The lack of understanding of the real costs (not charge) of delivering healthcare services poses tremendous challenges in the containment of healthcare costs. In this study, we applied an established cost accounting method, the time-driven activity-based costing (TDABC), to assess the costs of performing an abdomen and pelvis computed tomography (AP CT) in an academic radiology department and identified opportunities for improved efficiency in the delivery of this service.
The prevailing fee-for-service payment model has led U.S. health care administrators and physician practices to impose severe constraints on the time physicians spend talking, for which they are reimbursed poorly or not at all. New value-based reimbursement models, however, such as bundled payments, accountable care organizations, and shared savings plans, provide powerful incentives for physicians to regain control over the quantity and quality of time they spend talking. As we have helped dozens of organizations to estimate total care-cycle costs, we’ve identified many situations in which having physicians and other clinical personnel talk more with patients and each other can be the least expensive and most effective approach for delivering better patient care.
The United States spends more than 17% of its gross domestic product on health care services. Although national health care spending has recently slowed, its burden on the economy continues to be a major challenge that has caused patients, health care workers, and policy makers alike to demand reform (1,2). Current reform proposals focus on expanding access and coverage to the system but do not address the fundamental issue of how to lower actual costs without having an adverse impact on quality and patient outcomes.
At a time when hospitals are trying to reduce expenses, we discuss how a value management office can greatly enhance an institution's ability to improve outcomes and costs across the enterprise. Exploring two hospitals pioneering in centralized management, we show three areas of value-outcomes: Improvement on the collection of outcome measures, integrate quality data into care delivery, and expand from process excellence to population management.
In order to understand the metrics of value-based care, we seek to answer: how do you calculate the value of care when, as is typically the case, a medical condition has many relevant outcomes, each measured in different ways? And how do you communicate that information in a way that is accessible and actionable? We discuss our findings on the radar chart as an effective means to visually depict outcome and cost data simultaneously.
A team at Harvard Business School has worked with dozens of health care organizations to help them understand the true costs of their treatments for many medical conditions. One of the team’s central findings is that Time-Driven Activity-Based Costing cannot be delegated to the finance function. Using Mayo Clinic as an example, we examine the approaches needed to successfully implement value realization in each project.
Centers for Medicare and Medicaid Services in July of this year have proposed a bundled payments program for knee and hip replacements in major metropolitan areas called Comprehensive Care for Joint Replacements. Lessons from the Hoag Orthopedic Institute and Rothman Institute reveal three essential factors in achieving bundling success: "excellent data on outcomes and costs, proactive management of the patient, and alignment between physicians and hospitals."
“I would have written a shorter letter but did not have the time,” Blaise Pascal, the 17th century French mathematician and philosopher, once apologized. Unfortunately, the same problem often arises when physicians manage the care of patients with chronic conditions such as diabetes, heart failure, and kidney disease. If they had more time (and in some cases, motivational skills), they could better persuade patients to make the sacrifices and hard choices to change their lifestyles and to follow the recommended treatment plan.
Our findings show that to identify cost-cutting opportunities, hospital administrators typically work from the information that is most readily available to and trusted by them—namely, the line-item expense categories on their P&L statements. Those categories, such as personnel, space, equipment, and supplies, are attractive targets: Reducing spending on them appears to generate immediate results. But the reductions are usually made without considering the best mix of resources needed to deliver excellent patient outcomes in an efficient manner