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Value-Based Healthcare: Industry Endgame

By Miriam Bello | Thu, 02/11/2021 - 09:00

As science and medicine move toward a more holistic and integrated health approach, new health models arise. This shift is reflected in trends like Value-Based Healthcare (VBHC), a care model in which providers, including hospitals and physicians, are paid based on patient health outcomes.  

Professor Michael Porter, who introduced the VBHC concept, outlined three metrics to build an assessment for the implementation of this model: diagnosis, treatment and recovery. The basic unit of measurement should be the patient and outcomes what dictates financing. Porter also established a three-level outcome hierarchy to determine the effectiveness of the treatment. The first refers to the recovery process, which can be survival or the return to a previous health status. The second is the state of recovered health, meaning a return to normal activity or complications that may appear following the therapeutic process. Finally, Porter refers to a state of sustained well-being, which can also consider long-term affectations following the therapeutic process.

Financially, the VBHC model is intended to be more beneficial for health systems and patients. Patients are able to achieve better health outcomes through lower expenditure, which is especially valuable for patients suffering from chronic degenerative diseases predominant in Mexico, like cancer, diabetes and hypertension. These diseases represent a large burden for both patients and care systems. In Mexico, for instance, according to Mario Sicilia, Director General of Laboratorio Médico Polanco, “80 percent of the health budget is destined to chronic degenerative diseases.”

Porter points out that to begin implementing this model, it is most convenient to begin with the diseases that represent the heaviest burden for patients, as they usually have the largest impact on the healthcare system. Incidence volume is the second point to consider, followed by complexity, as starting with a multidisciplinary disease will be harder to measure at first glance.

VBHC in Current Health Systems

A study by NEJM analyzed the health systems of the UK and the Netherlands, both of them working under the VBHC model. These countries have adapted the model differently. The study measures seven elements based on Porter’s VBHC, which are the following:




Integrated practice units

Partial implementation

No implementation

Outcome measurement

National implementation

Partial implementation

Cost measurement

Regional implementation

National implementation

Value-based reimbursement

Partial implementation

Partial implementation

Regional systems integration

Partial implementation

Regional implementation

Geography of Care

Regional/national implementation

Regional/national implementation

Information technology

Regional/national implementation

Regional/national implementation


Financial and outcome accountability stopped the implementation of Integrated Practice Units (IPU) in the UK. NCBI describes IPU as organized around the patient and providing the full cycle of care for a medical condition, including patient education, engagement, and follow-up and encompass inpatient, outpatient and rehabilitative care as well as supporting services. The organizational structure of hospitals could not fit this element into traditional care organizations and its implementation would require a whole new budget, which would be a large disruption for many hospital systems. On the other hand, the Netherlands has integrated IPU through Santeon, a hospital network that adopted a complete VBHC model for the following pathologies: breast and lung cancer, stroke and hip arthrosis.

Outcome measurement has been nationally implemented in the Netherlands due to the joint work of the public and private sector. Both have agreed to collect outcome data for 50 percent of the disease burden in specialty care. Moreover, the infrastructure served as a solid base for this to be integrated, due to pre-existing records on diseases. The UK is currently focusing on building Patient-Reported Outcome Measures to build strong records to support outcome data and decision-making for doctors and patients.

The UK’s NHS has implemented cost measurement at the national level to measure actual resources used for acute care, mental healthcare and ambulance services. According to NEJM, “the data is collected by tracing the resources tied to an individual patient and by calculating the actual costs for the provider.” In the Netherlands, however, instead of measuring the actual cost of care delivery, the healthcare system uses a benchmark to compare costs between several facilities offering the same service.

For value-based reimbursement, the UK works with a scheme called best practice tariffs, which rewards providers who improve patient outcomes by delivering quality care. To make this work, the NHS has defined certain criteria for some conditions and providers work toward those goals. In the Netherlands, this works through insurers. For instance, there was a popular agreement between a hospital system and insurers through which hospitals committed to reduce their total number of procedures by 5 percent by 2030 over a 10-year contract with the insurance company.

Both countries have adopted regional system integration thanks to an agreement between the public and private sector to create better healthcare systems based on higher quality care and communication. For both countries, this required coordinated commissions focused on measuring both systems’ results on certain pathologies.

Geography of care in the UK focuses on determining the epidemiological map of the country to meet the specific needs of the population, strategically placing specialists so they can allocate more time and resources to the patients in worse conditions. Similarly, the Netherlands is already moving towards a more effective geographic accommodation to meet the needs of its citizens.

Lastly, regarding information technology, both countries dealt with a fragmented IT system, which limited the interaction of electronic clinical records (ECR) between entities. To combat this, the UK is encouraging interoperability between entities to slowly integrate all ECRs into a same system. As for the Netherlands, both individual providers and the government are working on the creation of a national IT strategy, which involves data exchange among several domains.

VBHC Ideals for Mexico

Ironically, countries that have the infrastructure in place to establish better health models are the ones that need it the least, said Augusto Muench, CEO of Boehringer Ingelheim Mexico, Central America and the Caribbean during Mexico Health Summit 2020/21. "Mexico, with more than 130 million inhabitants and without infrastructure for individual patient follow-up, is one of the countries most in need of such models," he said.

Diego Guarin, Regional Market Access Lead for Latin America at Merck MSD sees the heavily fragmented health system of the country as the major factor stopping this model from entering Mexico. During Mexico Health Summit 2020/21, he explained that this model demands the alignment of all stakeholders in the healthcare ecosystem. “In Mexico, there are financers including social security providers (IMSSS, ISSSTE, PEMEX, SEDENA/SEMAR, ISSEMyN) and private health insurers with different levels of vertical integration within their networks.” According to Guarin, there are also providers, including healthcare professionals (HCPs) and healthcare organizations (HCOs), like hospitals and clinics that are usually paid based on the services rendered.

Even for less prevalent diseases, BioMarin’s Country Manager David López said that there are many benefits to the VBHC model. “BioMarin has worked through this model in different countries that have clear and regulated frameworks. This patient-centric scheme is beneficial for the government because it allows to see the value history of each therapy,” he told MBN. He highlighted that AMIIF is already encouraging these innovative models but also highlighted regulatory barriers. “AMIIF has been actively working with different institutions to establish this scheme but in the country, it is hard to establish standardization on medicine effectiveness as the system is very fragmented and each institution has different KPIs.” According to López, this model is the future for innovative medicines because the rise in treatment costs is unsustainable. “As the largest provider of health in Mexico, the government will sooner or later need to change its investment model to something more thoughtful and personalized.”

How Could This Model Adapt to Mexico?

One of the first steps toward a migration to this system in both the public and private sectors, Gaurin explained, is the development of tools or technology platforms for coordinated patient follow-up. In addition, there is a need for outcome measurement and an integrated system. "You need a patient registry, including healthy people and those in treatment or rehabilitation. If we are integrated, we can see how the patient evolves; we can prevent illnesses and manage crises," he added.

During Mexico Health Summit 2020/21, Sandra Sánchez-Oldenhage, President of PharmAdvice Consulting, said that change requires the participation of the entire healthcare ecosystem. She recommended the definition of metrics and outcomes to drive continuous quality improvement, increased efficiency and reduced costs. “We also have to work together with the sector, providers and patients. Reducing costs while improving quality will only be possible when we all share the benefits and risks.” UCB Country Lead Omar Lugo said that even though this would be a big step for the pharmaceutical industry and health systems, the key to this change would be regulation. “To date, there is no regulatory framework that allows these kinds of dynamics. There is not a tender process that allows this.”

One factor that could hasten the adoption of VBHC is COVID-19. Mexico’s desire to replicate the model has already been brought to the table. “Mexico could benefit from the globally discussed VBHC model to reduce expenses while achieving efficiency,” said Executive President of AMIIF Cristóbal Thompson during an MBN interview. “The COVID-19 pandemic is a historic opportunity. For the first time, society, politicians, businesses and citizens have realized the value of health. Regulatory changes are now needed," Javier Picó, Partner at LifeSciences Consultants, stated during Mexico Health Summit 2020/21. “The pandemic has also made investors fight for the vaccine. This increases the GDP in health through private funds.”

Miriam Bello Miriam Bello Journalist and Industry Analyst