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Is Value-Based Healthcare the Right Business Model for Mexico?

By Sandra Sánchez-Oldenhage - Pharmadvice Consulting


Sandra Sánchez-Oldenhage By Sandra Sánchez-Oldenhage | President & CEO - Thu, 02/25/2021 - 14:17

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One thing all healthcare stakeholders agree on is that our global health systems are near breaking point. The aging population and increasing incidence of chronic disease, innovative technologies, and new powerful drugs, have led to an unsustainable cost explosion, and it is not surprising that the pressure is mounting. Health systems are spending more, without achieving better health outcomes.

Rising demand for healthcare is exacerbated by high levels of clinical waste and unexplained variance in treatment and outcomes. Healthcare spend is growing 1.5 times faster than GDP in countries within the OECD and have up to a thirteenfold variation in key health outcomes. Moreover, it is estimated that US$3 trillion goes to waste every year in healthcare, with the US alone accounting for US$1 trillion. Adding to the challenge are worryingly high staff burnout rates, administrative complexity and excessive and widely varying prices.

Zooming in on Mexico’s healthcare system, historically, private hospitals have focused on filling their beds and offering the latest high-tech procedures and testing. Their model incentivizes doctors to offer more treatments or services since costs are dependent on how many procedures, treatments, and services are offered. But that has only raised the cost of healthcare without necessarily improving health outcomes or the quality of services.

Similarly, the government’s health system, has focused its metrics on tracking filled prescriptions and bed availability; indicators that, again, do not speak to the health status of patients. Beyond the skewed metrics, fragmentation of the system has led to a less efficient attention, providing fewer resources to those who need care the most and leading to great health inequalities throughout the country. Furthermore, not having electronic patient files has caused havoc and inefficiencies in patient care, such as redundant testing and diagnostic procedures, extended time from diagnosis to treatment, conflicting diagnosis and medications, among others. As a result, patient outcomes have not improved and in some cases, they have even deteriorated.

Clearly, this is not a sustainable healthcare approach; hence, we urgently need to seek strategies and solutions that rebalance and transition away from this reactive, late, siloed, and resource “wasteful” care delivery to a more productive, proactive, preventive, efficient, and patient-centered healthcare.

The answer could lie in Value-Based Healthcare (VBH).

VBH care differs from a fee-for-service (no link to quality and value) or capitated approach, in which providers are paid based on the amount of healthcare services they deliver. This payment (or reward) happens regardless of whether a diagnosis or procedure is successful or not, and whether the steps taken are high-quality or even considered best practice. In other words, traditional healthcare is not necessarily working in the best interests of the patient.

The “value” in VBH is derived from measuring health outcomes against the cost of delivering the outcomes (aka pay-for-performance / P4P). Healthcare providers are compensated for the health and well-being of their patient population (patient satisfaction / patient-centered approach) in a cost-effective way, rather than for services rendered; it aims to reorganize healthcare around patient values, not volumes. On paper, this seems like a rather simplistic concept; in reality, it requires a major pivot on the part of healthcare providers that too many continue to resist.

The goals of a VBH model are to achieve better care, smarter spending and healthier people. As a result, a healthcare system must substantially reform its payment structure to incentivize quality, health outcomes and value over volume. Such alignment requires a fundamental change in how healthcare is organized and delivered, and requires the participation of the entire healthcare ecosystem.

How It Works

There are two ways VBH can increase the overall wellness of patients while reducing costs:

  • It decreases the cost of services, possibly by changing the approach to offering those services, while still providing the same outcome
  • It increases the outcome of well-being without increasing the cost of care

When put into practice to drive efficiency and raise quality standards, VBH attaches incentives and payments to outcomes for patients and the population, not system workload.

So, if you want to be successful and truly bring scale to the implementation of a VBH model, I see four essential building blocks that need to be addressed:

  1. Clearly defined outcomes and measurement standards

One of the initial steps, irrespective of Mexico’s fragmented health system, is ensuring there is a standardized measurement of (patient-reported) outcomes related to costs per capita. This is a baseline requirement. Once this is done, then you can align processes and incentives.

It is about ensuring you are capturing the right data and analyzing it in a way that drives continuous quality improvement, increased efficiencies and cost savings. You start by measuring outcomes that matter to a particular patient type, you consolidate that at a population segment level, and then apply those insights to tailor and improve interventions across the care continuum for many similar patients, thus becoming an iterative systematic process.

Once agreed between all healthcare stakeholders you enable the automatic capture of outcome data from multiple sources and you openly share the data among systems. This will allow differentiated reimbursement according to quality to be administered with consistency and transparency.

  1. Connected technology platform that integrates and shares health informatics in a secure and standardized way

The transparent capture and reporting of data between systems, processes and stakeholders is vital to drive performance-based payments and to incentivize much needed gains in quality, safety, and patient-centricity. It requires all stakeholders in the system (clinicians, administrators, technicians, technology partners and supply-chain partners, as well as pharma, policymakers and governments) to commit to the measure, optimize, repeat lean methodology, and standardized data formats to support a common transparent platform integration that will further fuel innovation and research.

3. Payment structure and reimbursements reform – aligning incentives to what matters

A substantial reform of the payment structure is urgent and needs to be focused on incentivizing what matters: quality, health outcomes and value, over volume.

Given the unmet potential and pressing need to make healthcare more sustainable, we must seek out and experiment with innovative payments that share the risk and align incentives across care pathways and providers. Health insurance providers, pharma and government payers have a significant role to play in expanding value-based care from “pilot, small-scale projects” into an operational model that can be quickly scaled up. There needs to be a commitment for scalability from all stakeholders.

4. Better-educated, patient-centered workforce and patient population

The drive to attain VBH will need to reshape hospital staffing at every level, from hiring to education to teamwork. The adoption of this model requires openness, trust and strong collaboration and partnerships between all healthcare stakeholder groups that are clear and trained on why outcomes matter and what will be the focus of today’s healthcare.

Moreover, we must work with the public overall to confront the social determinants of health. Nowadays, much of our health is influenced by preventable conditions like obesity, poor nutrition, lack of exercise, smoking, stress, lack of education, inadequate housing, and access to technology or transportation. We must engage the public in changing lifestyle behaviors and living environments and assist them in achieving that goal, which in the end will lessen the need for costly processes, tests, and medicines.

Transforming from fee-to-service to VBH will take some time and the shift might be daunting and harder than estimated. As the healthcare sector continues to evolve and all stakeholders accept the benefits of value-based care models, they might initially experience some financial hits, but this transition will eventually translate into an ideal model for decreasing the healthcare costs while expanding quality care.

We need to recognize that this approach will be difficult to implement, as historically, our health system has been defined by silos, fragmented ways of working, insufficient support for clinicians and legacy IT systems, which will be significant barriers. Physicians will find themselves with variations and unpredictable performance reports, staff members will be overwhelmed with more administrative tasks and less time to capture data and records, and a lack of transparency among payers and providers will be faced. Moreover, providers will be under increasing pressure to perform duties beyond caregiving, while garnering new abilities such as making clinically combined physician networks, gathering and assimilating data, and applying analytics to find cost and prospects for quality improvement.

However, in order to succeed in this new model, all stakeholders need to commit to sharing the burden of implementation and the benefits and risks for this to work. Leap forward a few years and, as digitization of healthcare gathers momentum after COVID-19, the situation will quickly improve and prove positive. Furthermore, I am convinced that we have a golden opportunity to standardize and bring meaningful scale to VBH. The reason I am so optimistic, is the steady integration of sophisticated health informatics and the recognition that healthcare costs are not sustainable, therefore finding new approaches like VBH can work.

In summary, a value-based healthcare model can bring down costs as it takes a proactive, preventive, and efficient approach to healthcare. It manages people's wellness, instead of treating illness and disease as it occurs. Many employers have started using value-based benefit designs where their employees benefit from lower insurance premiums when they take preventive or proactive measures to increase wellness by obtaining higher quality care or actively work on managing chronic conditions, hence positively impacting productivity.

We must all be willing to disrupt our traditional model to reduce the cost of healthcare while at the same time improve care. That again may seem counterintuitive, but it should not be. It only appears that way because traditional incentives are pervasive and wrong. Hospitals should benefit from better care rather than more care, and that is possible when providers share risks and benefits with insurers, hospitals, and all stakeholders.

The concept is that if an illness, or likelihood of it, is diagnosed and managed with preventive treatment prescribed, such as reducing the prevalence of diabetes for example, by monitoring, education, and support, then healthcare costs related to the illness around the country will be reduced.

We all — the entire health ecosystem stakeholders — need to focus relentlessly on a continuous improvement and develop more and more cost-saving initiatives while producing higher patient satisfaction.

This emerging model of healthcare delivery must be created through innovation in the field and with a shared commitment by the many stakeholders in the complex network of healthcare: hospitals, clinics, physicians and other caregivers, representatives from the pharmaceutical, insurance, medical device and supply industries, and the general public – all in the best interest of the patients.

Photo by:   Sandra Sánchez

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