Key Concepts

The value-based health care movement is based on the work of Harvard University Professor Michael E. Porter. His landmark book, Redefining Health Care Creating Value-Based Competition on Results, was co-authored by Elizabeth O. Teisberg and published in 2006 following 10 years of research into why the health care industry did not conform to the principles of competition seen in all other sectors of the economy. They described how health care had fallen into a pattern of dysfunctional competition where providers were competing on the wrong things at the wrong level. The result was that the US health care system was spending more per citizen on health care than any other nation and getting worse health outcomein important areas like newborn mortality.

There has been wide recognition of problems in the health care industry. It has been stuck in outdated management practices and payment models that made the problem progressively worse over the past 50 years despite tremendous advances in medical science. While medical science advanced, there were not major advances in delivery science. As a result, health care has used a delivery model that had existed largely unchanged since the turn of the last century. As the science improved, multiple layers of organizational structure were added to the system without a meaningful organizational strategy for care delivery. The result was an expensive, complex system with multiple goals rather than a single unifying goal. Over the years there were many efforts to improve the system such as use of evidence-based medicine, safety initiatives, electronic records, ‘lean’ approaches to performance improvement, care coordinators, turning patients into paying customers, mergers, analytics, big data, personalized or precision medicine, and population health to name a few. None was successful in improving outcomes and controlling cost.

On that backdrop, Porter and Teisberg proposed a radical restructuring of health care focused on competition and improvement. They proposed a single unifying goal for health care: to deliver value for the patient. Based on their extensive research, they proposed that to achieve value for patients, health care delivery needed to be organized around the medical conditions patients have, accurately measure the outcomes that matter to patients, and measure the cost to achieve them. Payment should reflect value and not volume. Networks of care that perform the right services, at the right location, with the right people are essential, and linked with an information technology system that support all of those mutually reinforcing elements.

Value for patients cannot be assessed at the level of the hospital, a site of care, a medical specialty, a procedure, a primary care practice, or an entire population. Value creation can occur if one looks at the medical condition a patient has and examines outcomes and costs to achieve those outcomes over the entire cycle of care for that condition. In primary and preventative care, value is created for segments of the population with similar needs. Ultimately, the medical condition becomes the unit of value creation and the focus of measurement in a value-based delivery system

Following the introduction of value-based health care in 2004 in a Harvard Business Review article, there has been worldwide interest in in the topic from all sectors of the health care industry. The concept of value for patients resonates with patients, providers, provider organizations, payers, governments, and suppliers. Since its introduction, there has been implementation of all of the elements of the agenda in pilots around the world based on dissemination of the concepts through publications and courses. The number of peer-reviewed publications addressing value-based health care has increased exponentially.

With this tremendous explosion of the application of value-based care in real world situations, there has been increasing understanding that changing a health care delivery system is not simple. It takes leadership, vision, dedication and drive to achieve this unifying goal. What has been learned in the time since this concept was introduced was that this is not a utopian dream but a real solution to the problems faced by health care delivery systems around the world.