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Institute of Medicine (US) Roundtable on Value & Science-Driven Health Care; Yong PL, Olsen LA, McGinnis JM, editors. Value in Health Care: Accounting for Cost, Quality, Safety, Outcomes, and Innovation. Washington (DC): National Academies Press (US); 2010.

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Value in Health Care: Accounting for Cost, Quality, Safety, Outcomes, and Innovation.

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2Stakeholder Perspectives on Value


An increasing number of signs indicate that our health system, at its current rate of growth, threatens to engulf the federal budget (Congressional Budget Office, 2007). As expenditures on health care continue to swell, our society’s ability to invest in education, infrastructure, energy, and additional aspects of the economy becomes ever more limited (White House, 2009). Since September 2008, new economic realities have changed the nation’s financial picture dramatically, and our concept of value has to change accordingly. The concept of value must expand its focus, looking beyond the desires of individual patients, providers, or industries, toward meeting societal needs. The value proposition in health care should reflect not just economic value, but also the societal principles that undergird our approach to economic analysis (Persad et al., 2009).

This workshop has focused on providing a forum for discussing solutions to the healthcare crisis, where discussions focused on increasing value—defined as the ratio of benefits to cost—as a cornerstone of not just controlling, but reducing, the rising costs of health care. In September 2008, the Institute of Medicine (IOM) Roundtable on Value & Science-Driven Health Care met to explore key stakeholders’ perspectives on value in health care, seeking to understand the meaning of value and the approaches to assessment among patients, providers, economists, health product and device manufacturers, payers, and employers. The September presentations formed a starting point for much of the conversations during this workshop’s stakeholder panel session, enabling further definition of the broad commonalities and the subtle differences between stakeholder views on value.

This chapter presents a synthesis of both workshop and Roundtable discussions of stakeholder perspectives (see Table 2-1 for participants).

TABLE 2-1. Participants in Stakeholder Perspectives Panels.


Participants in Stakeholder Perspectives Panels.

Both discussions emphasized the importance of perspective in discussing value questions, indicating that different stakeholders perceive costs and benefits differently. Economic viewpoints on the panel considered value in terms of the aggregate impact on society as a whole. In contrast, it was highlighted by participants that patients particularly value the ability of health care to help them obtain optimal health in order to meet personal goals. Yet it was also mentioned that patients do not necessarily believe they need more care to achieve better health provided that transparency of information, evidence, and treatment options exists. Overlapping with these views, representatives from the employer sector asserted that they value not only maintaining healthy and productive workers and families at the lowest cost possible, but also focusing on enhancing community health.

Meanwhile, providers on the panel desired evidence-based, effective diagnostic interventions and treatments that are delivered efficiently. They also considered value in terms of focusing principally on appropriateness of care discussions that fully engage providers and consumers together, rather than conversations about controlling costs. Participating payer representatives emphasized a value orientation around evidence-based medical interventions that are highly effective and around structuring incentives to encourage the use of these interventions. Manufacturers on the panel focused on maintaining incentives for product innovation while simultaneously considering the impact of their products on individual patients’ health in terms of costs and benefits over time.

Despite these differences in perspectives, many stakeholders indicated areas of commonality, suggesting that beneficial social outcomes, such as improved school performance and productivity, may be hard to monetize yet could be considered in assessments of value in health care. Importantly, several presenters also separately identified problems with the current delivery system, indicating a misalignment of payment incentives with the goals of value.

Economic Perspectives

A. Mark Fendrick suggested that while healthcare reform discussions focus predominantly on controlling costs, it is the concept of health that should be uppermost. Unlike assessments of spending in other economic sectors, value in health care—that is, the clinical benefit achieved for the money spent—is frequently excluded from the current dialogue on how to solve the nation’s healthcare dilemma, he explained. Despite the relative lack of attention to the value proposition, Paul B. Ginsburg stated that rigorous methodologies to measure health outcomes per level of expenditure are available, transparent, and well accepted.

Both discussants underscored the misalignment between the current health delivery and financing system and the achievement of value. Fendrick asserted that we instead have two streams of concern—quality improvement and cost containment—that create conflicting incentives for patients and clinicians. Some quality improvement initiatives are designed to improve patient self-management by increasing participation in specific high-value interventions that are becoming costlier to patients. Yet rising out-of-pocket costs discourage the use of recommended services and the overuse of interventions of questionable benefit. He commented that studies demonstrate that when patients are required to pay more for their health care, they buy less of both essential and excessive therapies alike (Newhouse, 1992). Meanwhile, current clinician reimbursement systems create additional financial barriers to providing adequate primary care and follow-up services.

Fendrick stated that consumers require education about the value of the services they are consuming and payers can assist by providing financial incentives to encourage the use of high-value services. He advocated that the current “one-size-fits-all” benefit design be abandoned and replaced by value-based insurance design. Using this approach, the promotion of services and interventions with high benefit-to-cost ratios will produce greater value—defined as health per dollar spent—at any level of aggregate health expenditure. Value-based insurance design offers a potential incremental solution to enhance efficiency in healthcare spending, suggested Fendrick. These insurance packages adjust patients’ out-of-pocket costs for specific health services based on an assessment of their clinical benefit (net of cost). The more beneficial a therapy is likely to be, the lower is the cost share. By aligning financial incentives in this way, high-value care is encouraged, while low-value or unproven services are discouraged. Ultimately, Fendrick asserted that such a strategy would produce more benefits at any level of expenditure.

Ginsburg asserted that pursuing a value-based strategy that discourages low-value interventions will be much less successful. He specified that to implement these strategies successfully, consumers, providers, payers, and researchers must be involved. Expanding on this idea, he said that since value determination will require extensive knowledge of the outcomes and costs of the services being evaluated, it will necessitate enhancing the commitment to effectiveness research.

Ginsburg also cautioned that while it is conceptually appealing to consider a medical intervention as either valuable or not, value is a continuous outcome, not a binary one. Medical services span a continuous scale, ranging from those with positive benefits to those without benefit and even to those that cause harm. Ginsburg said that although some may argue that enough evidence exists to enable distinguishing useless and harmful interventions from those that could provide utility, recent history has demonstrated our inability to determine the harms of many medical products prior to their widespread use in clinical practice.

Beyond identifying a need to form consensus about the best methods of measuring and utilizing value assessments, a common theme discussed by both discussants was the critical need to reform the healthcare provider payment system to reward outcomes over volume. Without this, they suggested, we will continue to struggle against powerful incentives that work counter to the achievement of better value.

Perspectives from Patients

Sabrina Corlette stated that the patient community is not monolithic and there is a wide range of consumer and patient perceptions of value. The distinction between a “patient” and a “consumer” is something to keep in mind, she said, because the perspective of a patient actively undergoing a course of treatment for a particular illness may differ significantly from the perspective of a healthcare consumer who may acquire goods and services over the course of a lifetime but not be actively in treatment.

Both Gail Griffith and Corlette spoke of how patients are often perceived as believing that more medical care and newer treatments are better, although patients’ views are more complex than this. Corlette expanded on this idea, saying that people generally do not question the quality of care they receive, even if their attention is called to the epidemic of medical errors and the huge geographic variations in quality in the United States. She stated that there is an unwillingness to accept the idea that the doctor they see and personally chose is not a high-quality doctor. She cited a recent poll by the National Business Group on Health that found that 72 percent of the employees surveyed thought their doctors were very or completely trustworthy sources of health information compared to 66 percent for nurses, 43 percent for health plans, and only 22 percent for employers (National Business Group on Health, 2008).

Given the emergence of health information technology (HIT), Griffith stated that patients have legitimate concerns about the privacy and security of their health information and the use of this information in ways that they do not understand and have not authorized. However, the general public will be willing to accept some privacy risks because it recognizes the benefits of interoperable health records, she continued. With new leadership for the nation, she believes there is hope that the focus on HIT will bring a concurrent focus on the protection and privacy of medical records.

The discussants stated that patients are often suspicious that there may be a hidden agenda of cost cutting behind the concept of “evidence-based” medicine and are concerned that it may restrict the treatment options available to their doctors. Yet as consumers face escalating cost exposure and bear more out-of-pocket costs, there is both an increasing recognition that costs are rising at too high a rate and, over time, an increasing acceptance of some elements of the value agenda. Griffith asserted that as recently as the 2008 Presidential election, spurred by the economic meltdown, American consumers and patients shifted from a mindset of “more is better” to an emphasis on access to care, equity, and value.

Yet health care is different from other industries, Corlette maintained. Because of the complexity of the provider-patient relationship, the asymmetry of knowledge, and patient vulnerability, health care will never be a purely commercial transaction in which patients seek the best “deal.” She indicated that a value-based agenda will fail with patients if the focus is on cost. She continued that proponents of value need to focus on quality and access and that any cost savings should just be an ancillary benefit of improved quality.

Perspectives from Employers

Martín-J. Sepúlveda stated that employers are an important, but reluctant, change agent in health care. He explained that unrelenting market competition and the imperative of competitive labor costs have driven employers to unprecedented levels of engagement in healthcare transformation and cost control. The marginal impact of employer innovations—for example, pay-for-performance and total health management to address chronic conditions such as diabetes and the exploding epidemic of obesity—together with logical limits to employee cost shifting in the face of escalating healthcare expenditures, referred to as the “PacMan” of the federal budget by Helen Darling, have compelled employers to demand accountability for value in current healthcare expenditures.

This demand in the healthcare marketplace has brought attention to deficiencies and defects in the healthcare industry that thwart accelerated value improvements, said Sepúlveda. Expanding on this idea, Darling discussed the specific target areas of waste in the healthcare delivery system—the 20–30 percent of overuse, underuse, and misuse in a $2.5 trillion dollar spending budget (Skinner et al., 2005). Other areas of waste include the complete lack of consistency or consensus on what “value” means in health care and confusion about the high leverage loci of value creation in health care, related Sepúlveda. He added that unrealistic expectations of the state of the “evidence” for so-called value-based coverage and inadequate attention to comprehensive, person-focused (not condition-focused) care delivery with revitalized and transformed primary care also continue to pervade the system.

The discussants agreed that evidence generation is foundational to value acquisition in health care. Yet there exists a gross imbalance in focus and funding between translational research (from discovery to randomized clinical trial) and applied community- and practice-based research and intervention, asserted Sepúlveda. The panelists stated that failure to remedy this irrational imbalance—by not significantly shifting resources toward community- and practice-based behavioral change, along with investments in data collection and quality assessment through HIT implementation and education on the comparative efficacy of treatment options—will perpetuate both the current T1 (“bench to bedside”) bottleneck of effective new interventions and the suffering, disability, and expense resulting from the deplorable state of our population’s health.

With respect to the investment in the health care of their employees, Sepúlveda suggested that most employers think that the key elements of value are costs that can be justified by improved patient clinical and functional outcomes, minimization of services re-work (medical errors, duplication of services), and reduced cycle time resulting from improved access and coordination of care. These factors, he said, have been demonstrated to deliver better performance at work, reduced absenteeism, and increased workplace productivity.

Darling concluded that employers and other stakeholders must be bold in their efforts to increase the value obtained from health care in this country. In the milieu of a sagging economy and rising unemployment, she articulated that the nation can address the deficiencies of the system and drive higher achievements in value only by shifting its focus from providing more care to a goal of delivering higher-quality, more effective, and more efficient care that can not only decrease the growth of healthcare spending but actually reduce it.

Perspectives from Providers

Physicians view value in a different dimension than other stakeholders, noted Howard Beckman. He added that when cost is presented as distinct from an assessment of quality, physicians view those who promote cost reduction as largely motivated by dollar savings that do not accrue to either providers or patients. The result is the perception that these cost-saving programs are untrustworthy. The discussants agreed that professionalism demands considering the needs of patients first. Confronted with talk of cost reductions, Beckman asserted that physicians hear two important messages: (1) plans or employers may be more interested in saving money than ensuring that needed services are provided, and (2) provider incomes and current styles of practice are at risk from those more interested in cost reductions than improving quality.

Beckman suggested that the IOM has created a more integrated model of value that places cost within the context of quality by defining quality as reducing overuse, misuse, and underuse of services. This model requires that each service offered be evaluated for appropriateness based on the best available evidence. Expanding on this idea, Bruce Ferguson articulated that evidence generated by comparative effectiveness studies can inform the development of appropriateness guidelines, and HIT resources can be designed to collect information about the quality of care delivered and potentially be utilized as a tool for the dissemination of guidelines.

Simultaneously, provider representatives also focused on the need for reform of the payment and delivery systems to reflect the patient’s perspective and to reward longitudinal outcomes. If payment can be justified only for appropriate care, expanding the definition of quality to include efforts to identify and reduce overuse and misuse of services successfully shifts the focus from defining quality merely as reducing underuse to increasing the value of care in a way that is professionally acceptable to physicians. They articulated the belief that focusing on appropriateness more effectively engages physicians in changing their behaviors while reducing cost and improving quality.

Recognizing differences in perspectives on value, the panelists stated that successful programs involving practitioners to improve value should focus on reducing overuse and misuse of services. Ferguson provided the example of the collaborative efforts of the American College of Cardiology, the Society of Thoracic Surgeons, and the American Heart Association, which have already started to recognize the importance of engaging these aspects of medical care by shifting their paradigm for defining value and creating appropriateness criteria for a number of cardiac services and conditions. Sharing variation in a group’s utilization patterns in the framework of appropriateness criteria is another example of how value can effectively be addressed in collaboration with physicians. He stated that providers additionally need access to a combination of clinical quality data and cost data at the point of care, which is being done by the Virginia Cardiac Surgery Quality Improvement Project; otherwise healthcare providers lack knowledge of a critically important denominator of the value equation. The discussants concluded that without the implementation of these changes in focus, payment structure, and information delivery, providers will not be able to make the right decisions in terms of value for the patients with whom they are entrusted.

Perspectives from Payers

Troy A. Brennan noted that while payers broadly see the same components of value as other stakeholders, they have significant differences as well. Often in the medical arena, he related, emergent technologies—such as Intensity-Modulated Radiation Therapy or, more recently, proton beam therapy—are widely adopted for treatment without demonstration of clinical superiority to less expensive alternatives. However, he asserted that payers do have a role in improving value in health care by making coverage decisions based on the evidence.

Yet significant challenges exist for payers as they tackle the issue of value. The first is the lack of trust from consumers and providers, stated Murray N. Ross. He explained that for these stakeholders, attempts to drive an increase in value will be considered as all about the bottom line, not about providing the best, most efficient, and oftentimes very expensive care to very sick people. Continuing, he suggested that payers, like patients, are not monolithic. Many different business models exist, some of which are not predicated on obtaining value but rather on obtaining profit. He also discussed the difficulties of convincing consumers that the need for comparative effectiveness research will not decrease the quality of their care, but rather potentially improve it, when most consumers do not realize that most of the care provided in this country is anything but evidence based.

The panelists asserted that a keystone to tackling these challenges will be the availability of better evidence of the effectiveness, including cost-effectiveness, of different treatments. Insurers currently do not factor cost-effectiveness information into coverage decisions, making these decisions based solely on efficacy, asserted Brennan. However, a government program likely would have the stature to incorporate cost into its analyses for cases in which multiple treatment options exist, he continued. Without using these types of information, the discussants concluded, we will continue to have irrational decisions in the healthcare system, the costs of care will continue to rise at unsustainable rates, and we will be unable to control the actual dollars spent on health care. Without considering these types of factors, they said, it will be even harder to achieve higher rates of healthcare coverage.

Perspectives from Manufacturers

In these times of burgeoning healthcare costs, discussions of what value means in health care are common, stated the participants. The product company view of value in health care is based on the understanding that value is multifunctional and must take into account a number of perspectives, but value from a patient perspective should come first, noted Harlan F. Weisman. He asserted that manufacturers offer specific value to the healthcare enterprise through the development and discovery of effective treatments that are supported by evidence on outcomes and comparative efficacy. Jean P. Gagnon expanded on this, stating that the value to patients of these pharmaceutical and technological innovations relates to the actual improvement in health through the appropriate use of such products, achieved through the proper education of providers, patients, payers, and researchers about their safe and effective use.

Weisman believes that cost alone should not be used to assess the value of treatments or to limit access. Rather, value should consider the individual patient, should consider actual improvements in patient health and costs over time, and should include assessment of patient satisfaction for services provided. The need for comparative effectiveness should be balanced by the need to introduce innovations addressing unmet medical needs, he added. Weisman continued, suggesting that initial approval and reimbursement should be based on standards of efficacy and safety that depend on the seriousness of the condition and the relative unmet need, with post-approval commitment by the manufacturer to ongoing data collection and analysis to increase information about safety, efficacy, and real-world comparative effectiveness.

At the same time, incentives need to be preserved to support the full spectrum of incremental and substantial innovation that adds value to health care, said Gagnon. He suggested that integrated care, supported by appropriate reimbursement and evidence, is the most appropriate enabler of value-based decision making. Continuing, he specified that decisions should be informed by the most comprehensive and up-to-date information available, including observational data where appropriate. Standards of evidence should be sensitive to the seriousness of the condition to be treated and to the relative unmet need of treatments for that condition.


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Copyright © 2010, National Academy of Sciences.
Bookshelf ID: NBK50926


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